I'. .,, 2) Relative Terms: Ethics is a relative term. i.e.

, the concept of morality and

UNI T2 _Area of Business Ethics'··
1,1
. ·: ,.
2 ·:1· · -BUSI NESS 'ETH ICS · · .. ;:·. - - ...>.?ti;·..·.-.
' > ' ~ t• . _, • ·~ , · ,
, .. , ,. ., \. •.. • •
2.1.1. ~kani ng and Definition of Business Ethics
Busine:-s Nh ,rs tt>fr r~ to the t1pplication of ethics to business. To be more
specific. busmc-:-s l'.'t.111,s I) the ~tudy of good and evil, right and wrong and just
and un_1u<1 :i-.' lt,~ns c>f bus111cs~mcn. It may be defined as a set of moral standards
which p,•,Tk ◊"- nmg ·n_nd managing business is expected to follow. These
st:md:mb ~,.. mt"an lo govern the condu1.:t of business persons.
B11sm('.'~S ethics J) a form of applied ethics that examines ethical principles and
rnor;il N ethical problems that arise in a business environment. Business ethics
oons1s:b ('f a set of moral principles and values that govern the behaviour of the
,,rg;misation with respect to what is right and what is wrong. It spells out the
h.1,;1c ph1lcsophy and prioritie~ of an organisation in concrete terms.
According to Robert Kreitner, "Busi ness ethics is the sludy of complex
business practices and behaviours that gives rise to ethical issues in
0rganis:i1 1ons".
Accordin g to Raymon d C. Baumha rt, "The ethics of business is the ethics of
responsibi lity. The businessman must promise thal he will not harm knowingly".
Accordin g to Andrew Crane, "Business ethics is the study of business
siluation-;, :ictivities , anci decisions where issues of right ,rnd wrong are
addressed· ·_
Accordin g to Manuel Velasquez, "Business ethics is npplied ethics. It is the
:.ipplication of our understanding of right and good to institutions, transactions,
activities, and pur!>uits called business".
2.1.2. Nature of Business Ethics
Nature of business ethics i~ as follows:
I) Ethical Value: Dusine~s ethics is concerned with morality in business. In
today's world , business communily forms a large part of the society and its
actions are bound to have a direct impact on the well being and welfare of the
society. Therefore , it is neces~ary rhat bu~iness community conducts its
activities with self-check, self-control, self-sacrifice, keeping always in mind
the interest of community a1 large.
l
immorality differs from one individual to other or society. What is moral in
one soci~ty may be immoral in other. For example , taking or giving bribe is
considered as unethical in our society but may be a routine affair or just.
:A ::::·\ ignored by society in some other countries.
'., .. . ,.
3) Analytical in Nature: Its purpose is to analyse things as they ~e. The nature
of this type of study is known as positive study. Jt is both a normative and
positive science.
:'..1,~ •·•.,·,, ,; .,.:..:·;.~_·,,,;. \-.~-
4) Diagnostic Nature: After examining the various aspects of business
dealings, operations and management techniques, it is possible to know the
ethical or non-ethical pathology of the business.
5) Evaluative Nature: It makes an evaluation of business dealings, overt finn
behaviour and perfonnance and comes to judge whether a particular business
concern is ethical or not.
6) Prescrip tive Nature: It makes various prescriptions to eradicate the
unethical behaviour of the firm so that it can be ethical. It suggests many
corrective ways and means to purge the finn out of the morass of moral
wrongs.
7) Interest of Society: Business ethics implies that the business should do first
good to the society and then to itself. Business is an important institution and
has a social responsibility to protect the interest of all those groups like
employees, shareholders, consumers who contribute to the success of
business.
8) Businesses-Society Relationship: Business ethics set the terms and
standards to understand business-society relationship. lt indicates what
society expects from business and what it thinks about business.
9) Provide Framewo rks: Like an individual, business is also bound by social
rules and regulations. Business is expected to confine its activities within the
limits of social, legal. cultural, economic environment.
2.1.3. Objectives of Business Ethics
According to Peter Pratley - business ethics has two-fold objecti ves - 'It
evaluates human practices by calling upon moral standards, also it may give
prescription advice on how to act morally in a specific kind of situation '.
Objectives other than those given by Peter Pratley include:
1) To prevent malpractices in business. Ethics _ make business activities more
authentic .
2) To ensure uniformity in business practices among various business
enterprises throughout the country.
3) To make businessmen more aware, sensible, ,md liable to customer s, other
stakeholders, and society as a whole. _
4) To ensure conformity of business operations with the contemporary legal
framework (the Acts).
 1.rnsmcss tthics Area of Busin ess Ethic s (Unit 2)
5) To confi ne or restri ct harm fo\ operations which
affect adver sely long- term 7) Helps to Manage Values: Ethics identi fy preferred
intere sts of peopl e. values ~nu ,
6) T o teach the ethica organ isatio nal behav iours are aligne d with those
l mies and princi ples that are releva nt for busin ess. values. This effort~ :' '1
7) T0 re~orcling the value s, devel oping polici es and proce
tench the numag,er as lo how to 1\1n the busin ess
on ethica l lines. dures to al ign bc1ii,'.,\'
8) To _cnnb with prefen-ed values, and then tr?iining all perso nnel
k a busin ess firrn ti) ide, tify the areas which ,uc about the polic,,
no\ practising proc;; Jures. Mana ging value s in the workplace
ethic al princ iples a nd theref
ore can prescr ibe the neces sary ethica l code. legitimises man ,"
9) :·~ actions, streng thens the coher ence and balan ce of
help a firm to make busin ess decisi ons and· strate the organisation ' s Cl;:
gy which are moral ly impro ves trust in relatio nship s betwe en individuals 1111
t :i..1.r. JUSt and consi stent . and group s, su·,,.
!, :·:, .1;;:1 Lunsi ,tcnc) ia ,tanda rd, and qualities
of products, and ctdi\, ,;
greater sensitivity to the impac t of the enterp rise's
2.1. 4. Imp orta nce of Business Ethics values and messages '
lmpo rtnnc e of ethic s in busin ess is as follow s:
1) Help s
to Main tain a Mora l Cour se in Turb ulent Time
2.1.S . Sources of Business Ethics
s: Business ethics are Sources of deriving business ethics are as follows:
v ital for main tainin g moral s durin g turbulent times
where fundamental changes l) Religion: One of the oldest sources of ethica l
hav_e to be made in a busin ess. In gener a\, durin inspiration is religion. Mo:
g hard times, there is no dear than 1, 00,000 different religions exist across the globe.
cthica~ comp ass that can guide mana gers throug But despite doctrin
h difficult conflicts concerning differences ,· the major religions cover age on the
what 1s wron g or right. In such times , contin uing belief that ct11ics is a,
placing more attention on the expression of div ine will that reveal s t11e nature
busin ess ethics se.n sitize s staff and leade rs to the of right and wrong i1
way they should act. business and pther areas of life.
2) Culti vates Stron g Team work and Prod uctivi
ty: Ongo ing auent ion and 2.) Cultural Exper ience: Culture refers to a set of values
dialo gue regar ding value s in the work place , rules and standard
bui\ds openn ess, integrity and transmitted among generations and acted upon to produ
comm unity - critic al ingre dients of strong ce behaviours that fal'
teams in the workplace. within acceptable limits. These rules and standards
Empl oyees feel stron g align ment betwe en always play an important
their .values and those of the part in determining value, because individuals ancho
organ isatio n. They react with stron g motiv ation r their conuuct in the
and performance. culture of the group.
3) Supp orts Emp loyee Grow th and Mean
ing: Atten tion to ethics in the 3) Legal System: Laws are rules of conduct,
work place helps empl oyees to face reality appro ved by lcgislat1.1res that gu1l:
, both good and bad, in the human behaviour in any society . They codify ethica
organ isation and thems elves . Empl oyees feel l ex.pectalions and k-:t,
full co1\fidence, they can admit chang ing as new evils emerg e. But laws canno t cover all
and deal with whate ver come s their way. ethical cx.pectatio·
of society. Law is reactive, new statutes and enforc
ement always lags bchi1 .
4) Help s to Ensu re that Polic ies are Legal the opportunity for corporate expediency. Whate ver
: There are an increasing nu_mb~r ~f ethics that law codili ~,
lawsu its in regar d to perso nnel ·matte rs and it is binding on business. Socie ty expects busin
to effect s of an organisation s ess to abide by law a;,;
servi ces or produ cts on stake holde rs. Ethic al princi obeying law is presun'led to be ethical behav iour.
ples are often st~te-of-t~1e-
art legal matte rs. These princ iples are often applie
d to current, maJor ethical
iss ues to becom e legisl ation. 2.1.6. .Typ es of Bus iness Ethi cs
Types of business ethics are as follows :
1i
5) H elps to Avoid Criminal Act<, "?f
dete ct any violat ions and ethica l issues in
On~is sion": Busin ess ethics us~ally
--- --- --- ---
advan ce s? that they c~11 . be Types of Busine ss Ethics
a dd ressccI or rCportcd . In Ccl·tain cases· , when a busm ess has sufficient
k nowl cdoc of a p otenti al or an actual violat . Genera\ Busine ss Ethics
ion and fa ils to '.·epo1t t~ the
autho riti;s, this may b e regar ded like an ill.-:ga F unctim ,al Businc s~ Ethic,
l act. How~vcr, since b~smes_s
ethics preve nt such situat ions from oc~urring,_ they
potentially reduce tines 1f
a comp any is maki ng an effort of workmg ethica \ntemational Business Ethics
lly. and Ethics of Economic Systems
6) Prom otes a Strong I•ublic Image: Hav ino clear business ethics and
mana gi· ng t h em 1s consi dered as a good epublic re lat1ons st1.ategy. Tl1e
· .\ . . l) General Business Ethics: Featu res of gener
,1 so
. . h. al business ethics arc as fo:lo,' -
sim le fact that a comp any regula rly pays attent i) It partially covers the viewp oint of business, one
ion to all its et i:s may of the motives of\. t''
orira a benef icial positi ve to its consu mers. is to ascertain the basic aims of the corporation.
People norm_ally see th~ise If the chief ;\i:;: ·
p y • I ·
comp anies as va umg them more than their profits, as .
they stnve to function comp any is to expan d the return to the shareholders
, then it 11,.iy .:,,,
•
with t \1e greates t 11011our and integr ity. When busme 1• 1· d unethical to be concerned with the inclinations
· tly they aid in succe
. . . .ss et m:s . are app 1e somebody else.
and the 1:;
cons1 sten , . ssfu\\ y bmldmg a respo nsible company.
 ii) The cover ing term un,kr ne.ath whae the Arca of Busin ess Ethics (Unit ?.J
,·lhica l i-ights and liabili ties arc
alway s found to be ,·ontr ovcrs i:il h<.:twecn corpo 2) Organisational Goals · ·rh 33
ration s and comm unitie s b' ·
is kno wn as Cm ~'tlT:llL' Socia l R espon s ibility (CSR
).
va . · e o ~ect1v es of- an orga_m. sat1on
.
influe nce the
iii) The liabil ities conce rned with trusl, con~e l~cs of 1ts memb ers. Many times , mana gers may
plion s of strikeholcfer ,,ersu,< be forced to comp romis e
