ETHICS IN

FUNCTIONAL AREAS
▪ There are many tasks which business needs for its successful operation.
▪ Each of those tasks can be described as a function of business. The
functional areas of business management are varied and of course
challenging.
▪ They demand high level of skills and practices.
▪ They can be categorized on many fronts.
▪ Broadly they cover four main functions of management, namely, Planning,
Leading, Organizing, and Coordinating.
▪ In practice they would further apply to areas such as
Production(manufacturing) management, Financial management, and
Personnel management.
▪ Functional areas of management naturally raise many ethical questions.

▪ For instance HR Management tries to ensure the best staff for the job and
that they work effectively in a safe environment.

▪ Finance management is supposed to record all money coming in and

going out in business. It has responsibility for securing finance for future
expansion and paying the staff and suppliers.

▪ Operations management has the task of producing the goods or service

in the most efficient way.

▪ Marketing and sales department is in charge of maximizing sales by

carrying out market research and promoting the goods or service
through a motivated sales team.
▪ Research and development wing help business remain competitive by

developing new goods and services and updating the existing ones.

▪ All these functional areas naturally invite many ethical questions calling

forth the attention of mangers.

▪ Thus we deal with ethical issues in areas such as operations, marketing,

finance, human resource, and information technology.

 Ethics in Operations
Operations in business see to producing the goods or service in the
most efficient way. This is done by making best use of the business
staff, machinery, building and raw materials.

Fundamental management imperatives of business operations:

1. Generate recurring income

2. Increase the value of the business assets

3. Secure the income and value of the business

 Ethical approach to Operations
Management

Operations manager is likely to confront a number of ethical issues.

1. How does the decision serve ethical values in general?

2. How is the decision perceived by the employees?

3. Probability of the effect. The operation manager has to be at least

morally certain about the expected good result.
 Ethics of Marketing
Marketing is often described as “the performance of business activities that
direct the flow of goods and services from producer to consumer or user”.

Marketing includes business functions such as product development, pricing,

promotion and sales practices.

All these aspects of business raise profound ethical questions.

Marketing ethics is a sub-set of business ethics. It examines the moral issues

related to marketing decisions made by organizations and followed by
business persons. Broadly speaking, marketing ethics is the study of right and
wrong with respect to marketing policies, practices and systems.
Traditional perspective:

1. “Let the buyer beware” ( caveat emptor)

2. “Let the seller beware” (caveat vendor)

Recent time practices:

1. There is an expansion of the domains of marketable goods. Eg: religion,

politics, healthcare, and education are counted among the marketable
goods.

2. The recent developments in the media of marketing invite broader and fresh
ethical concerns.

3. The changed socio- political and economic structures allow or even demand
business on a globally expanded level.
Four Basic Values in Marketing Ethics
Four basic values are considered prominent in assessing marketing
questions. They are,
1. Truth
2. Freedom
3. Well-being
4. Justice
A different terminology is also expressed. They are,
1. Trust
2. Honesty
3. Respect
4. fairness
Truth

In view of the value of truth, often advertisements, purchase agreements and

promotions have been attacked for dishonesty or misleading statements. In this
regard, the ethical limit of the use of puffery or hyperbole in advertisements is a
matter of constant concerns.

Freedom

The value of freedom is at risk in marketing when potential customers are

coerced or pressurized. Freedom is challenged when the privacy of customers
in intruded into. The use of new technologies such as computers, scanners and
surveillance devices to collect and store vital information about customers
without their knowledge and consent debunks the value of freedom in
marketing.
Well-being

Well-being of customers is challenged when the quality and safety measures of

products go down. Marketing strategies indirectly may promote a life style that
ultimately destroys the wholesomeness of consumers; for instance, by promoting
a consumerist and materialistic approach to life. Because human beings cannot
be reduced to consumers who will be satisfied simply by fulfilling their material
needs and wants.

Justice

Justice is often challenged in the marketing practices, especially with regard to

price levels, debt arrangements and exploitation of vulnerable groups.
 Scope of Marketing Ethics
1. The Disclosure of Information

2. Pricing

3. Deceptive and Manipulative Marketing

4. Marketing Research

5. Advertisement

6. Manipulation of Consumer Behavior

7. Deceiving the Consumers

8. Excessive Sexual Appeals

9. Anti-competitive marketing practices (Explicit agreements, Tacit Agreements)

 Marketing via Internet
Ethical domains in Web Marketing:

1. Privacy

2. Ownership

3. Access

4. Use of the Internet Advertising Tools

 Human Resource Management
◦ HRM in business shows how a firm manages its staff/personnel.

◦ Formerly for large organizations the “Personnel Department” mostly meant a tool to
manage the paperwork in hiring and paying their staff. But nowadays the human
resource department in business organizations plays a major role in staffing, training,
and helping to manage people.

◦ HRM of a business firm clearly indicates its ethical standing. The personnel affect both
the quality of the product as well as the quality of a firm’s relationship with the
customers and the society at large.

◦ Treating employees ethically means treating them with ordinary decency and
distributive justice. It is done mainly by focusing on three activities of the HRM, namely,
Hiring, Paying and Firing the employees.
 Hiring the Personnel
Hiring employees raises many ethical questions. The crucial ethical issue in this
regard is who should be hired for a particular job from among different applicants.

In general the answer is very simple and straight- forward, namely, a person who is
expected to contribute most to the purpose of business is to he hired.

It may not be easy to determine whether a firm should select the best person for a
job from the candidates who have actually turned up or the firm should widen its
area of search for still better candidates.

