Ethics Chap 1

Business Ethics & Corporate Governance ([. Y.B.B.l.) (Sem.
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1. DEFINITION, MEANING, NATURE OF ETHICS
The word •ethics" is derived from the Greek word ethos (character), and from the
Latin word 'mores' (customs). Derived from the Greek word "ethos", which means
•way of living", Ethics is a branch of phil~ophf ~hat_is conc~ed with human conduct.
It consists in a code of conduct of human beings hvmg m a society.
Ethics examines the rational justification for our moral judgments; it studies what is
morally right or wrong, just or. unjust. Together, they combine to define how individuals
choose to interact with one another. In philosophy, -ethics defines what is good for the
individual and for society and establishes the nature of duties that people owe to
themselves and to one another. It aims at individual good as well as sc:,cial good, the good
of mankind as a whole. . ..
( Ethics is an attempt to guide human conduct and it is also an attempt to help man in
lea~g good life by applying. moral principles. Ethics refers to well based standards of
right and wrong that prescribe what humans ought to do, usually in terms of rights,
obligations, benefits to society, fairness, _or specific virtues\· Ethics is related to issues of
propriety, rightness and wrongness. What is right is ethical and what is wrong is
unethical. The words 'proper',' fare' and 'just' are also used in place of right 'and 'ethical'.
If it is ethical; it is right, proper, fair and just. Ethics is a matter of practical concern. It tries
to determine the good and right thing to do; choices regarqing right and wrong, good and
evil; questions of obligation and value. Ethics is to consider the practice of doing right
actions or what we may call the a~ of living the goodlife. .
It is also defined_as the science of the trlghest good. Mackenzie defines ethics as "the
study of what is right or go,o d in human conduct" or the "science of the ideal involved .in
human life". So, it is clear that ethics is the. study which determines ·r ightness or
wrongness of actions. · .· · · · . ·
· A~plied ethi~s. is _t~e practice of ethics that aims to guide the _moral judgment
goverrung the decis10ns we make in all areas of our lives .Issues of right and wrong are
related to one1 s values. In the context of ethics, values are our standards of right and
wrong. · ·
I(;~$ NATUREOFETHICS . .
. 1. Ethics aims at systematic knowledge
So,_ .ethics is_ a scie~ce. Every sc~ence is concerned with a particular sphere of nature.
As a science ethics has its own particular sphere; it deals with certain judgments that we
make abo~t human conduct. It deals with systematk explanation of rightness or
wrongness m the light of the highest Good of man. ··
2· Ethics is a normative science
posi!~: ::'c';'.e! w:::a1~ught to be done ~ather than wh~t (s the case. It differs from
with what is It deJs with f citence,d.naturla~ science or descriptive . science is concerned
· th . · · ac s. an exp ams them by their c I ·· •
Rather it deals with value ~!
ere is no question of jud in its b" · .
f ~c!s
O 1
~anyway.
. auses. n positive science
ethics does not deal with fact.
value, while positive scie~ce d:a~;e, i_ is _c ear that ethics is concerned with judgments of
positive science but a normat· . with Judgments of facts. That is why ethics is not a
· ive science. ,
No1:'ffiative ethics deals ·th .
actions. to be right or wronw~ F:::::ids or n~rms by w~ch we can judge human
normative sciences, because lo~c and t1f logic, aesthetics are also considered as
truth, beauty and value are the three id::~s :£ ~re concei:ned with truth and beauty. So,
gic, aesthetics and ethics respectively.
Introduction to Business Ethics 3
3. Ethics is not a practical science