ctmc eptin ns nf shard wldc rs arc· the conce rns their perso nal ethica l value s in order to achie ve
which arc the ethica l 1ights organ isational goals. But the
:ind li:i hilHic s bc:twc t·n a corpo ration and its share g~_al may b~ tempe red by many value s. Leade rship,
holde rs. integr ity, know ledge and
1, ) F thical l' Ollcn ,1s conne cted with
skills ,_su'."1val are some of them. All these factor
the relati onshi p amon gst vario us s chang e the goals of an
orgam sat1on and conse quent ly expec ted behav iour
co mpan ies and corpo rati ons, c .g., hostil e from its memb ers.
takeo vers, and indus trial
c sp1on agl'. 3) Wor~ and ~ar~e r: Work refers to the job
and the tasks or respo nsibil ities
v) :'\l<1 11agc ment conce rns such as corpo
rate gover nance . ass~~Jated '.vith 1t. Caree r,. on the other hand,
repres ents a series of jobs or
, ·i) Poli ti c al hand- outs given by the comp anies pos1t10ns. Each work h as Its own value s and
. persons perfo rming the work
\'ii) Ame ndme nts in laws like the ethica l contr follow these value s.
overs y over the inncw ation o f a
crime of corpo rate mans laugh ter. 4) Supe riors: Most peopl e succu mb to pressu re from
vi ii ) The maltr eatm ent of busin ess ethics super iors in doing things
proce dures as' marke ting that they may consi der uneth ical other wise. For
inst rume nts. example, a secretary may tell
a visito r that the boss is out when he is actua lly
in becau se her·uo ss has told
2) Func tiona l Busi ness Ethics: It comp rises the her to do so. Many a time an emplo yee may
nume rous n::alis tic ethica l sign false docum ents due to
obsta cles and inc ident s, which o ccur in press ure from the boss.
partic ular opera tional fields of
corpo ration s or else whic h arc conce 5) Peers and Colle agues : A n indivi dual in
rned with iden tified busin ess a work group tends to confo rm to
:,peci alisa tions. It inclu dei; ethic s 01 accou nting the norm s of the group . He does so either to get
infor mation , ethics relate d to appro val or friend ship of his
mark eting mix, et hi<.:s of huma n resou rce mana collea gues. He adopt s the attitu des, belief s and
geme nt, ethics of produ ction, value s of the group to which
and ethic s of intell ectua l prope ny, know ledge he is assoc iated. Thus, the behavioura l stand ards
, and skill. of the peers and collea gues
exerc ise a signif icant influe nc e on the value system
3) Inter natio nal Busi ness E thics and Ethic of an indi vidua l.
s of Econ omic Syste ms: The
conc erns herew ith ·arc cluste red jointl y, as 6) Profe ssion al Code s: Big comp anies fomm !atc
they comp rise of mu ch exte::nsive their philos ophy or creed to
ideas from vario us peop le all acros s the globe guide the behav iour of their emplo yees. The
regarding tJ11:: issues of busin ess main objec tive of these
ethic s. It inclu des: docum ents is to build the comp any's image
by sho•,•/ ing the comp any's
i) Inter natio nal Busi ness Ethic s: Thou gh . conce rn for ethica l behav i cu r in the socie ty. Comp
busin e~s ethics took birth_ a~ a any polici es conta in a code
field in J 970s, but intern ation al busi ness ethics to guide action s that have an ethica l condu
did not comc out unttl late ct, e.g., no d isc rimin ntion in
I 990s. A n u mber of new realis tic conce rns recmi tment on the basis of caste, creed , sex and
emer ged. out . <~f- the re ligion . Profe ssion al bodie s
also have p rescri bed ethical codes to gover n the
mtem a t'10nal busi·n
· ess backg round Hypo thetic al matte rs like condu ct of their memb ers. In
• · • · ·h· -,
c1v1hsmg India , the Instit ute of Chart ered A ccou ntants
linka ge of the mora l value s attrac t addit ional elabo ration m , 1s area. of India , the Instit ute of Cost
and Work s Acco untan ts of India , the Instit ute
, s o t· 1·· · Syste n1s·. This indis tinctl y emph asised field, of Comp any Secre taries of
. . . Ethic •,cono m1c India. the All India Mana geme nt Assoc iat ion
") . ·~ . . .. . .. (AIM A), etc. have fo rmula ted
en . but conce rned with the
c once ivabl y not be t11e scgm t busm css c:tlucs, 1s profe ssion al codes .
. .. . . .
•v iler<.: b us incss e ti1 icists
· ·
c ndew o ur into the areas of polit1ca 1 mone tary
~ ' S lt!Jn nnd pn litic,i l phil.o sophy . conce ntrati ng
' . t , i v ·011gs of
.} .
on con:e c _s ,~nc , J • 2.1.8. App roac hes to Bus ines s Ethi cs
a vand y <' t·· sc I1crncs. fo r the ·sc'1lter
·•
i11<r of f111a11c1al adv,1n tagt.s.
"' There are fou r differ ent ways of deriv ing stand
ards of busin ess ethics :
J) Profi t Moti ve Appr oach: So me busin
ess peopl e argue that there is a
2, " j .•7 • Fac to rs j;ttluencing Bu8incss EHd~~s. svmb iotic relati on bet\vc cn ethics and busi ness
for a rrofit -orien ted busin ess
Dusm cs s et h'. - I
1cs 1,as• deep and . wide roots in soc1c ty. Some of thi! factors f~els adopt ing food ethica l polici es w ill natura
lly lead of foo_d busin ess_. In
. . other word s, good ethics result s in good busin
·
influ encin g busin ess c tl 1ics· '•ire
•·
given below .
T1 . e
ess. Mora l busrn ess practices
J) Valu e F•orm m _ ·•. g
1 1n,·tit ut101 1s· ,e va 1u .S)'Ste.
m of an indiv idual is sha ped by are profit able.
I' . 0 schoo l and the gover nmen t. Tl1ese
••
vario us institu twn_s , e.g., fa_mily, :c •~t d
insti tution s presc nbe what is go? 01 ..)J unish
for an indiv idual . Right behav iour This has also disad vanta oes which are given as
i) Many mora l busin cs: pract ices will have
follow s: .
ed This conti nues throu ghout an e_conomic advan tage ? nly m
is re"."' ankd wh!lc _w:on g l~ch;~ io~;c ~sir~s the long- run. In other words , this may not suit
certai ~ value s throu gh his _daily the short -term buSm_esses
the hfe of an 111d1v1dual as Th . :1uenc"s and may provi d~ littk incen tive for busin
of these instit ution s are mter- esses _ _that are des~g~ed
expe ricnc e in the long run. e _111 exclu sively to seek 3horc-te11n p rofi ts. When
V com petitio n grows , Sutvi val
relate d. would be a seriou s probl em.
·
 ii) Some moral business practic<"s
mny not be economically viable even in
the long-nm. For example, this might
be the case with retaining
workers who are int"fficient. as opposed
and nK,re efficient workers.
older
to replacing them with younger
Corporate ethics refers to that part of cmporate
standards and moral principles. In gene
conduct, the difference between right and wrong
business. which in,0 1,,, , ,
1
ral, it relates to human char~1.:,-,
I
and absolute <:•,ii·:-, '
ili) Moral busint"ss practices that .ire obligations existing in all business situa
good for business depend upon what tions . ln the opini0n of Stcr 1i.
produces profit. In different sci::ments, corporate ethics applies ethical reasoning 11
the same practices might not be to business situ:.ition s and ,!dii· i·· ,r
eronomicl\\l)' viable. 11ms, any overlap stems from a combination of distribu te
that exists between morality and justice (i.e., the issuing of re-,•. ., ,;·, • \
profit il- both limited and incidtnt:1\. contribution to corporate goals and valu es) 1
and ordinary common dccc~c'- ,
an absolute judgement placed on all activities
2) ). As John son and Scholts 1/..,._. .- I
Leg al Approach: Thi~ approach assum
e.~ that moral obligations in business ethical issues at the corporate level are frequ 1
ently referred to as corp,.,r:HL· ,•.; _
3~ restric-tc
d to what the law requires. Moral princ responsibility and are focu sed on the issue
iples are bey0nd the s faci ng individua l an,J curp"!
requirement of law. The unreasonableness entities when f~rmulating and implementing
of such a moral requirement is all strategies.
the more evident in societies that do have
a strong external source of morality.
3) Mo ral Obligations App roac h: The
third approach to business ethics is ;· , 2.2.2. Framework of Corporate Ethics
morality must be introduced as a factor Sadri, based on a survey of research literature,
that is external to both profit moti,-<! identified a set of nine .,tanda:,
and law. This is the view of most philo framewor ks of corporate ethics. These are briefly exam
sophers of business ethics. It is' ined below :
e x ~ mos t clearly in a well-kno 1) Self-Interest: It is in the interest
wn business ethics essay as "P1 o~er of the organisati ons to ~e seen as acting
ethical behaviour exists on a plane abov ethically. Thus , e.g., corporate ethics fonns a key element
e the law. Tbe law merely specifies of compttiti vcness
the lowest comm.on denominator of 1
in the United States.
acceptable behaviour. The most
convenient way to explore this approach
is 10 consider, among other. The fiye ··· 2) Utilitarianism: Utility is the wan t
supra-legal moral principles suggested by satisfyin g power of a good or .i
philosophers are as follows: · commodity, utilitarianism asserts that hum
i) Han n Prin cipl e: Businesses shou
ld avoid causing unwarranted harm. an beings maximise their plea.sun.:,
and minimise pain. In doing so, they act ratio
ii) Fairness Prin cipl e: All business nally and cons istcntlv. clmu,ing
practices should be fair. between alternatives.
iii) Human Rights Prin cipl e: Business · -
es should respect human rights. 3) Categorical Imperative: There should
iv) Autonomy Principle: Businesses shou be an ;honour cede' for corporntior.,
ld not infringe on the rationally just as there is one for the armed forces.
The constant endeavour to put t\. •
reflective choices of people. ethical and other interests of the corporati
on and nation above th~ oth·:
v) Ver acit y Principle: Businesses shou interests must prevail throughout the business
ld not be deceptive in their practices . world at all levels.
4) Social Approach: This approach enab 4) Duty: It is defined by the personal prefe
les the company in to operate such a rence of the acto rs. Ther<! could t.
way that it actively recognises the duty to oneself. It could be duty to a caus
central role that business plays in the e. It could be duty in the hope ,.,
suuc ture of society by initiating innovativ higher reward. It could imply placating
e ways to improve the quality of the ego of a devious sup~ ri0!
repaying past favours to him or just loyalty.
life of a broad community. It coul d be duty to on~' , bd', :
5) Justice: Every decision managers take
must be based on a str1.::t , {•.':
ethics to ensure fairness to all .
6) Neutralisation: Profossional and
personal integration is . 1 p~·r .,.
characteristic ·Nhich must be highly rated by
2.2.1. Introduction man agers.
Corporate ethics implies a critic 7) Legality: Orders need not be obeyed
al assessment of disco~rses _and pra~tic~s discarding one' s consciell\.:c. Tr::
organisations. It starts from a moral soci~log_y, from the ex1ste~t1a in must be individual thinking and judging, and
l, organisational not merely follo wing ordl! t~
life as it is perceived within the orga
nisation, from the ~th1cal paths. used by Ideo logical Con viction: Ideo logy
O£ganisational members. Corporate ethic 8) is germane tu all thoughts and ~- ·.:.11
s thus cannot av01d a_n analysis of the There must be emphasis on public inter
moral consensus in order. to be able to est in business ethics. ll \ :0ul,i r-
present realistic solutions to the moral wrong to give ideology a negative connotati
1

