R.G.

ALFONSO GOVBUSMAN 2nd SEM 2020-2021

GOVBUSMAN MODULE 5:

Chapter 6: BUSINESS ETHICS

Expected Learning Outcomes

After studying the chapter, you should be able to …

1. Explain what business ethics is.

2. Discuss the purposes of business ethics.
3. Describe the scope and impact of business ethics on
a. the economy
b. society
c. environment
d. business managers
4. Explain the ethical challenges in today’s world.

BASIC CONCEPT OF BUSINESS ETHICS

Business ethics refers to standards of moral conduct, behavior and judgment in business. It involves
making the moral and right decisions while engaging in such business activities as manufacturing and
selling a product and providing a service to customers. Business ethics is an area of corporate
responsibility where businesses are legally bound and socially obligated to conduct business in an ethical
manner. Business ethics is based on the personal values and standards of each person engaged in
business.

PURPOSES OF BUSINESS ETHICS

Main Purpose

The main purpose of business ethics is to help business and would-be business to determine what
business practices are right and what are wrong.

Special Purpose

There are other purposes which are corollary to the main purpose. These purposes include the
following;

1. To make businessmen realize that they cannot employ double standards to the actions of other
people and to their own actions.
2. To show businessmen that common practices which they have thought to be right because they
see other businessmen doing it, are really wrong.
3. To serve as a standard or ideal upon which business conduct should be based.

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R.G. ALFONSO GOVBUSMAN 2nd SEM 2020-2021

SCOPE AND IMPACT OF BUSINESS ETHICS

Business ethics covers all conduct, behavior and judgment in business. This includes the slightest
deviation from what is right to illegal and dishonest acts that are punishable by law. It involves making
the right choices while engaging in such business activities as manufacturing and selling a product or
selling and rendering a service.

Business ethics is based on the personal values and standards of each person engaged in business. Since
individual values differ, what is ethical or unethical in making profit also varies from person to person.
There are still no uniform standards of right and wrong from which all businesses base their actions. The
businessman who provides fair business competition is the most likely to observe the business ethical
rules of conduct, behavior, and judgment.

Economic Impact

A business has an economic impact on society through the wages it pays to its employees, the
materials that it buys from their suppliers and the prices it charges its customers.

Social Impact

The social impact of corporate governance contributes to the ethical climate of society. If
businesses offer bribes to secure work or other benefits, engage in accounting fraud or breach
regulatory and legal limitations on their operations, the ethics of society suffer. In addition to a
deteriorating ethical environment, such as corruption may unfairly raise the price of goods for
consumers or the quality of the product or service compromised.

Environmental Impact

Environmental protection is a key area of business influence on society. Businesses that

implement good environmental policies to use energy more efficiently, reduce waste and in general
lighten their environmental footprint can reduce their internal costs and promote a positive image of
their company.

Impact on Business Managers

The concepts and principles for the ethical conduct in business are relegated to the managers of the
business enterprise. Thus, although the manager is expected to act in the best interest of the business,
he cannot be expected to act in a manner that is contrary to the law or to his conscience.

In particular, a manager should:

● Acknowledge that his role is to serve the business enterprise and the community;
● Avoid all abuses of executive power for personal gain, advantage or prestige;
● Reveal the fact to his superior whenever his personal business of financial interests’ conflicts
with those of the company;

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R.G. ALFONSO GOVBUSMAN 2nd SEM 2020-2021

● Be actively concerned with the difficulties and problems of subordinates, treat them fairly and
by example, lead them effectively, assuring to all the right of reasonable access and appeal to
superiors;
● Recognize that his subordinates have a right to information on matter affecting them, and make
provision for its prompt communication unless such communication is likely to undermine the
security and efficiency of the business;
● Fully evaluate the likely effects on employees and the community of the business plans for the
future before taking a final decision and
● Cooperate with his colleagues and not attempt to secure personal advantage at their expense.

DISCUSSION QUESTIONS:

1. What does business ethics mean?

2. What is the main objective of observing ethical behavior in business?

3. What is the scope of business ethics?

4. Describe the inherent conflict between ethics and the pursuit of profit.

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R.G. ALFONSO GOVBUSMAN 2nd SEM 2020-2021

COMMENTS / FEEDBACK

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