ASSIGNMENT

BUSINESS ETHICS
BUSINESS PSYCHOLOGY AND ORGANISATIONAL BEHAVIOUR

(A Research Paper Submitted to Jindal Global Law School, Sonipat)

Submitted To: Submitted By:

Mr. Chetan Sinha Bisma Khalid (21011673)

Ganya Bishnoi (21012009)

Adarsh Agarwal (21012129)

Madhur Aggarwal (21011521)

Yash Khatri (21011547)

Ishika (21011589)

B. Com LL. B (Hons.)

1st Year (2nd Semester)

Section A

O.P. JINDAL GLOBAL UNIVERSITY

Sonipat Narela Road, Near Jagdishpur Village

Sonipat-131001, Haryana

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 TABLE OF CONTENTS

A Brief Overview of Ethical Principles........................................................................................3

Ethics in the Workplace................................................................................................................3

Issues of Ethical Conduct in the Workplace...............................................................................3

How to Frame Issues in an Ethical Manner................................................................................4

An Approach Based on Utilitarianism.........................................................................................4

An Approach Based on Deontology.............................................................................................5

Ethical Principles in a Democratic Society..................................................................................5

The Importance of Ethical Behavior............................................................................................6

How to Activate Ethical Principles..............................................................................................6

Structure................................................................................................................................................6

Motivation......................................................................................................................................6

Professionalism..............................................................................................................................7

Organizational Ethical Issues: What You Should Know...........................................................8

Ethical Issues in the Finance Industry.........................................................................................8

Human Resource Management: Ethical Issues to Consider......................................................9

Ethical Issues in the Manufacturing Process..............................................................................9

Fairness.........................................................................................................................................10

Justifications on Why Fairness Is Beneficial.............................................................................10

Affective Consequences of Fairness...........................................................................................11

Potential Conflicts of Interest.....................................................................................................13

Difference between a Conflict of Interest and an Impropriety...............................................13

Conflicts of Interests Can Take Many Forms...........................................................................14

Codes of Ethical Conduct............................................................................................................14

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A Brief Overview of Ethical Principles

“Ethical theory is a branch of philosophy concerned ,with the relevance of all facets of human
activity. The objective of theoretical ethics, which is frequently referred to as normative ethics, is
to establish a distinction between right and wrong. This discipline of philosophy is highly
intellectual in nature and, as such, is rational in nature. It is the analysis and description of what
is right and what is wrong, just and unjust, and what is good and bad human behaviour, as well
as the analysis and explanation of what is good and bad human behaviour. It aids in the
development of the guidelines and norms that we use to analyse and guide meaningful decision-
making.”

Ethics in the Workplace

“Furthermore, it is referred to as business ethics or applicable ethical theory. Business ethics is a

branch of applied ethics or professional ethics that focuses on the moral standards and dilemmas
that arise in business. Also referred to as organizational culture, it is defined as the written and
unwritten rules of principles and values that are produced by a company's culture and that govern
its decisions and actions. It applies to all aspects of business activity in all circumstances, both to
individuals and to the entire enterprise. Fundamental business ethics can be stated as the capacity
to identify what is right and wrong in any given situation and choosing to do what is right.”

“The study of business ethics is divided into three parts: personal (on a micro size), professional
(on an intermediate scale), and corporate (on a macro scale). All three are intertwined and
interdependent. It is beneficial to differentiate between them since each is predicated on a little
distinct set of assumptions and requires a slightly different emphasis to be comprehended
correctly.”

Issues of Ethical Conduct in the Workplace

Organizations place a high value on ethics because their actions have the potential to have far-
reaching consequences on their communities. Individuals, as well as corporations and
organizations, are concerned about their ethical obligations. While acting in a way that
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contributes value without engaging in inappropriate behavior or having negative consequences
for any other group or individual, organizational leaders must be fully aware of the implications
of certain decisions and organizational trajectory choices, as well as ensuring that these decisions
and organizational trajectory choices are aligned with societal interests.1

“Numerous instances of ethical blunders have occurred in organizations when decision-makers

followed objectives that benefited them at the expense of the rest of society. The budgetary crisis
of 2008 was characterized by a significant amount of bad decision-making on the part of the
banks. A further example of people seeking personal gain at the expense of society is the Enron
fraud incident, which occurred in 2001. Extreme circumstances like this exist only to
demonstrate how devastating the repercussions may be when ethical considerations are
neglected.”