dilemmas with which the organisationa on .

l members are _confront~- The corporate
lan uage that is used to express organisat
ional cu~ture 1s d~temuned by ~orpor~te
val! es and their relative compatibility with
those or com~u~ors, o~ other mdustnes
in the given society and of the glob~ cultu
re of countnes m which the company
operates . Corporate ethics is the cornerstone
oflong-term success of a company.
9) Light of Day: If one cannot discuss one'
s decision freely and opc:nly. i: i, n,;1
ethical. There is no such thing as a labo
ur problem. Indeed, there is o!·.i:,
management problem. If the management
can discuss a dismissal .:a:;,: L•' .
worker openly, its decision is ethical.

2. 2. 3. C om po ne nt
Th e risks of uneth
s of C or po ra te-E tf iic s P
.
.
ical behavio ur . .
.
eth ic s 1s be co m mg
. .
mo re im
arc mc
~
rca~111g, so the il'·1pr ov emenl o us mc ss
,1l'l' as fo llo ws
portant. , of co
: ·•
Ap po inti ng a Corror
.'.ltc Eth ics
Off ice r
Est abl ish ing a Co rpo
ral! ! Cu de of
Eth ic~
Re qui tin g Em plo yee
s to Ta ke
Elh ics Traini ng
1) Ap po in tin g
a Co rp or at e Et hi
de fin ed co in clu de cs Officer: Co rp or
eth ica l conduct, leg
re sp on sib ili ty Th e
pr im ar y functions
se tti ng sta nd ar ds ,
bu ild in g f!Warene~s
th at ar e eit he r no t
co ns ol id ate d or ha
re su lt, ma ny or ga
ni sa tio ns pu ll these
Of fic er to en su re
lh at they receiv~
tre atm en t.
Th e Co rp or ate Ethi
cs Of fic er is a senio
an d direction in the
area of business cond
ba ck or ou nd s su ch
as legal staff. hu ma
line ;p er ali on s. Th
eir r~lc includes "in
values initiatives. co
mp lia nc e activities,
de cis io n- ma ki ng pr
ocesses at all levels
Ethics Of fic er ri'i
cs to establish an
dec ision -m ak in g
throu gh the actio
"c om pl ete ov ers igh
t of the ethics fu
de ve lo pi ng an d int
erpreting eth ics po
ed uc ati on an d traini
ng. and overseeing
2) Et hi ca l St an da
rd s Set by Board
re sp on sib le for the
ca re fu l an d re sp on
a fo r-p ro fit co rp or
ati on , th e bo ar d's
or ga ni sa tio n's bu sin
es s ac tiv iti es an d
sta ke ho ld er s, in clu
di ng sh ar eh ol de rs,
co m m un ity . In a no
n- pr of it co rp or ation
sta ke ho ld er s, pa rti
cu lar ly th e lo ca l co
Th e bo ar d fulfils
so m e of its re sp on
va rio us co mm itt ee
s. Th e bo ar d is no
ma na ge me nt an d
op er ati on s; th es e
or ga ni sa tio n's m an
ag em en t teatlJ,. Ho
su pe rv isi ng th e ma
na ge me nt tea m.
ro gr amrnbie . .
C(1111poncn 1~ . n 1o-atc cthti:~ nr og
' · • ra mm e
E1hic "I S um dar ds
Sci by Bo ard of
Dir t!ct ors
, Co ndu ctin g Soc ial
Aud11s
Includ ing Ethica l Cri
1eria in Em plo yee
Ap prn isa ls
ate eth ics ca n be br
oa ~J y
al co mp lia nc e, an d
co rp or ate social
of a corporate eth
ics policy in clu de
. and ha nd lin g intern
al reports - tasks
ndled we il in ma ny
or ga1lisations. As a
functions togeili-:r
um lc, a Corpor~te
su ffi cie m em ph as
is an J co he siv e
r-level manager wh
o provides ~ision
uct. Ethics officers
co me from dtverse
n resources. finance
. audiling, security
teg rating _their orga or
nisation•~ eth_ic s an
and bus111ess conduc d pr om ot ed an d co
t practices mt o the
of the organisation
". Typically. _the
en vi ronment that
en~o_u_rages _et~1cal
ns. Specific respo
ns1h1ht1es . mc1ude
nc tion, collecting
and _m1alys_mg da_ta.
licy, _dc :·elop1ng ~11
1.i ~dn n111s ten
ng eU nc
ethics mvcst1gat1on s ex am pl e, Pr oc ter &
s .
of Di re ct or s: Th e
Bo ar d of Di_rcc~ors
sib le ma na ge me nt is
ot ~n or ga ms au on .
pr im ar y ob.1ec11vc 1s to In
ov er se e th e
ma na ge me nt for
the_ ~enefit of all
cu sto me rs, supphe
1_s, an d th e
, L'le bo ar d re po rts
to a d1~fercnt se t of
mm un iti es that th e
no n- pr of it se rv es .
sib ili tie s di re ctl y an
d as sig ns ot he rs to
t no rm all y re sp on
sib le fo r da y- to -d
re sp on sib ili tie s ar ay
e de leg ate d to th
we ve r, th e bo ar d e b~ se a po rti on of
is re sp on sib le fo r
• .-vu v1 crnsm cs s Ethics (U nit
2)
Directors of th e co 37
mp an y ar c ex pe cte
d to co nd uc t th em
the hig he st sta nd ar ds
of pe rso na l an d pr of se lv ~s ac co rd in g to
ex pe cte d to se t th e es sio na l in teg rit y.
sta nd ar d fo r co mp Di re cto rs ar e .:ils o
complia nc e with law an y- wi de eth ica l co
s an d re gu lat io n. nd uc t an d en su re
3) Establishing a
Corporate Co de of
or ga ni sa tio n's key Ethics: A co de of
ethical jss ue s an d eth ics hi gh lig hts .in
principles that ar e id en tif ies th e ov er
im po rta nt to th e or ga ni sa tio n an d ar ch in g va lu es an
co de frequently in clu its de cis io n- ma ki ng d
de s a se t of fo rm al, wr itt en statem . Th e
of the or ga ni sa tio n, en ts ab ou t th e pu rp
its va lu es , an d th e os e
actions. An or ga ni sa pr in cip les th at gu id
tio n's co de of eth ics e its em pl oy ee s'
em ployees. Th e co de ap pl ies to its Di re cto
of eth ics sh ou ld fo rs, of fic er s, an d
risk relating to th eir cu s em pl oy ee s on
ro le in th e or ga ni sa ar ea s of eth ica l
re co gn ise an d de al tio n, prov id e gu id an
wi th eth ica l iss ue s, ce to he lp th em to
un eth ical co nd uc t, an d pr ov id e m ec ha
an d fo ste rin g a cu ltu ni sm s fo r re po rti ng
organisation. Th e co re of ho ne sty an d
de of eth ics he lp s accountabiLity in an
Ja w, fo llo w ne ce ss ar y re gu lat to en su re th at em pl oy
io ns , an d be ha ve in ee s ab id e by th e
an eth ica l m an ne r.
4) Co nd uc tin g So ci al Au di ts:
An in cr ea sin g nu
soda.I audits of th m be r of co m pa ni
eir po lic ies an d pr es co nd uc t
ide nti fy ac tic es . In a so ci al au di t, co
eth ica l lap se s th ey co m pa ni es
av oi di ng sim ila r mi m m itt ed in th e pa
ss tep s in th e fu tu re st an d se t di re ct
so cia . Fo r ex iv es fo r
l re sp on sib ili ty go am pl e, ea ch ye;u·
als an d tra ck s re 'In te l' se ts
anm1al re po rt on its su lts ag ai ns t th os
so cia l re sp on sib ili e go als . In te l's
em pi oy ee s, sh ar eh ol de rs , ty ef fo rts sh ar es th e in
in ve sto rs, an aly fo rm at io n wi th
go ve rn me nt of fic ial sts , cu sto m er s,
s, an d th e co m m un iti es in su pp lie rs ,
5) Re qu iri ng Em wh ic h In te l op er at
pl oy ee es .
s to Ta ke Et hi cs Tr ai
eth ics mu st be ni ng : A co m pa ny
's co de of
or ga ni sa tio n, fro m nt in ua lly co m m un
to p to bo tto m . Or ga ni sa tio ns ic at ed wi th in th e
ex am pl es of ho w sh ou ld sh ow em
to ap pl y th e co de pl oy ee s
th ro ug h a co m pr of et hi cs in re al
eh en siv e et hi cs lif e. O ne ap pr oa ch
em pl oy ee s to ac t ed uc ati on pr og ra m is
re sp on sib ly an d m e th at en co ur ag
pr es en ted in sm all eth ica lly . Su ch pr og ra es
,~ or ks ho p fo rm ats m m es ar e of te n
or ga ni in wh ic h em pl oy ee
sa tio n's co de of et s ap pl y th e
hi cs to hy po th et ic al bu
Ga m bl e re qu ire s all t re ali sti c ca se stu
the. topic of pr in its em pl oy ee s to ta di es . Fo r
cip le- ba se d de ci sio ke a wo rk sh op on
n- m ak in g, ba se d
co rp or ate co de of on pr in ci pl es in
eth ics . W or ks ho p th e
re sp on d to re al- lif e eth ica l pa rti ci pa nt s m us t
pr ob le de ci de ho w to be
fe ed ba ck to an . em m s su ch as gi vi ng ho .st
pl oy ee wh o is no ne st an d co ns tru ct
als o gi ve n ex am pl t m ee tin g ex pe ct at io iv e
es of re ce nt co m pa ns . Em pl oy ee s ar
de cis io n- ma ki ng . ny de ci sio ns m ad e us in e
Th e ex ist en ce of g pr in ci pl e- ba se d
fo m1 al tra in in g pr
ma rk et re du ce a co og ra m m es ca n al
m pa ny 's lia bi lit y in so is
th e ev en t of le ga l
6) In clu di ng Et ac tio n.
hi ca l Cr ite ria in Em pl oy ee
in cr ea sin gl y ev al ua Ap pr ai sa ls: Em pl
te d on th ei r de m on oy ee s ar e
th at ar e sta ted in th str at io n of qu al iti
e co rp or at e co de of es an d ch ar ac te ris
et hi cs . Fo r ex am pl tic s
th ei r em pl oy ee pe e, m an y co m pa ni es
fa irl y an d wi th re rfo rm an ce ev al ua tio ns
sp ec t, op er at in g ef on tre at in g ot he n;
fe ct iv el y in a m ul
tic ul tu ra l en vi ro nm
en t.
 Business Ethics
accepting. p~rsonal ac~unrnhi Area of Busine~s Ethics (Uni1 2)
lity t,, mc~t business needs.
d.:!\ elo;:,ing tht•m.selves and oth: continually
.-rs, and operating openly and
honestlv with 8i Creates Good Image: Corpora
sup?li~.r.-. rust\'n-iers. and othe . te ethics creatt: a oood imaoc for
r ~-mploy ees . These factors are
con;idered andbusmessmen. If the bus1.~e.ssme c, "
ti . b .
k ' U,1·
alOOfWllh n\l1It' traditional crit n follow all ethical rules. then the, ,, .:·_
ena used in performance apprais fully accepted a~d not cnhc1sed by
employee· s owl1'll contributio als, such as an the society. The society wili .t' '-'1 1
1.'('l:np\eti,:in of projt'Cts. and mai
n to moving the business ahe
ad, successful support those busmessmer! who follo
w this necessary code of cond uci
i
nte na. ~ of good customer rela · '
tions. 9) Smoothens Business Functio
ning: If the business follows all th~
2.2.4. e~c s, then the en:'ployees,. sha_ ,w,,...
Importance of Corporate Et
The imponar,cc of corporate ethi
1\ Shapes an Organisati
hics
cs can be explained in following poin
onal Cul ture : Corpor:;te
Or£anis atio nal culture that help
ts:
ethics shapes an
result m smooth funct1omng of
expand and diversify easily and
reholdtrs, cons~mers, dealers and
will all. be happy. So th~y ~v1ll give
the busmess. So, the business will
quickly. It will have more sales
su1; ["., .
full c~operat1on to the business. Thi,
o:u·
,· I
s to build responsible business profits. and ""ri...
sound ethical culture provid conduct, and a
es company leaders with a firm
~hi ch the y can craft sustainable foundation upon 10) Satisfies Consumer: Today,
business strategies that builds the the consumer is the king of the
cf employees and all other stak confidence business simply cannot survive with market. ..:11.
eholders. out the consumers. Therefore, the
2) Bclps in Sun iva l for Lon aii;:n or objective of business is con
sumer satisfaction. If the consume
rnai
g-Term: Corporate ethics help satisfied, then there will be no sale r is no-
the right thing while remaining com s companies to do s and thus no profits too. Consumer
petitive and getting the best prof satisfied only if the business follo will Ix:
If companies behave honourably it possible. ws all the corporate ethics, and henc
and ethically in their operations highly needed. e are
the greater good; if they sacrific focusing on
e short-term gains for their long
they are bound to gain terrific mil er-term health, 11) Facilitates Healthy Competi
eage and abundant returns through tion: The business must use corporat
productivity and profitability. and increased while dealing will) the com e etl1ic~
return on investment. petitors. They must have healthy com
the competitors. They must not peti tior. with
3) Prevents Business Ma do cut-throat competition. Similarl
lpractices: Some 1.1nscrupulo must give equal opportunities to y, th~)'
business malpractices by ind us businessmen do small-scale business. They m t1s!
ulging in unfair trade practice
s like black- monopoly. This is because a monopo ~"U".'
marketing, artificial high pric ly is harmful to the consumer,.
ing, adulteration, cheating in
measures, selling of duplicate weights and
and harmfol products, hoarding,
business malpractices are harmfu ~tc. These
l to the consumers. Corporate ethi
stop these business malpractices. cs help to
4) linproves Customers' Con
fidence: Corporate ethics .are ne~ 2.3.1. Introduction
the cus tomers' confidence abo ded to improve An ethical behaviour refers to indi
ut the quality, quantity , .pnce, vidual conduct that is recognised
products. The customers have etc.-, of the good in the context of a governing as right c•:
more trust and confid~nce m the moral code. It corresponds not only
who follow ethical rules. The ?usmessmen but also it conforms to a broader set to the h ".
y feel that such businessmen of moral principles expected by all
will not cheat by a segment of society. In othe pcop k l •·
them. r words, ethical behaviour is, or
ethics are, indicative of standard beh.aviour.d
S) Safeguards Consumers' behaviour. It is an ideal way of beh
Rights: The consumer. h.as man others. ll implies 1he idea l beh avm g w11:1
right to health and safety' righ y rights such as . aviour of individuals and grou
t to be info rmed, ngnt to choose, 0 orga nisation . The tenn is difficul ps in 111,
n"ht to be t to define as it is a relative issu
heard. right to redress, etc. But unethical to a person, group or e. So111cllH 1.;.
these right•;. Corporate ethi cs
are must to safegt,ar t ese ng ~t~:~
many businessmen d.o ~ot ~cspec~
~:i~ ethi cal) by others. within and outs
organisation may be viewed d1ff
ide the organisation. For exampl
erc111ly '·, (
consumers. . generally viewed as unethical, whi e, smk c: ,,
le it is ethical to workers demand
and facilities. Well-defined and wel mg fo 11 11 ,1/··
, nd Shareholders: Corporate l-communicaied common behaviou
6) Protects E.mpl.oye~ a l ethics are required to posi tively affects well-being of emp r~\ ctbit ··
· protect the interest o emp oye es shareholders, competitors, dealers, suppliers, loyees and their pc1fom1ance.
etc. Tl protects them from explo1t. ' . h f ·r trade practices.
In fact all busi1,L ,\ '.:thics are equ
at1on throug un ai ally applicable to ethical behavio
7) Develops Good Relations.• C orate ethics are important to develop good restrict' undesirable acts in the orga ur a, the)
orp . nisation. An organisation is made
, 1 d als and groups. Behaviour of all of incli vidu·
and fnend y re lauo . between busines s an soc1· ty. This will result in a
I ns .
regular supply of ~ood qfiua~,tfy g~:
s and services ate low prices to the society. internal and external activities and
participants within the organisation
transactions. Thus, ethical beh avio ctsH'.
affe
l It will also result m pro lls or e\usinesses thereby resulting in growth of
economy.
. ·
of observing, accepting, and resp ·
elicit desirable, accepting or positive
l ur consi,ii
ecting t 1e prescn·bed behavioural code s ih:11
·
behaviour.