Below we deal with three ethically relevant areas in hiring the personnel, namely,
assessment of candidates, the selection process and discrimination in selection.
Assessment of Candidates

Hiring an employee requires a prior assessment of the candidates to make sure that
s/he is the best person to fulfill the business functions in a given context.

But it is not easy to assess the prospective contribution of a candidate to business.

The means used to assess candidates must be efficient and ethically justifiable.

Some of the typical means used to evaluate candidate include credentials,

aptitude tests, psychometric test to measure personality traits and screening for
disease or drug use, etc.
The Selection Process

Whatever be the selection process, all candidates must be given equal

opportunity to appear for it. Any of the prospective candidates shall not be
prevented from appearing for the selection process.

Advertisement of job opportunity should not be publicized in such a way to

exclude any group to appear for the selection process.

Rules and standards must bind all candidates equally. It also required that
applications must be invited giving all relevant information about the job offer.
In fact these are demands of justice and fairness.
Discrimination in selection
It is illegal and unethical.
However, we have to make a distinction between discrimination on relevant grounds
and undue discrimination.
For example, qualification, experience, eligibility to contribute to business and qualities
required to perform a job in the best manner possible. We can call them functional
abilities or qualities.
Usually functional abilities are considered independent of sex, age, religion, ethnic
group, social background, colour, family background, sexual preferences, etc. These
qualities could be called circumstantial features of a person. When any of these items
become determinative of the selection process, it causes undue discrimination which is
considered harmful for business in the long run.
Remuneration

The ethical principle which has to regulate remuneration is distributive justice.

Different aspects of giving remuneration can violate the ethical practice of business.

Rewards must be in proportion to the contribution that one makes to the business goal.

In the place of actual contribution made, if anything else is considered as a claim for
remuneration such as employee’s ability, effort of need, it violates the demands of
distributive justice.

However, this should not mean that ethics allows no space for sympathy, generosity, etc. it
just means that one cannot mix generosity with strict business practices.

Sometimes seniority is counted as a criterion for higher remuneration. It can be unethical, if

an employee’s seniority does not make any difference in his/her contribution.
Perks
Perks are meant to attract as well as to gain the good will of the employees. The ethical
norm is that perks must be given regulated by the demands of distributive justice.

Employee Recognition
Employee recognition functions as both a reward and a strong message that reinforces
the performance level of employees.

It is ethically relevant on two counts; First, it has a business value to the extent it reinforces
the most productive employee functions. Secondly, it is part of giving reward to
employees which is a matter of distributive justice.

Unless sufficient care is taken, employee recognition can become both

counterproductive for business and unethical for employees.
 Firing
Despite its apparent unwelcome color, firing employees need not always be
unethical.

Quite contrary, it could be an ethical demand in certain cases.

Keeping in line with the norms of distributive justice, whenever an employee

fails to contribute to business goal with respect to the cost of employing
him/her, s/he has to be fired, despite its unfortunate implications for the
employee. Otherwise, it would counter long term profitability of business.
However, firing employees has to be done for the right reason and in the right
manner.
 Technology Management in Business

Various kinds of technology have been in existence in all stages of

business life in history. But in recent times, technology has become a
crucial business concern by the development of information
technology (IT).

IT opens various possibilities in enhancing the quality of business,

increasing the speed of business transactions, altering the nature of
business, and redefining the role of business personnel. Hence,
technology has become a subject matter of serious ethical concerns
in business.
 Ethical issues in the use of IT in Business

1. Security Risks of Private Information

2. Ownership of Information Technology

3. Access to Technology

4. Copy Right and “Intellectual Property”

5. Censorship and Freedom of Expression

6. Security of Data

7. Adoption of a (new) Technology in Business

8. Threat to Responsibility
 Finance Ethics
Every aspect of business has got financial ramifications. Some financial problems
are clearly due to ethical misconduct; for example, theft or deceit.

Major business scandals are associated with finance, though it is no an exclusive

ground. Business can suffer from undercapitalization or mismatched funding, bad
debts, etc. they are simply the results of folly, rather than fraud. All of these
propositions suggest the scope for a finance ethics.

Finance ethics is still in its period of maturation. The ethics of finance is

underdeveloped compared to the fields of business ethics or professional ethics.

Here we review some of the most important ethical aspects of financial

management.
Financial Statement

It is expected that business accounts be true and trustworthy. Perharps the

primary ethical step to maintain financial integrity is to make business’ internal
financial reporting honest, fair and reliable.

As we know, business usually keeps two kinds of accounts; financial

accounts to report to its shareholders and internal management accounts. The
latter is to respond to the different functioning, various operations and to
account what they cost and what they earn, etc. Management accounts are
fundamental tools to evaluate the performance of busines and to identify
operational problems.

So it is absolutely necessary that a business’ internal accounts are fair and

reliable, just as external accounts are to be so.
Mergers and Acquisitions

Mergers and acquisitions of firms and their related issues have often been
subjected to fierce criticism.

They have been condemned for charges such as destroying industries

and capital structures, causing unemployment, unsettling suppliers,
customers and traditional power relations.

They are even made responsible for many of the ills of modern
economies.

All these criticisms suggest how significant Mergers and Acquisitions,

buyouts and buying could be in the business world.
Code of Financial Ethics
As a handy guide to financial dealings, business organizations usually develop a
code of financial ethics. As per the nature of the firm, codes also will differ in
their focus, nature and extent.

Significant values in a financial code;

1. Practice and promote honest and ethical conduct.

2. Protect the confidentiality of non-public information about the firm.

3. Produce full, accurate, timely and intelligent disclosure in reports of the firm.

4. Act in good faith, with due care, prudence and diligence.

5. Comply with governmental laws, rules and regulations.