How to Frame Issues in an Ethical Manner

“One of the challenges of establishing a solid ethical basis in an organization is the fact that
there are several schools of thought on the subject. While ethics is a subject of philosophy, it is
also a branch in which the idealized viewpoint is both flexible and unpredictable. However, we
have at our disposal some compelling instances of ethical frameworks from a variety of historical
times. To ensure ethical conduct in the future, there are four schools of thought that might be
effective in defining strategic choices for the organization. Utilitarian, deontological, virtuous,
and communitarian views are among the viewpoints available.”

An Approach Based on Utilitarianism

“The most direct and clear ethical perspective, a utilitarian will always evaluate one question:
what is the best possible outcome for the greatest number of people? This strategy simply
evaluates the implications of one's actions on others and seeks to ensure that the best outcome is
attained for the greatest number of people.”

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“However, although this kind of outcome-based reasoning is valuable, it does have one fatal
weakness. When considering what is best for the greatest number of individuals, the notion of
'best' may become highly subjective. Accordingly, it is critical to establish words and define
definitions that allow for the reasoning to be relevant and quantifiable when using ethical
judgement in decision-making situations. Simply said, while following this ethical line of
reasoning, one must make certain that their terminology is well defined, as well as what they
mean by "good." “

An Approach Based on Deontology

“The essential concept in this point of view is obligation, which was popularized by Emanual
Kant. Kant was strongly opposed to the notion of utilitarianism for one simple reason: the goals
should not justify the methods in the first place. The ethical argument provided by Kant is that
moral maxims such as regard for one's fellow human beings and acceptable conduct serve as the
foundation for all ethical reasoning. It is these fundamental principles that must never be
compromised for the sake of the greater good. “

“Virtue Ethics is an ethic that is based on virtues. This point of view, which was popularized by
Greek philosophers such as Aristotle, holds that virtue is the ultimate standard by which all
ethical action should be measured. Virtue, in this context, is defined as an ardent desire to
undertake a certain act because of extensive deliberation on the significance of that act. The only
way to make an act noble is to do it well. Therefore, we engage in extensive deliberation about
the significance of a particular action or choice, to which we put a tremendous deal of effort and
thought. Following that, we may use our reasoning brains to work towards the flawless
performance of that act or action. “

“It is equally crucial in this school of ethical theory to reject the justification of a means by the
aims that the means is intended to achieve. An act should be committed because it is valuable in
and of itself, rather than because it is desirable for the sake of another. Each conduct is thus
thoroughly evaluated, both logically and virtuously, to guarantee that it is genuine, good, and
worthwhile in all aspects of life. “ “

Ethical Principles in a Democratic Society

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“Finally, we have communitarian ethics. The individual decision-maker should consider the
responsibilities that they due to the communities in which they are involved from this point of
view. When using this frame of reference, the individual decision maker will be able to
distinguish between his or her expectations and the repercussions of a particular choice in
relation to the requirements, demands, and effects of a certain desired community. “

“To behave ethically, one must carefully analyze all frames and have a clear awareness of the
consequences of a particular action. A crucial purpose of organizational management is to instill
a good sense of values and ethos in individuals at all levels of the company. “

The Importance of Ethical Behavior

“It is the direct depiction of the principles and values that govern both the person and the
organization that they represent when they engage in ethical conduct, whether at the
organizational, professional, or individual level. Businesses develop internal cultures that are
mirrored outwardly in their company values. These values have an influence on the relationships
inside the business, on productivity, on reputation, on employee morale and retention, on legal
issues, and on the larger community in which the organization operates. Because of this, most
firms develop a declaration of corporate principles as well as standards of behavior that all
workers must understand and follow to be successful. A major obligation shared by managers
and workers is that of motivating and rewarding good behaviors while also working to create a
workplace that is free of unethical activity. “

How to Activate Ethical Principles

Structure

“When it comes to the person, firms must put emphasis on educating and empowering their
employees so that they understand and adhere to ethical norms. There are four fundamental
components that corporations may use to strengthen individual ethics: “

A formalized set of ethical criteria that is written down (ethical code)

Management and staff both get training (ethical training)

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“A situation-by-situation basis is used in providing advice and consulting services (ethics
officers) A mechanism of reporting that is both confidential and immediately available (ethical
reporting)

In addition to alleviating much of the load on the person, equipping firms with these four
components allows each employee to understand what is suitable (and not) in their situation. “

Motivation

“Individual ethics, like other aspects of management, has a vital motivating component that must
be taken into consideration. When it comes to workplace behavior, both intrinsic and extrinsic
motives may be used to reward good behaviors and/or eradicate undesirable behaviors. “