\
 2.3.2. Setting Standards of Ethical Behaviour
Over .the past couple of decades. many organisations have made efforts to set o ut
specific standards of appropriate ethical conduct for their employees to follow.
5)
Codes or tlhics are voluntary statements that commit organisations, industiies, or
professwn:- lo specific- beliefs, vrtlues, and actions and/or that set-out appropriate
ethical bchav10ur for employees.
4 ) :emcmber_the Sabbath Day'. to Keep it Holy: The fourth commands us to
vere~cc Go~ by. act. God wished that a certai n day be set aside on whi~h
men direct their mmds to the service of the Lord.
Honour Thy Father and Thy Mother: Amongst all our rel atives there are
none closer than our father and mother. People are ought to love God first
~~en there father and mother. Hence, God has given us the Commandment ~
Honour thy father and thy mother".

There arc four 111ain types of ethical codes:
1) Organisational 01· Corporate Codes of Ethics: These are specific to a
I
I s ingle organisation. Sometimes they are called codes of conduct or codes of
I business principles, but basically these codes seek to identify and encourage
6) Thou Shalt not Kill: 1n the divine law which tells us we must love God and
onr neighbour, _i t is commandeq that we not only do good but also avoid evil.
The greatest evil that can be doneJq,one's is to take his life.
7) Thou Shalt not Commit Adultery: After the prohibition of murder, adultery

I 2)
etl11 cal beha v10ur at the level of the individual organisation.
Pr_ofe~sional Codes of Ethics: Professional groups also often ha ve their own
I guidelmes for appropriate c,:mduct for their members. Whilst m<Jst traditional
p~ofessions such as medicine, law, and accountancy have longstanding codes
of conduct, it is now also increasingly common for other professions such as
marketing, purchasing, or eugineering to haye their own codes.
is forbidden. This is fitting, since husband and wife are as one body . T hey ·
shall be two in one flesh. Therefore, after an injury inflicted upon a man in
his own person, none is so grave as that is inflicted upon a person with whom
oIJe is joined.
8) Thou Shalt not Steal: The Lord specifically forbids injury to our neighbour
in the commandments. This commandment forbids us to injure our neighbour

l
'./
3) !ndust~y Codes of Ethics:- As well as specific professions, particular
rndustnes also sometimes have their own codes of ethics. For example, in
many countries, the financial services industry will have a code of conduct
for companies and/or empJc.yees operating in the industry.
4) Programme or Group Codes of Ethics: Ce11air1 programmes, coalitions, or other
sub-grouping of organisations al50 establish codes of ethics for those participating
in the specific pro61Tammes. Sometimes, confomJ..ing lo a particular progranune
code is a prerequisite for usin6 a particular label or mark of accreditation.
j
2.3.3. Ten Con1n1andn1ents of Ethical Behaviour
The Ten Commandments are among the llldest codes given in Christian religion
established to reg ulate ethical behaviour. They deal with the fundamental
quandaries of human life. Although the commandments appear straightforward,
!heir demands are often hard to fulfil. In these commandments 'thou shalt' means
·you will'. The Ten Commnndncuts in the original form are as follows:
J) Thou Shalt have no Other Gods befoi·e Mc: The enti re l;iw of Christ
depends upon ch;irity and charity depends ou two precepts, one of wh ich
concerns l ovi ng ~od and th,~ other concerns loving our neighbour.
2) Thou Shalt not make unto Thee any Graven I.m:.ige: TI1is commandment says
that people s hould noc have any likeness of any thing that is in hea~en above, or
!hat is in the earth beneath, or that is in t11e waler under the earth. Tius means that
people sho uld nol have any wish that is impossible for them to perfom1.
3) Thou Shalt not take the Name of the Lord thy God in Vain: This is the
third commandment of the law. Just as there is but one God whom we must
worship, so tl1ere is only -:me God whom we should reverence in a special
manner. This, firs t of all, has reference to the name of God.
in his goods. This commandnJent forbids any worldly goods whatsoever to be
taken away wrongfully. ·
9) Thou Shalt not Bear False Witness against Thy Neighbour: The Lord has
forbidden anyone to injure his neighbour by deed; now he forbids us to injure
him by word. This may occur in two ways, either in a court of j ustice or in
ordinary conversation.
IO) Thou Shalt not Covet: There is this difference between the divine and the
human laws that human law judges only deeds and words, whereas the divine
law judges also thoughts. The reason is because human laws an~ ..made by men
who see thin gs only exteriorly, but the divine law is from God, who sees both
external things and the very interior of men. Therefore, this commandment says
that, to include not only the taking by act, but also the intentio n to take.
2.3.4. Gandhian Philosophy of Ethical Behaviomr
l\fahatma Gandhi, che Father of the Nation is now being held up as the master
strategist, an exemplary leader. and someone w hose ideas and tactics corporate
India can emulate. The doctrine of trusteeship is Gandhiji ' s contribution towards
the peaceful transfonnation of Indian Society or any society. It is a call for peaceful
revolution, a ne\i,, social order. It requires an integrated political, moral and
economic approach. It is a struggle both by masses and the leaders. According to
Gandhiji, the word non-violence meant much more than the absence of war or the
absence of violence. He proved that the true practice of non-violence is also about
people's attitudes, behaviour and relationships not only with each other but with
nature and earth as well. A more understandable definition is the "culture oi
violence" that has so obsessively dominated human life for centuries. Gandhi' s life
mission was to help change the "culture of violence" to a "culture of non-violence'"
the only way humanity could be truly civilised. .
 I dh
Gan 1. prefeJTed the term · Satyagraha because it gave the
breadth and depth. He always main. • d .t. . . th philosophy greater
.
•--· ·""" ..... uu1,,.,s
Area of Business Ethics (Una 2)
I
I t3:11.1e \Jlat o nly pos1 t1ve oug hts Ben efit s of
positive destiny and· he defined. ~os cou ld lead to a Aud itin g Eth ical Behaviour
I' compassion and other such
1ttve_thoughts as l?le , resp ect, und erst and ing, The re are many reasons why com ies cho .,
I pos 1ttv e acttons and emo tion s. He pan ose to understand and 1mr ro vc ti
violence that humanldnd practic would classify the ethical conduct. Recent accounting
es today into "ph ysic al scandals and legal and ethi cal trn1 ,
violence"; the first being the kind viol enc e" and "pa hav e enc "rc, /
I of violence that requ ires the use of phy
ssiv e
of are~
our age d companies to better account for
their actions in a wide r~:,' 11
.
and the latter the kind of violenc sica l forc e s incl uding corporate governance, ethi
e that we commit con scio usly and rela cs programmes, l' ll stl\u '
when we hurt people through unc ons ciou sly tion ship s, emp loyee relations, environmental
selfisluiess , and insensitivity ofte involvement. policies, and corrununn
touching them or seeing ~em n without even
, Gan dhiji set himself very high stan
practice ·of ethical leadership, stan dards in his
dards that we ofte n find diff icul t to Stak eho
prac tice . · lder s are now demanding increased transparency
active role through external org and are taki ng a lli"r,
Gt1ndhiji proved that moral and anisations that represent their
ethical beh avio ur is inex orab ly gov ernm ent regu intcre,i:
sincere understanding and pra link ed (o .the lato rs are calling on companies to improve
ctic e of the philoso phy of non-violence. Those who and make more decisions based on tbeir ethical concl u;;
claim that non-vio principles rather than laws alone.
!
len ce is a stra tegy that can be used when con
discarded would also believe tha venient and
t ethical and mor al beh avio ur too The asse ssm ent
when needed and discarded whe can be used of the ethical culture of an organisation
n not. Gan dhi wou ld tota lly ethi cal perf orm is necessary to impro 1 ,
point of view. He would say bot disa gree with this anc e and to document in legal proceed
h ethics and non-violence must bec effective ethics programme. ings that a finn has a;,
of the being so that one becom ome the law
es imbued with positive thou ghts
and positive atti tud es cul , pos itive de. e els
min
effective non-violence must beating in a: positive destiny . In other words, to be Benefits of auditing ethical behavio
ur are as follows:
internalised. I) The aud iting proc ess can highlight trends, imp rove
and facilitate communication and orga nisa tion al lear nin g,
2.3 .5. Au dit of Et hic al Be ha vio prov ides
working relationships. As such, aud
itin F
Controlling and
ur benefits for both organisations and
their stakeholders .
aud itin g are eva luat ion of a person, organisation, system, 2) Aud iting can help companies to asse ss lhe effectivene
~roc~ss, enterprise , pro ject or pro and ss of their programmes
duc t. The term most commonly refers to audits poli cies , whi ch often improves their operating effi
m accounting, but similar con costs, ciencies and redu ces
cepts also exist in project manage
management, and for energy con ment, quality
serv atio n. 3) Info rma tion from audits and reports can also
various activities so that the help to iden tify prio ritie s amo ng
An ethi cs aud it is a sys tem atic com pan y can ensure that it i~ achieving
evaluation of an organisation's ethi greatest possible impact with availab the
and performance to determine cs programme le resources.
whether it is effectiv e. The ethi cs 4)
"regular, complete, and docum aud it incl ude s The proc ess of ethics auditing can also help an
ented measurements of com plia organisation to identi fy
company's published policies and nce with . the pote ntia l risk s and liab ilities and improve its compliance
procedures". As such, the audit with the law,
opp ortunity tc mea sure con provides an 5) Fur ther mor e,
form ity to the firm's desired ethical the aud it report may help to document
audit can eve n be a pre standards. An with lega l requ the firm's compliance
cur sor to setting-up an ethics programme irem ents as :well as to demonstrate its prog
identifie s the firm 's cur ren t ethi in that it it prev ious ly faile ress in areas where
cai stan dards and policies and risk d to com ply such as by describing the syst
ethics programme can effectively area s so that an menting to reduce the likelihood of ems it is imple-
address problem areas. a recurrence of misconduct.
6) For organisations, one of the
Regardless of the breadth of the greatest benefits of the aud iting
audit, ethics auditing is a tool improved relationships with stak proc ess ,~
employ to identify and measure that com pan ies can eholders who des ire grea
their elhical commitment Many stakeholders have become war ter tran spar cnC' y
Employees, customers, investors, to stak eho lder s. y (cautiou s) of corp orat e
suppliers, community members campaigns. Verbal assuranc pub lic rel:t ti c: 0
media, and regulators are increasi , acti vist s, the es by corporate management are no
;
ngly demanding that companies sufficient to gain the trust of stakeho !or; ::·
accountable for their conduct. In be ethical and lders.
response, businesses are working 7) An ethics audit could have
accountability into their actions to inco rporaie saved scandals if it iden
, from long-tem1 planning, everyda millions of dollars in debt in off-bala tifie d and guc stio: 1.:'
making, and re-thinking processes y decision- nce sheet partners
for corporate governance and fina ncia and their employees, suppliers, hips . Wh en com p,iii:c'
to hiring, retaining, and pro l reporting and investors trust each other, the
moting employees and building cosr , c-
customers. The ethics audit pro rela tion ships with monitoring and managing these rela
vides an objective method for tionships are lower.
company's commitment to improv dem onstrating a 8) Companies experience Jess con
ing strategic planning, including flict with these stakeholders, whi
with legal and ethical standards and its compliance a heightenea' capacity for innovati ch ro1:,, 1•
social responsibility. on and relationship building .
., .
 ou:.nrc;:.:. 1.,uw.. .1
2.4. INDIV IDUAL ETHIC S . .
2.4.1. Introduction
Individual ethics are personal standards and values that determine how people
should act towards others when their own self-interests are at stake. What
constitutes ethical behaviour varies from one person to another. For example,
one person who finds a ~2.000 on the floor of an empty room believes that it is
okay to keep it, whereas another feels compelled to turn it in to the Jost-and-found
department. Further, although ethical behaviour is in t11e eye of the beholder, it
~su_aJ_ly refers to behaviour that conforms to generally accepted social norms. The
~nd1v1dual ethics of a company's founders and top managers are especially
important shapers of an organisation ethics.
·
An ind.ivi_dual's ethics are detennined by a combinatio n of factors. People start to
form ethical standards a~ children, in response to their perceptions of their
parents' and other adults' behaviours and in response to the behaviours they arc
ailowed to choose. As children grow and enter school, they arc also influenced by
peers with whom they interact every day. Dozens ·o f important individual events
shape people's lives and contribute to their ethical beliefs and behaviour as they
grow into adulthood. Values and morals also contribute to.ethical standards, as do
religions beliefs. Thus, the influence of one's family, peers and upbringing in
general are the basis of a person's indi victual ethics.
2.4.2. Motivators of Individual Ethical Behaviour
Motivators for individual ethical behaviour are as follows:
.Motivators of Individual Ethical
Behaviour .
Restraints upon Personal
Determinants of Individual
Liberty
Ethical Behaviour
Unselfish Concern Driven by
Self-Concern Driven by Social
Empathy·
Pressure
Personality
1) Restraints upon Personal Liberty: If personal liberty was completely
unrestrained then individuals need not'have any regard to the· interests of
others. In such a·society, driving a motor vehicle on any side of the road at any
speed would be perfectly pennissible. The cost of such liberty would be .
unacceptable carnage on the roads, which would be in nobody's true interests.
Thus, liberty involves the voluntary renunciation of certain freedoms for the
benefit of all citizens. For the most serious matters people agree (usually) to
accept legal restriction s upon personal freedom. In a democracy, this con~ensus
is implemented bY. the elected government through the various laws, statutes
and regulations which define standards of personal behaviour.
Arca of Busi~ess Ethics (Unit Z)
45
2) ~e!e~minants of Individual Ethical Behaviour: The study of what motivates
individuals to behave etrucally may throw some light upon whether the same
factors ~ ~e brought to bear on corporate etl)ics, on the basis that a company or
co1?°1:'~on 1s legally d~fined as a person with many of the rights and obligations
of mdiv1d~als. The quesllbn 'why_.should a person behave ethically?' has been
explor~, if'not fought over, by moral philosophers and others down the
centun~s. The range of answers is wide. indeed, but there are also three important
detemunants. The first two are driven by seemingly opposite human concerns:
i) Concern for others, ·
ii) Concern for self, and
iii) The personality of the individual.
3) Unselfish Concern Driven by Empathy: There is a social or caring impulse
· shared by most people which goes far beyond mere politeness and responds to the
interests of others, sometimes requiring people to relinquish individual self-interesL
When people eneounter somebody who is injured or distressed it may be
inconvenient to stop and render assistance but hopefully people have an impulse to
relieve that person's suffering or calI for help. This is not a requirement of the law
but falls within the scope of ethical behaviour (e.g., although in some countries it is
an offence not to stop and render assistance at the scene of a road accident). People
do this atleast partly because of the common humanity to identify or empathise
with the misfortune of others: In identifying or empathising people put t11emselves ·
in the place of the other and imagine how the other is feeling.
This social or caring impulse usually operates at the level of direct person-to-
_person contact. However, people can also be motivated to help indirectly
when, e.g., people give money or time to charities. . -
4) Self-Conce,;on Driven by Social Pressure: An equal and opposite motivation
for ethical behaviour derives not from _empathy or social concern for others,
but rather from self-concern. Titis is linked to the reason ·why some people
might abstain from illegal behaviour - the fear of social stigma or
punishment. In the same_way, people may decide to behave ethically in order
.• .not to lose moral standing in the ·opinion of society and to avoid the
· dis~p~ro~al of others. Alongwith this, . as a· result ·of upbringing or
s<:><:1alisation, people may feel ashamed or guilty .if they behave unethically.
Simply put, peopl~ would not feel comfortable if they did not behave in the
way society rucpecfs. This motivation to ethical behaviol,lf is driven by social