“Whistleblowing, for example, is a behavior that receives a great deal of attention from the
media, both positively and negatively. Organizational whistleblowers are persons who discover
unethical acts in companies and bring the conduct to the attention of management or the
appropriate authority. To the contrary, a whistleblower who acts honorably and properly in
revealing a problem should be commended for their courage and honesty, rather than being
penalized or shunned. In most cases, when an employee comes out with information, it is
because the business has failed to empower and positively promote honest and ethical dialogues
inside the organization. “

“Another example is the practice of paying workers for acknowledging errors. If a mistake is
made on the assembly line and a batch of faulty items is accidentally produced, an employee's
reaction might be a variety of different. If a company punishes workers for making errors, the
employee is likely to be driven to stay quiet and not reveal the mistake to prevent penalties and
avoid further punishment. Alternatively, if a firm is ethical and intelligent, it will enable its
workers to accept responsibility for their errors and even reward them for stepping forward,
apologizing, and guaranteeing that no customer gets a faulty product. 2 Rewarding an employee
for making a mistake is counter-intuitive, but eventually, it results in the best conclusion for all
parties involved. “

Professionalism
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“At the end of the day, certain parts of individual ethics are deeply established in the person.
Attaining an intense sense of professionalism and understanding the ethical consequences of
specific professional actions are essential components of education, individual reflection, and
practical experience in the workplace. It is even more vital and relevant in certain occupations
than it is in other ones. 3“

“To increase traffic to a news website, journalists, for example, might simply gain more
recognition by fabricating phony reports about celebrities. An ethical journalist, on the other
hand, understands the ramifications of slander on the person being discussed and adheres to an
honest ethical rule of publishing only what they know to be factual (and not what they
speculate). Psychologists will protect the privacy of their patients because they understand the
ramifications of disclosing sensitive information about their clients. 4“

There are several instances that may be used, but the main point is that professionals are well-
versed in their subject, including the ramifications of making ethical blunders.

Organizational Ethical Issues: What You Should Know

“Organizational ethics is the way in which a company communicates its principles to its workers,
and it affects all functional aspects of a corporation. Organizational ethics is the way in which an
organization reacts ethically to a stimulus, whether internal or external. Organizational ethics is
the expression of an organization's principles to its workers and other entities, regardless of
whether the company is subject to governmental and/or regulatory legislation. There are at least
four factors that contribute to the promotion of ethical conduct inside an organization: 5“

A documented code of ethics and standards must be in place.

Executive, management, and staff ethics training is provided.

Availability for ethical consultation in a variety of scenarios (i.e., advice lines or offices)

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Systems for providing sensitive information.

Ethical Issues in the Finance Industry

“The budgetary crisis of 2008 prompted some critics to question the ethics of the executives in
command of financial institutions and regulatory authorities in the United States and Europe at
the time. Previously, financial ethics was given passing mention, because difficulties in finance
are often treated as legal rather than ethical ones. Among the responsibilities of finance and
accounting are fair trading practices, trading conditions, financial contracting, sales practices,
consultancy services, tax payments, internal and external audits, and executive compensation.
Finance and accounting also include the areas of finance and accounting. Particularly egregious
examples of corporate ethical and legal violations include creative accounting and earnings
management, deceptive financial analyses, insider trading, securities fraud, bribery/kickbacks,
and facilitation payments. “

Human Resource Management: Ethical Issues to Consider

“The human resource management (HR) system encompasses the recruiting, selection,
orientation, performance appraisal, learning and development, labour relations, including health
hazards. Disability, obesity, and attractiveness are all ethical issues that human resource
management must handle. Discrimination on the basis of age (preference for the young or the
elderly) is another ethical dilemma that the human resources management must address. “

“Sales and marketing ethics are critical issues to consider. Marketing ethics is concerned with the
principles, beliefs, and/or ideals by which marketers and marketing organizations should conduct
their business. Marketing redundant or dangerous products or services is one example of an
ethical marketing issue. Other ethical marketing issues include transparency about environmental
risks, product ingredients (including genetically modified organisms), potential health risks, or
financial risks; respect for consumer privacy and autonomy; advertising truthfulness; and
fairness in pricing and distribution. Some claim that marketing has the potential to impact

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people's opinions of and interactions with other people, meaning that marketers have an ethical
obligation to avoid distorting those perceptions and relationships with other people.6 “

Pricing procedures include both criminal acts such as price fixing and legal actions such as price
discrimination and price skimming. Pricing practices include both illegal and legal actions such
as price fixing and price discrimination. Greenwashing, bait-and-switch marketing, shilling, viral
marketing, spam (electronic), pyramid schemes, and multi-level marketing are just a few of the
promotional practices that have come under scrutiny. Attack advertisements, subliminal
messaging, sex in advertising, and marketing in schools have all sparked controversy in the
advertising world. 7