pressure and self-preservation, rather than empathy for others. · ·
5) ~ersonality: Innate human personality, whether by genetics or upbringing or both,
1~ an_irnportm~ determinant of each individual's ethical tendencies
in a given
SJtuation. Classical Daiwinism would· seein to exclude the human evolution of
morality and.innate ethical tendencies. On this basis all ethical behaviour would be
d~riv~ from u~ging and socialisation. However, few experts today would agree
with this extreme view. Social Darwinism and its offshoots.have come to provide a
more flexible model for human behaviour, one in which Darwinian competition and
reciprocal altruism (or cooperation) can go hand in hand. This works on the
principle that the cooperative aspects of human behaviour.have evolved alongwith
the competitive instincts in order to ensure the survival ofthe community.
 2.5. PROF ESSIO NAL. ETHIC S
2.5.1. Introdu ction
Profession al ethics are standards or cod.:;s of conduct set by people in a specific
profession. Profession al ethics helps a professiona l choose what to do when faced
with a problem at work that raises a moral issue. By setting-out expected
behaviours in the form of professiona l ethics, professiona ls work together to try
to uphold a good reputation.
People within each profession are expected to be respectful and honest in 1..heir
personal dealings as well. For example, it would be unethical for law enforcement
professiona ls also to be criminals in their time off the job. Professionals are also
expected to uphold professiona l ethics by nol getting involved in any type of
conflict of interest. A conflict of interest situation may occur when an individual
tries to accomplish personal goals as a result of being in a certain profession. For
example, a politician who uses government resources to get work done on his
personal home could b e seen as being involved in a conflict of interest.
Professiona l ethics training is often included in career education programmes. For
· example, medical assistants are trained on the many ethics issues regarding patient' s
confidentia lity. It is both unethical and unlawful to discuss a patient's health records
with others who are not involved in the medical care of the individual.
Ethical codes or rules in professiona l ethics must never go against laws , but rather
often coordinate with them. In general, professional ethics always include
upholding honesty and respect in the profession over personal needs, conflicts or
biases.
2.5.2. Purpos e of Professi onal Ethics
Purpose of code of conduct in professiona l ethics is as follows:
l) To Provide Guidelines: It provides guidelines to the professionaj. regarding
how he should perform his functions ethically in various situations. They
inform him of his moral obligations to society.
·'
2) To Help in Ethical Decision-Making: Codes serve as the starting. point for
ethical decision-m aking in case of ethical dilemmas.
3) To Give Inspiratio n: Codes of ethics inspires professiona ls to study them,
understand s them and practices them where appropriate.
4) To Provide Support: Codes aJways support professionals, who follow ethical
principles. If a professiona l comes under _pressure to act unethically, the
publicly ·proclaimed codes allow him to defend himself by saying that he is
bound by the codes of ethics of his profession. They support him legally also.
5) To Help in Deterrenc e ·and Discipline: They serve as the formal basis for
•investigat ing unethical conduct. Where such an investigation is possible, it
also acts as a deterrent for the immoral acts contemplat ed.
1iitt 4-.id(ffil,.$(.&WM
I~.
6) To Provide Basis for Education and Mutual Understan ding: ( \ ,c1 ..
be used in the education process of students and youag profcs,1t ,
111 1
r
classrooms or elsewhere, to prompt discussion and reflection on m1)rJI 1
and to promote shared understand ing among the profession als, public , , .,
1
as governmen t organisatio ns.
7) To Contribute to the Profession 's Public Image: Codes reflect a µ" · ·: \,:
1
image of ethically committed profession, and make the professional , , ., .
public more effectively.
8) To Help in Self-Regulation: It he lps profession als in maintai mng
regulation and self-contro l in ethical aspects of their profession .
9) To Promote Business Interests: Codes ·ensure- moral conduct among ,,
professionals in dealing with business. Such moral conduct cre.itc.~
atmosphere conducive to t.he dealings related to the business.
2.5.3. A1·eas of Profess ional Ethics
Professional ethics covers the followi ng fields:
J) Professional ethics for Journalists ,
2) Professional ethics for Engineers,'
3) Professiona l ethics for Accountan ts,
4) Professional ethics for Lawyers, and
5) Professional ethics for Doctors.
2.5.3 .1. Profession al Ethics for Journalis ts
Journalism is concerned with news management and it is a very responsibl·
public profession that brings to us everyday stories of right and wrong,, moralJ·_
and imrnoral_ity and many other sensationa l news and episodes. The basic purpo .
of journalism is to make the public aware of what is happening arou nd 111 !I.
areas of politics, economics and business, society, entertainm ent and sports.
Coverage is a critical issue in journalism . In some newspaper s and media. p0liu.
is given more prominenc e than social and economic issues, and in some othci:
the opposite is the main focus. The coverage is a function of many fauo,.
including the bias, orientation , reporter's attitudes, value and beliefs, resour,,,
and the culture of the media.
Ethical codes for journalists include:
1) The very bas ic ethical principle of journalism is to present the fa::ts ir. 1·
objective manner without any fear or favour. No subjective likin[;, r·
disliking should cloud the facts qf the case being -reported. A journali<t :, ·
neutral observer and reporter. He must forget his party affiliation or r,~Li ?1r·
feelings while reporting a matter of national or public interest. His rcr0r,-,
should be done dispassiona tely.
2) A journalist must not be biased or prejudiced . He should not use the r,,1: ·
discrimina tion against race, sex, political pany, religion, colour or crc.:J
European j ournalism ethics is particularl y against discriminatory _nr~:·
Th.is ,is also the principle of journalism in many countries.
 '';i_·!,;(~t:~•'i,. ;i:J: jt~iji.! !:;_•:i.ii:•,:,;,,:o•;,;::,3..4. I ,';°J.'_ _ _ _ _ _ _ __ _ __ _
Business Ethics Area of Business Ethics (Unit 2) 49
48
2.5.3.3. Professional Ethics for Accountants
2.5.3.2. Professional Ethics for Engineers
Ever since the serial failures of many giant corporate houses in the United States
Enginec1ing services are e.~sential for the industrial development of a country.
and the United Kingdom in the present century, the profession of an accountant
Engineers make infi astructure. technological outfits, communication network,
has become all the more critical and important. In India, the Chartered
fact0rics and equipment und the like. The importance of engineering profession is
Accountants Act of 1949 is the primary source of code of ethics for accountants.
increasing in recent years due to globalised and competitive industrial product
The basic codes of conduct for Chartered Accountants (CAs), as given in the CA
markets. It is felt that since enginee1ing is a crucial profession, there should he a
Act of 1949, are briefly enumerated as under:
code of ethics for engineers. There are two types of code of ethics - one for the
I) CAs is expected to work with professional dignity and prestige in discharging
general engineers to follow and the other for the corporate members. The code of
his duties. They are expected to work in a manner which is not derogatory to
ethics for engineers in India is formulated by the Institution of Engineers.
their profession.
2) They should work with diligence, honesty and independence, and it is
The fo llowing code of ethics is accepted as universal for the professional
engineers: essential for him to command the respect and· confidence of the general
public and he has his obligations and responsibilities to those _who rely on his
l) All engineers are supposed to follow the general ethical principles of honesty,
services.
justice and fairness, truth in all dealings, individual respect, trustworthiness,
3) A CA must have the necessary professional competence and should be a
reliability, human welfare, safeguarding of human life and property, working
person of character and integrity.
with competence and accountability and social responsibility.
4) A CA shall act in public interest and public responsibili ty must always be
2) Engineers will serve the society with a view to ensure social safety, creating a
alert in his mind.
social good and enhancing the public utilities, preventing the wastage of
5) The accountant should prepare the financial statements and auditing in a
national resources through the application of their knowledge, expertise and
dispassionately efficient and correct manner·so that the users can rely on the
professional competence.
financial documents prepared by him: These documents are used by tax
3) An engineer shall pay particular attention to safety in design and operation
I'.~
;ll
.
i
for all processes and products.
experts, management consultants, government and ·other companies.
6) The services provided by CAs are to be executed at the highest level of
4) An engineer should maintain the honour, integrity, dignity of his profession performance in accordance with ethical requirements.
so that he gains the tru~t of the people and the profession. 7) Objectives of the accountancy professiC'n are based on:
5) One of the important duties of the engineers is to en11ance engineering i) Credibility of information provided by CAs,
l efficiency by using less input tn produce a particular amount of output. This ii) Professionalism,
'1 concept is different from economic efficiency which aims at reducing cost of iii) Professional ethics to evoke public confidence, and
.i production to the minimum. iv) Best quality of services.
·i 6) Engineers are to promote the common tie that exists between the humanity at 8) The achievement of the aforesaid objectives will necessitate the CAs to observe
! large and the engineering profession in particular. The members should have a number of fundamental ethical principles. The fundamental p1inciples are:
-~ i) Integrity (straightfon•>ard and honest).
the highest regard for social justice, and fairness, and equality of
.! opportunities without any discrimination. ii) Objectivity (should work without prejudice, fear or favour to any one).
7) Engineers should not misuse their power Md position for private, sectional iii) Professional competence and care (diligence, skill and circumspection).
:/ and pcrsoual gain. Maximisation of social welfare should be their motto. iv) Professional demeanour (behaviour consistent with the good reputation
:1 of the profession).
8) They should neither solicit nor accept any financial or other consideration
v) Confidentiality (should not disclose the accounting information unless
from any one related to the project or assignment of which they are in-charge.
there is legal obligation).
1i,; .'
9) They should make statements or .give evidence in the cou1t of law in an
il ' objective and responsible manner and give opinion on the basis of proved
··~ '
2.5.3.4. Professional Ethics for Lawyers
knowledge, evidence and experience.
Bar Association of India provide following code of ethics for lawyers:
l~- I0) They should not act in any manner that may injure or damage the reputation l) A lawyer should maintain dignity, independence, and guarantee professional
of the Institution of E;-igineers or of the Institution where they are employed. confidentiality. In order to be ethical, he should follow the principles of
11) They should maintain confidentiality of any informatio~ with utmost conscience and humanity.
sincerity. However, if non-disclosure of such infomiation leads to 2) He must respect all the individuals involved in the court case. Human dignity
f: jeopardising public safety, welfare. and health, they may disclose th_c is the basis of all ethical reasoning. Everybody is to be regarded as innocent
information. in the eyes of law unless his guilt is proved beyond the shadow of doubt.
:ii;
~ ~
'
' -·
 DU~ IHL:.)S 1.:.lJll \,;.) Area ot· uusm ess b th1cs (Unit 2)
3) A lawyer should avoid all canvassing or solici 5) Medica1 Research: A medical practitioner may
tations for the clients. He or she car~ out, pm1icip:He Ill, \' <1·\ ,.
should not snatch away the client s from ano th er lawye · rc h
resea · cts funded by phan naceut1cal and allied health
r. . pro;e care
4) A lawyer should not solicit employment from .
medical practitioner is obliged to lrnow that the fu . tnclw,tnc'·
a prospective client.. . lfil ment of the folkw.111~ lltir
5) A lawyer should not get his clients' i) Ensure that the partic ular resea rch prop
ca~es published in the media, and give osal(s) has the due ptrn 1i,;_
interviews in connection with any sensa tional case. from the competent concerned autho nt1es;
6) When approached by a prospective client , ii) Ensure that such a resea rch proJect(s)
a lawyer can accept ~r refu~e t? . has the clcarancl' ,
accept any brief. However, once he accepts a case,
he should continue with 1t national/state/in stitutional ethic s comm it~ee/ bod1e
till the finalisation of the case. s; . . .· , . .
iii) Ensure that it fu lfil s all the legal req uuem
7) Lawyers are supposed to follow the legal codes ents p1esc r1bec. for mcu: ..
of the country like the Penal research;
Code, Criminal Procedure Code, Evidence Aci. . .
and so many other Acts and iv) Ensure that the sourc e and amount of fundi
Rules. Their interpretations are to be supported ug is publi cly cf1~closcd ,1 t 1i,
by similar cases alrc:1c\y beginning itself;
decided. They are supposed to have a thorough
knowledge of all the leg,11 v) Ensure that proper care and facilities are provi.
documents and procedures. ded to huma n volun tc·cr, .
8) Lawyers are to follow certain professional they are necessary for the research projects;
decency and norms while arguin.~ vi) Ensure that undue animal expe rimen tation
for a case or examining witnesses. In such cases s are not done and when thr .
, any immoral remark nr are necessary they are done in a scientific and a
personal attack is to be strictly avoided to huma ne way;
escape from the offence of vii) Ensure that while accepting such an assig
contempt of court. nment a medical prnctitionc
9) He should not ask his witnesses or client shall have the freedom to publish the result s of
to give false or wron g evidence. the research in the g rcarc ,
Perjury is a serious criminal offence. interest of the society by inserting such a claus
e in the MOU or any other
10) A good lawy er is to fight for truth and justic document/agreement for any such assignment.
e. It is not a good practice to take
time again and again and delay the case. Justice 6) Maintaining Professional Auto nomy : ln
delayed is justice denied. dealing with phan nace:itical an-::
11) Lawyers have a social responsibility
of not protecting criminals in the larger allied healthcare industry a medical pract ition er
interest of the society. They have to maintain shall always ensu re that (her ·
a balance between their legal shall never be any compromi se eithe r with
duties, social empowerment and the trust they enjoy his/her own profe ssi\)n ~I
. autonomy and/or with the autonomy and freedo
m of the medical in stituti on.
2.5.3.5. Professional Ethics for Doctors 7) Affiliation: A medical practitione r may work
for pharm aceutical :.1nt.l aliied
Medical Council of India, in dealing with pha1m healthcare indusllics in advisory capac ities, as
aceutical and allied health sector co nsulrnnts, as researcher s. ;i ,
indus try, provides that a medical practitione treating doctors or in any other profe ssion al capa
r shall follow and adhere to the c ity. In dCling so, a mecliul
stipulations given below : practitione r shall always:
I) Gifts: A medical practitioner shall not i) Ensure that his professional integrity and freed
receive any gift from any om are 111ain ta111e.j ;
pham1aceutical or allied healthcare indus try ii) Ensure that patients interest are not comp romi
and their salespeople or sed in any way :
repre sentatives . iii) Ensure ,that such affili ation are withi n the law:
2) Trav el Facil ities: A medi cal practitioner iv) Ensure that such affiliations/employments are fully
shall not accept any trave l facility transparent and di,cl,,,.::d
inside the country or outside, including rail,
air, ship, cruise tickets, paid 8) Endorsement: A medical practitione r shall not endo rse
vacations, etc., from any phan nace utica l or allied any d ru ~ or pr0,: ..:
healthcare industry or their of the industry publicly. Any study cond ucted
representati ves for self and family members on the effic acy or :~tlx:1,, 1~-c· ·i
for vacation or for attending sue~ produ cts_ shall be prese nted to and/o r
confe rence, seminars, workshop s, CME programm throu gh arpro rt"iate , cic·:11 ·1 :
e, etc., as a delegate. bodies or publi shed in appropri ate sc ientific _jo
urnals in a prope r way
3) Hosp italit y: A medical pract itioner shall
not accept individually any
hospitality like hotel accommoda tion for self and
fa mily members under any 2.5.4. Lim itat ions of Pro fession al Eth ics
pretext. The privilege of the profession to serve the
socie ty shou ld be priit,·, r....· I
4) Cash or Monetary Grant<;: A medical practi ~arcfully ~evelopin g codes of etbic s and cond
tioner shall not receive any cash or uct for profe ssion als. Thcs.: ,!:,' .. '
mone tary grants from any pharmaceutical and ec~me b1ndmg on mem bers and any deviatio
allied healthcare industry for n fro m the de fined path <11,1:.I.. i·
individual purpose in individual capacity under any punishable, or ~lse the privi lege to serve beco
pretext. Funding for medical mes the privil ege to e.xr i,l,t ·1
rescar~~- stud~, etc., can only be received throu ~recepts and nund set amon g all profession als
gh approved institutions by towa rds the ethical cotks ,.1,,c, 1·
~o~al1~es ~aid-down by law/rules/guidelines impro ve as they think it has follo wi ng li mitations·
adopted by such approved I) Cod · . · .
mst.It uuons, rn a trans parent manner. It shall alway . e~ are fom1 ed m gene ral word mg .
s be fully disclosed. and, henc e, cann ot he applii:,~ · ·
s1tuat1ons directly .
 51
Business Ethics
I
I
2 ) h is not possible to analyse fully and predict the full range of ~10r~I problems
that arise in complex situations. In these cases. codes form gu1delmes but not
solutions.
3) Codes represent a compromise between di ffering judgements.
4) Often codes cre.:ite internal conflicts. At the same time these conflicts help
development or modification of codes by debates and discussions.
5) They are not the final moral authority for any professional conduct.
6) Not all practicing eagineers are members of professional societie.s and are not
aware of the existence of codes for their society or their profession.
7) Even if they are members, the society cannot make the codes mandatory.
8) Even j£ some societies try to make them mandatory and force the members to
follow, many professionals do not like it and give some justification, by
b reciprocal ethics, for not following the codes.
" Social audit has various features which are as follows:
9) Codes cannot be reproduced in a rapid manner.
j guide planning and action.
2.6. SOCIAL AUDIT
ji4
2.6.1. l\1eaning and Definition of Social Audit
A soci~ audi! at~emp~s to measure a company' s actual social performance against
the social ?bJecttves 11 has set for itself. A social audit may be conducted by the
company itself. However, one conducted by an outside consultant who will
j impose minimal biases may prove more beneficial to the firm. As with a financial
audit an outside auditor brings credibility to the evaluation. This credibility is
;;. ~s.selltial if management is to take the results serious!;· 1nrl it thr general public is
to believe the company's public relations pr<iriciuncements.
Once the social audit is complete, it may be distributed internally or both
internally and externally, depending on the finn's goals and situations. Some
firms incl ude a section in their annual report devoted to social responsibility
activities; others publish a separate periodic report on their social responsiveness.
Companies publishing separate social audits include General Motors, Bank of
America, and Atlantic Richfield. Nearly all Fortune 500 corporations disclose
social performance information in their annual reports.
The need for social audit arises because of various reasons. In order to reach the
objective of enriching economic wealth for the shareholders, the firm does it at
chc cost of social and environmental disorder. And since many would not take
into account the social costs of such negative implications, their prices do not
reflect the real cost. Organisations do it more because of competitive reasons.
However, if the larger interest of society is to be preserved, there has to be some
consideration for social good.
According to Mondy, Sharplin and Premeaux, ·"A social audit is a systematic
assessment of a company's activities in terms of their social impact".
Area of Business Ethics (Unit 2)
53
Accord~ng to Cotton'. "Social audit is the process which an organisation
undertakes when assessmg and reporting on its social perfonnance·•.
According to Blake, Fredrick and Myers, "Social audit is a systematic ntte
"d 'f 1 ' mpt
to I e~ll y, ana y~e, measure, evaluate and monitor the effect of an organisation's .,
operations on society".
According to Turnbull, "Social audit is the process whereby an enterprise
measures and reports on Its perfom1ance in meeting its declared social
community or environmental objectives". '
2.6.2. Features of Social Audit
I) Getting the Evidence: Hard data from the households, schools and
communities as well as from the service itself are gathered systematically to
2) Community Participation: Communities not only co-produce the data, but
also through focus groups and workshops involving community
representatives, help design local and national solutions.
3) Impartiality: Community based audit by a neutral third party can help to
build a culture of transparency and strength service credibility.
4) Stakeholder Buy-In: All those \Vho have significant stake in the service are
actively involved through-out the audit - from the initial stages of design to
the implemcr:ting of community-led solutions.
5) No Finger Pointing: A special ::iuclit is intended to focus on system flaws and
programme content, rather than on individuals or organisations. Even
negative findings can be framed as a starting point for improvement.
6) Repeat Audits: · Several audit cycles are usually needed to measure the
impact and progress over time, and to focus planning efforts where they can
be most effective.
7) Dissemination of Results: A communication strategy, including feedback to
communities, mapping-out, and media dissemination is a part of every social
audit design.
2.6.3. Objectives of Social Audit
Social auditing can be used as a tool to provide critical inputs and to correctly
f assess the impact of government activities on the social well-being of the citizens,
assess the social costs and measure the social benefits accrued as a result of any
programme implementation. The performance of government departments is
monitored· through various mechanisms, in different states. However, these
practices do not capture adequately the broader social, community and
environmental benefits. Social audit has following objectives:
l) To monitor social and ethical impact and performance of the organisation.
 i •u>n,t;..'t.3 j,jUll\.. ~
Area of Business Ethi cs (Unit 2 )
2) To prov ide a b3si ; for shap ing man
agem ent strat egy in a soci ally resp o.n siblc 55
and acco unta ble \~ ay and to design strategies. 5) Environmental Protection: Grow ing wate
3) To faci litate orga a1sntional
r, a.ir, and environm ental pollu tion
!earn ing on how to impr ove social perf orm by vario us indu strie s in rece nt time s has
-l ) To faci litate the strategic man ance . 'env iron men tal prot ectio n' at any
led to a public outc ry dem andi ng
agem ent of institutio ns (incl udin g conc
their influ ence a nd soci al impa c t on orga ern for envi ronm enta lism, a few orga nisa tions ,
cost . Heed ing to the call of
nisa tion s and com mun ities). espe ciall y in developed countries .
5) To info rm the com mu nity . publ
ic, othe r orga nisa tions and institutions
abou t
the al!oc ation of their reso urce s (tim e
and mon ey) ; this refers to issue s of 2.6.5. Pri nci ple s of Social Au dit
acco unta bility, ethic s (e.g ., ethic al inve
stme nt), etc. The fore mos t prin ciple of soci al audi
t is to achieve continuously improvin
perfo rman ces relat ive to the chos en g
social objt:ctives. Eigh t specific key
2.6 .4. Sco pe of Soc ial Au dit principles have been iden tifie d from soci
al audi ting prac tices arou nd the worl d
Soci al audi t focu ses atten tion on gene which are as follows:
ral hum anis tic valu es whil e redu cing
trad ition al econ omi c and tech nica l valu l ) Multi-Perspective/Polyvocal: It aims
es to sub- syst ems within the larg er soci to reflect the views (voices) of all
syst em. If soci al issu es are igno red, it al thos e peop le (stak ehol ders ) invo
may prov e to be very cost ly to busi ness lved with or affec ted by the
Ij Soci al audi t. prim arily, ~ries to cove r the . organisa tion /dep artm ent/ prog ramm e.
follo wing area s:
i 1) Eth ical Issu es: Ethi cs are cont
emp orar y stan dard s of princ iples or cond 2) Com preh ensi ve: It aims to (eve
that gove rn the actio ns and beha viou rs ucts ntually) repo rt on all aspe cts of the
of indiv idua ls within the orga nisa tion. orga nisa tion 's wor k and perf orm ance .
The y offe r a basi s for dete nnin ing wha
t is righ t or wron g in tem, s of a give n 3) Part icip ator y: It enco urag es
situa tion. Ethi cs is best unde rsto od whe part icipa tion of stak ehol ders and shar
unet hica l cond uct.
n cited exam ples show relat ion with their values. ing of
I
I 2) Equ al Opp ortu nity : A seco nd
relev ant social issue whic h com es unde
r
4) Multidirectional: Stak ehol ders shar
e and give feed back on mul tiple aspe cts.
soci al audi t is the equi ty of treat men t in 5) Regular: It aims to prod uce
emp loym ent and a fair justi ce syst em soci al acco unts on a regu lar basi s so
in the orga nisa tion . Emp loym ent deci sion
s in an orga nisa tion shou ld be base d conc ept and the prac tice beco me emb edde that the
on mer it and abili ty and not on the basi d in the cultu re of the orga nisa tion
s of arbitrary quot as base d on sex, cove ring all the activ ities .
race , or relig ion.
6) Com para tive : It prov ides a mea ns
whe reby the orga nisa tion can com pare
- ·3) • Qua lity of Wo rk Life : The
quali ty of lite issue pe1:eins to several own perf orm ance each year and agai its
area s. Besi des dern ands for . a .5afe , he<)..lthy, and an-th e-job nst appr opri ate exte rnal norm s or
human work environment, benc hma rks; and prov ide for com pari sons
peop le are seek ing grea ter mea ning in to be mad e betw een orga nisa tiom
doin g simi lar wor k and repo rting in simi
their lives . Pay alone will not mee t thes e
requ irem ents . Grea ter resp onsi bilit y, grow lar fash ion.
th, autonomy, and rewards cont inge nt 7) Verified: It ensu res that the soci
upon perf onna nce are all factors that peop al acco unts · are audi ted by a suita
le arc demanding from the work plac e expe rien ced pers on or agen cy with no bly
and man agem ent is incre asin gly sensitive vest ed inte rest in the orga nisa tion.
to these needs nowadays.
8) Disclosed: It ensu res that the audi
ted acco unts are disc lose d to stak ehol
The re is nlso a grow ing dem and for emp
loye e assis tanc e prog ramm es. Fam ily and the wide r com mun ity in the inter ests ders
and nrnn iage coun selli ng, pers onal of acco unta bilit y and tran spar ency .
fina nce advi sing (Ban ks like ANZ
Grin dl:.y s, Cit1 Ban k, etc.) psyc holo gica
l coun selli ng serv ices and othe r such Thes e are the pilla rs of soci al audit, whe
re soci o-cu ltura l, adm inist rativ e, lega
assi stan ce progra111mcs are bein g advo
cate (; as part of social resp onsi bilit ies and dem ocra tic setti ngs form the foun dati l,
aime d at irnprovin;.l the qu.1lity of wor on for oper atio nalizing soci al audi t. The
k life for an emp loye e. social audi t proc ess is inte nded as a mea
ns for soci al enga gem ent, tran spar ency
4 ) Con sum crls ni: The re are und com mun icati on of info rma tion, lead
no effe ctiv e cons um:::r coun cils in Indi ing to grea ter acco unta bilit y of deci sion
a to prot ect rnakers, repr esen tativ e~, man ager s and -
agai nst food adul terat ion, dece ptiv
e prod uct mes sage s, and econ omi c offic ials.
expl oitat ion. It is said that mor e than
30 per cent of our mas s cons ump tion . 2.6.6.
good s are free ly adul terat ed. Ap pro ach es to Soc ial Au dit
Bus ines s has a spec ial obli gati on towa Any one of the fo llow ing appr oach es can
rds the cons ume r as the cons ume r is its be adop ted to cond uct a soci al audi t:
1) Inventory Approach: It is a
raison d'et re - busi ness exis ts to serv simp le listi ng and shor t desc ripti on
e and satis fy the need s of the prog ram mes whic h the firm has deve lope of
cons ume rs. [l is the prin cipa l duty d to deal with soci al prob lems .
of busi ness to mak e avai labl e to the
cons ume r item s of dail y need s in the 2) Pro gram me Man agem ent App roac
right quan tity, at a righ t time , pric e, and h: It is a mor e syst ema tic effo rt tc
of the righ t qual ity. mea sure cost s, bene fits and achi evem
ents of an orga nisa tion . It is "ar
exte nsio n of a trad ition al man agem ent
auclit to soci al prog ram mes ".
- ..
 56
nu~incss Ethic~ Area of Business Ethics (Unit 2)
3) Process Audi\ Approach
: Similar to above approaches,
information over four pha but with mor e 3) Macro-Micro Social Ind
ses i.e.. hist ory .ind backgr
ound, objectives, icator Audit: This type of audit requ
operations, and evaluation. of a company's performance ire
in terms of social measures (m
against macro-social mea sure il·i, '··•
4) Cost Benefit Approach: This is s. The macro-social fact ors incl 111 ,J