Ethical Issues in the Manufacturing Process

“Business ethics is often concerned with the obligations of a firm to ensure that its goods and
manufacturing methods do not unnecessarily damage others. It might be difficult to determine
the ethical course of action when there are few commodities and services that can be created and
used without danger. Consumers, for example, may desire things that are harmful to them, like
cigarette products. Production may have negative environmental consequences, such as
pollution, habitat loss, and urban development, among others. It is possible that the long-term
consequences of technology such as nuclear power, genetically engineered food, and mobile
phones are not fully known. While the precautionary principle may prevent the introduction of
modern technology whose ramifications are not completely known that concept would have
prevented the introduction of most of the modern technology since the Industrial Revolution.
Proponents of product testing standards have accused them of breaching the rights of both people
and animals in the process. “

Fairness

Employees who are treated fairly get significant organizational advantages while avoiding
unethical business practices and the resulting repercussions of their actions.

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 Justifications on Why Fairness Is Beneficial

The fair treatment of all workers and stakeholders is crucial to the success of a corporation and
the appropriate implementation of business ethics. When managers and employees are aware of
potential fairness traps, and they work together to ensure that all employees feel valued and
equitably treated, they can avoid a wide range of ethical and operational problems, while also
maximizing employee performance by creating an environment where people can flourish and
grow. Organizational Justice is a concept that is used to describe how a company treats its
employees. The notion of justice must be considered as a major pillar in the creation of a fair
environment to guarantee that an organization operates fairly (and what does not). The issue is
straightforward: how do workers view the conduct of the company, and how does this influence
both employee and organizational outcomes? The answer is straightforward: When attempting to
answer these concerns, there are three relevant angles to consider when contemplating fairness in
the workplace: 8

Distributive - To put it another way, the distribution of resources should be proportional to the
value of an individual's contributions. Of course, this is a more complicated issue than just
paying a wage. As a manager, you should make certain that credit, incentives, and rewards are
allocated equally.

Employees are looking for more than just monetary rewards. They also need a voice in the
decision-making process as well as shared responsibility for the choices made. When
establishing the method for a certain work group, it is important to include the viewpoints of all
members. This may result in much improved levels of satisfaction, efficiency, and justice.

All members of an organization must be treated correctly (from a social frame of reference) and
informed respectfully for the organization to succeed (from an informational frame). Workers
should be treated with respect at meetings, and they should not be kept in the dark when major
decisions are made.

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Affective Consequences of Fairness

Employees who are treated fairly experience a variety of overt and subtle consequences. The
most straightforward instances of beneficial outcomes that have resulted from a keen sense of
ethical fairness in an organization are as follows:

Higher levels of performance and efficiency — People believe that their contributions are in line
with their rewards.

Commitment - Employees who are pleased with their jobs are more likely to remain with the
company.

Citizenship - When there is disparity in how individuals are treated, it has the effect of dividing
people. This is quite risky, and it has the potential to swiftly diminish the beneficial effects of
watching out for one another.

Dissatisfied personnel are more likely to engage in behavior that is counterproductive to the
organization's defined aims, to put it another way. Inefficient behaviors such as failing to
complete duties or assisting certain work groups may rapidly accumulate and become a cause of
inefficiency.

The use of sick days, missing meetings, and disengaging from the company are all common
outcomes of inequitable organizational structures and practices.

Emotional Exhaustion - Dissatisfied workers struggle with feelings of uncertainty and

unhappiness, both of which are demanding on their emotional resources.

While there are several more instances of repercussions averted and advantages realized because
of an ethical operational approach, this provides a clear picture of why it is necessary and how to
frame managers' viewpoints to promote equitable action.

“Decisions are communicated in an open and transparent manner. Being transparent is doing
business in such a manner that it is simple for others to observe what activities are being taken.
Transparency, as it is applied in science, engineering, business, the humanities, and in a broader
societal context, indicates openness, communication, and accountability, among other

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characteristics. Transparency refers to doing business in such a manner that it is simple for others
to observe what activities are being undertaken. Example: A cashier making change at a point of
sale who separates a customer's large bills from the sale amount and places the change on the
counter in such a way as to invite the customer to verify the amount of change demonstrates
transparency by inviting the customer to verify the amount of change. When all decision-making
is carried out openly, this is referred to as radical transparency in management terms. All draught
papers, all arguments in favor of and against a proposal, all final conclusions, and the decision-
making process itself are made public and stored in a publicly accessible location for future
reference. It is the notion of eliminating all obstacles to—and facilitating—free and simple
public access to—corporate information that is considered radical transparency. Corporate
transparency is one radical transparency. This encompasses the laws, regulations, and procedures
that make it possible for people and companies to freely participate in, create, and enhance the
process while also facilitating and protecting those individuals and corporations. “