an atte
mpt to list all social costs and
incurred by an organisation in
term s of money .
S) Social Indicator Approach
: This pertains to utilising soc
suitable housing, good health
and job opportunities) to clar
needs 1nd then evaluating cor
porate activities in the light of
indicators.
2.6.7. Types of Social Audit
Various types of social audit
are as follows :
Types o[ Social Autlil
goals expected by society in udl' ,
benefit s terms of health, safety , educa1
;;,ccidents, pollution control 1, 11 ,
measures, etc . The micro- soc
measures of the perfonnan ce ial indie::,
of the company in those area
ial criteria (e.g., macro-social indicators. s nil' ., ,
ify community
One of the important problem
these community s with this approach is the non
reliable macro-social indi cato -ava ;1,11 "
rs . Does an increase in family
indicate better medical facilitie pla11 111nt· ,L
s? Further it is not easy to spe
individual actions initiated by
a company have actually improv
cify whct ii
of life of a community, such ed thL "'
individual actions may ultimatel
irrelevant, insignificant and som y be lah~I..
etimes, even unnecessary. In
a?proach helps all companies any c i·.•, 1
to evaluate their contribut ions
social life on a rational basis. in im1,!,

Social Process Audit 4) Social Performance Audit:

In developed countries, several
Financial Statements Form at ir!cluding church groups, univ intere,t, r1
Social Audit ersities, mut ual funds . consum
Macro-Micro Social Indicator regularly measure, evaluate and er ;1c.1. ,
rank socially responsi ve compan
Audit basis of their social performanc ies (,:
Social Performance Audit e. Regular opin ion poll s are carr
companies that initiate social ied-out le. ·
effons in a proactive manner

I
Partial Social Audit goodwill of the general public. and earn 11
Comprc.hcnsive Audit 5) Partial Soc ial Audit: In this case, the
specific aspect of its social pe1 company undertakes tl' n1easurc
fom1ance (e.g ., environment, cner
:\ \) Soc ial Pro ces s Audit: resources) because it considers !,'.y. hu11 ,
It tries to mea sure the effc.ctiv that aspect to be very imporlanL
\ of the organisation eness of those _activiti_es social efforts for the time being \)[ becau v· 1
wh ich are largely taken-up are confined to the area :
objectives. Corporate exl!culi to meet certain social i) Environmental Audit: In
vcs in thi s case try to examm~ developed countri es people prn\
. what they arc the companies try to pollute the est vi,,k 1
d . and how they are doing. environment and the compan ies
itn :in d circumstances lead
The method. mvolves four step
s. . .
comply with regulations but
also proac1ively explore oppn1
n.,, •··
ing to che starting of the recycle wastes into useful prod t11n;, ,
social audit ucts. An internal grm1p ron, titut
programme, unit concerned prepares a repo t'll 1
ii) List out goals of the social rt aho ut the way the environmen
of importance are being take tal 1·
... State how the organisatio programme, n care of. This repo11 is gem
111) , , . . I n is going. to meet s11ch goal s_, examined by an out side m1d :r., 11:,
iv) Qualttanve y eva Iua te what is ·1ctu ·1\ly done as agam am! itor to see whether air/w ah:r
, , ' ' , l what has been mea sures. release of mxic was p,,,
planned. • . tes, safet y regulati ons have b~cn
with or 1101. c, 1
2) Financrn.:1 Sta
, I< ,l ii) Energy Aud it; To conse:·v
tem ent s orma Social A11 ctil: In. this type. finaticiaL e energy sources, ene rgy audits
arc u 11 •.1::
statements show convent1on . 1 financial illformat1on plus 111t . . • to inve stigate how energy is obta
. . . . . Aboaut associ ates a man or111at,0 n. ined, consL1mcd, and preserve d.
. I . f'
1
regardmg socrn acbuvl1ues. I age men t consu tancy 1rn.,; iii) Hu ma n Resource Accoun
ting (HR A): The bas ic phil osup
oposed that the a ance s iee t should show a list of social as~els on one is that human reso urces are asse h y ,.. '
pr ' · . · ,· 1 ts and th at the investment in ,,,
side and social comnut• men ts, liabilities and equ ity on other side ·
.
Tl
te. training, and developing these -1
' .. . resourc es should be acco unt~d
income statement s·hou ld reveal social benehls, social cost. s an d 1 • ) asset. Conventional accounting f.
t ,e ne ! methods wri te-off invc ~11 ncnt , 1
soc1. a,' mco
. .
me prov1'ded by the company operations to t he sta t·t· commun ity ; capabilities and values as ope 1• '
, bl' d clients. This approach has · · d 't rating expenses and ther ~by und 1
f~;t~;~~~ c~ ::: confusion of com been cnt1·cise as many feeli
profit. The current value of
a company's human assets 1s 11-lt
r1·,
plicating issues further and defy while computing expenses/reve , •.•.'
ing eas y\ nues and, as a n!sult. ,ht.: b,11.. I',·
understanding. docs not portray the true and •
fair picture of the crn np:\ ," '
i affairs. '

\
 '"~" v, u u~111ess .t.t111::s (Unit 2)
6) Comprehen! .ive Audit: It tries to measure, verify and evaluate the total 59
performance of the organisation incluciing its social responsibility activities. 2.6.~. ~i~tation s of Social Audit
It focuses mai :lly or. 111anagcrncnt systems rather than or: the aGtions or events A social aud1t 1s a process audit rather tha d'
which arc not ~•> implmnnt. It aims at cvaiuating the qu .1li1 y of prc;.:esses and social audit determines only what an org ~ ant· au _it dof results. This means that a
the informatm;, on wh ic h organ isatio nal decisions arc t;'lk~.11. the amount of social good that results framsa th ton 1s oing in •
. . . soc1a1areas and not
. not made because:
resu Its 1s om ese activities A
· n aud'tt of social
2.6.8. I) They are difficult to measure If e O coll .
Benefits of Social Audit I . • 'b'' " owing a co n , S
Benefits of soc ial and it are as follows:
1) Enhances Rcpulation: The i;ifo11r,ation generated from a social audit can
emp oyment programme in a certain region
:r
there is f II . th pa~y s C/ST
rate ~y 4 per cent, it is difficult to measure how muct ~n ~ \! vs~lcnt crime
by this programme. e enct1t 1s caused
provide crucial knowledge about the organisations ' ethical performance and 2) Their classification under "oood" or "bad" ·
th ·
how stakeholders 1x·rc~ive the services offered by the organisations . The 1s not
o er words, the same social result may be classed universally accept d 1
b

social angk in the delivery of services, real or perceived, can be a major · · d

as " .,.. ~ · n
"b
one op1mon, an as ad,. according . to another. ' goou according to
factor adding to the reputation of the organisations and its functions. In an era
3) Most _of _them occur outside the organisation, making it difficull for the
where all the ser\'ice~ are benchmarked and where citizens are becoming
orgamsat10n to secure data from these outside sources.
more aware about the ~ervices, organisations are also aiming towards
building their reputations. Social auditing helps the organisations in
identifying the problem areas and provides an opportunity to take a proactive 2.7. EXERC ISE . --- . . · .
stance and create solutions. J /'! ♦ ~ <' '
I

l)
Define business ethics. Discuss its nature.
2) Alerts Policy-Makers to Stakeholder Trends: Social auditing is a tool that 2) Write short notes on:
helps managers understand and anticipate stakeholder concerns. This tol>i i) Social audit
provides essenti~l information about the interests, perspectives, and , ii) Individual ethics
iii) Corporate elhics
expectations of stakeholders facilitating the interdependen cy that exists : iv) Gandhian philosophy of ethical behaviour
between the governme11t and the community. i ;!
Discuss the purpose and limitations of professional ethics.
What are the different types of business ethics?
3) Affects Positive Organisational Change:· Social auditing identifies specific : 5> Outline the sourer.~ ~nd factors influencing business e:h.ics.
organisationa l improvement goals and highlights progress on their r ~i
State the meaning and benefits of audit of ethical behaviour.
implementat ion and completeness . Also, by integrati_n g social audit into \ 8) Describe the benefils and limitati.:ins of social audit.
Elaborate the objectives and importance of business ethics.
existing management systems, employees responsible for ~ay-to-day /
decision-ma\< ing can mqre effectively consider stakeholders' issues and !
concerns.
4) Increases Accountability: Due to the strong emphasis on openncs~ and \
accountabilit y for organisation, the inform~ti_on ~isclosed needs to be fa)[ a~<l ;
; , 1· ·'tiJ1't1·11g uses ext,'rnal vcnf1cat1on to validate that the social ;
a-:curate. S o C"' ... · - . .. · \
LISI ;., aiid Clllnpletc
• .· , n
, An externally verified audit can
1• • •
auG1t iS lllC 1 . . add I
ci.::dibility to the department' s eff0t.l~. Bui_the greatest 1\emon~tra~on _of a\
socia· 1 au ct·it ·~ :rn tlien ti·c 1·ty must be s,·cn m how the pertorm,rnc,. ni the .
• · ·
orgar11sa1.1on 1rnp, oves
objectives.
-
. ., . . .
. over time in relation to its m1ss10n. values, and
I
\

~.•-- ncn11ng and Re-1.<'ornsing Priorities:

. • .... , (> · , - Social auditing could
5) Ass1sls m ;_ . . .. . .
· ,oo 1 to h e Ip ganisations re-shape their onont1cs m tune. w1tn1
· be a useful ..
or , . , · •
people's e,.prctJtior.s
. .,. . ·d c·, r·dence in Social Areas: Social audit can enable
6) Provides lncr.,.,,s<. .on l
soc1a, are;,1s t ,... , . h'ave b.,
. . . .
. h . , tcr cinlidcncc 10 . ' . t·, .
orgamsat101J 10 act wit g1ea_ ecn
.' , . . . ,.
neglected in the pai;t 0r have been gtvt•n ;1 lo'.1er pnortty .