Companies should make a commitment to open communication since it is essential for the
development of relationships and a feeling of community. It is impossible to stay isolated and
shut off from one another if we are unable to convey our thoughts, views, and ideas. Open
communication also provides the opportunity for self-correction as well as group problem-
solving opportunities. Open communication promotes improved decision-making and error
correction by speeding up the repair of mistakes. Because of open communication, transparency
is created, which guards against abuses of power and promotes a safer atmosphere in general.

Potential Conflicts of Interest

A conflict of interest occurs when someone in a position of trust has conflicting professional or
personal interests with someone else in the same position of trust.

“The term "conflict of interest" refers to a situation in which a person or organization is

interested in numerous interests, one of which might potentially corrupt the reason for an action
in the other. The existence of a conflict of interest is distinct from the commission of an
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impropriety in its implementation. Therefore, it may be identified and willingly defused before
any corruption takes place, saving time and money. For many professionals, it is difficult to
avoid having conflicts of interest at some point in their careers. Although it is not always a legal
issue, it may become one when someone attempts (and/or succeeds in) influencing the result of a
decision to benefit themselves or their family. A corporation's directors and executives may face
legal consequences if they engage in conduct that violates their duty of loyalty because of a
conflict of interest. “

Difference between a Conflict of Interest and an Impropriety

There is a lot of ambiguity around these two circumstances. Someone who is suspected of having
a conflict of interest may assert that the conflict does not exist since he or she did not behave
inappropriately. A conflict of interest may exist even if no inappropriate activities are committed
because of it, which is the case in many cases. Using the phrase "conflict of duties" to describe
this situation is one approach to put it into perspective. As an example, the Institute of Internal
Auditors states that in the field of business and control the following is true:

When a business delivers two distinct kinds of services to the government that have competing
interests or look unacceptable, an organizational conflict of interest (OCI) may emerge in the
same manner (as mentioned above) in the domain of the private sector delivering services to the
government (I.e.: manufacturing parts, and then participating on a selection committee for parts
manufacturers). To reduce the danger, or perceived risk, of a conflict of interest in their
operations, corporations might use simple or complicated systems. As part of a government
procurement process (for example, in a US Government RFP), these risks are typically evaluated
to determine whether the risks provide a significant advantage for a private organization over its
competitors or whether they will reduce the overall competitiveness of the bidding process. 9

Conflicts of Interests Can Take Many Forms

Here are a few examples of the most prevalent types: It is possible to engage in self-dealing
when a controlling official of an organization leads the organization to enter a transaction with
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the official or with another organization that benefits the official; in this case, the official is on
both sides of the transaction.

Outside of the workplace, in which the interests of one job conflict with the interests of another.
When a spouse, child, or other close relative works (or applies for work) in a family business, the
business is a family interest, as is when products or services are acquired from a relative or a
corporation managed by a relative. As a result, many job applications include a question about
whether the applicant is related to a current employee. In this case, the relative may be barred
from participating in any employment choices. Nepotism is the term used to describe the abuse
of this form of conflict of interest.

Goods from friends who also conduct business with the individual who is receiving the gifts are
particularly appreciated (may include non-tangible things of value such as transportation and
lodging). It is possible to pump and dump a security by selling it and adding short positions, then
"downgrading" it or spreading unfavorable rumors to drive its price down. In addition to
inappropriate conduct that are occasionally labelled as conflicts of interests, the following may
be more appropriately classified elsewhere: Accepting bribes, for example, is corruption; using
government or corporate property or assets for personal gain is fraud; and having a conflict of
interest is not fraud.

Codes of Ethical Conduct

These aid in minimizing difficulties associated with conflicts of interest since they define out the
degree to which such conflicts should be avoided, as well as what the parties should do if
conflicts of interest are allowed (disclosure, recusal, etc.). In this case, experts cannot argue that
they were oblivious of the unethical nature of their unlawful action. Even more crucially, the fear
of disciplinary action (for example, a lawyer being disbarred) tends to keep unwanted conflicts
or inappropriate activities to a minimum when a conflict cannot be avoided.10

In recognition that codes of ethics cannot cover every case, several countries have created an
office of the ethics commissioner, who should be nominated by the legislature and report to it.
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