PrJlctical science deals with means for the realization of an end or ideal. It teaches us
to know how to do. As for instance, medical science is a practical science. It concerns with
the means in order to remove the causes of ailments or diseases. But ethics is not
concerned with means in order to achieve moral ideal that is rightness or goodness. It
does not teach us how to live a moral life. So, ethics can not be regarded as a practical
science.
4. Ethics is not an art
Ethics ~oes not teach us an art as to how. to lead a moral life. Rather it helps us to
justify rightness or goodness which can lead to the supreme goal of human life that is to
realize the summum bonum of human lif~. So, ethics is not a me~ to the highest ideal of
human. life. But, like the practical science, art is also a means for obtaining a goal. So;
ethics is neither a practical science nor an art. ·
Again the question is, is there any art of conduct? The reply is, in case of morality this
is not true. Art especially deals with acquisition of ~kill to produce objects, while morality
deals with motive, intention, purpose and choice which are considered right or wrong in
the light of goodness. Therefore, morality consists'of goodness, which is really an in_trinsic
end. .
5. Ethics deals with moral judgements
Ethics is a science of values as it discovers the forms of conduct or behaviour, which
have the character of oughtness. Ethics deals with moral phenomena and it observes and
classifies them and explains them by the moral ideal. It distinguishes moral judgments
from logical judgments and aesthetic judgments and reduced them to a system. So, we
may define the nature of ethics as scientific. ·
K MEANING OF ETHICS AND MORALITY G'),

These two terms are similar in nawre. Ethics and morality are essential in conducting
business activities in smooth manner.
Morality
Morals are how to judge others. M~rals have a greater social element to values and
tend to have a very broad acceptance. Morals arE\..more about goods and bad than other
values. We thus! judge others more strongly can''aescribed as a core set of values and
belief that act as guide while formulating course of action. ,
Ethics
Ethics are professional standards. Ethics are thus internally defined and adopted,
while morals tend to be externally imposed on others. E~~ics is a branch of philosophy
concerned with human values and conduct, moral duty arid obligation, Basically ·ethics is
concerned with what people might describe as right and wrong human conduct.
Distinguish·between ethics and morality
Morality ,
Ethics
1. Meaning
Ethics relates to what is good or bad, Morals relates to principles of right
moral duties and obligations. and wrong.
2 Derived from
The word ethics is derived from .Iatin The word is derived from latin word
word'Ethos;whichmeanscharacter. 'Mos' which mean customs.
, ,,.,,.,,. . E h. & Corp
Business t ,cs
· orate Governance (T. Y.B.BJ.) (Sern.~ V)
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3. Nature
this arise
Morals are accepted . due to authority ---
. Ethics are accepted ~a~se
frompersonallyaccep e
t d principles.
.
which may be religious or cultural .
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4.Scope Morals are in small scope then ethics ---
Ethics js much w1'der in scope. It it address human need for belonging.
. dards of a group or
ex~es the :!:mine whether this
::;~:.ds t:e reasonable or not in certain
situation. -
5. Expression
Moral norms are usually expressed as
Ethical norms ~e comparatively rules · and statements. For
abstract it cannot be described in general general
example : Always tell the truth.
rules and statement. -
6. Absorption .
It is adopted or absorbed by an Morals are typically adoped or
individual gradually by taking reasonable absorbed since childhood from family,
decisions in appropriate site. friends, schools, religion, religious leaders
and so on.
Jt TYPES OF ETHICS
1. · Personal Et1'ics
.. .
· .
. . .,
H..;
Introduction
Personal ethics is a category of philosophy that determirt~s what an individual
believes about morality and right ,arid wrong. This is usually distinguished from business f
etJ:tlcs or legal ethics. These branches of ethics come from outside organizations or
governinents, not the individual's conscience., These branches of ethics occasionally
overlap. Personal ethics can, affect all areas of life, including family, finances and
relationships. · ·,
• 'Personal ethics' is rarely identified by philosophical irtstitu!ions as a formal area for I
philosophical investigation, but there is little doubt that the history of philosophy, west 1
and east, includes much work about individual choices, good and bad ways of living, and ,
articulating what may be considered guides to good living on a personal level. That is, of
course philosophers addressed good and bad values in terms of politics, culture, religion,
and soon, but they also took seriously individual struggles and values involving such
ordinary things as how to eat and how much to eat? How should you devote your time?
When do you know you have a good friendship or, backing up, what is friendship and its
. value? When is solitude good? Can fasting be purifying?
Definitions
Personal ethics refer to a person's personal or self-created values and codes of ,
conduct. From the very beginning, these ethics are instilled in an individual, with a large
part having been played by their parents, friends, and family.
Common examples may include honesty, openness, commitment, unbiased behavior,
and sense of responsibility. · ·
. What a pers~n ~evelop_s regarding fairness or learns during childhood remains with
him al! through his life and 1s reflected by his actions and words. No matter if he is talking
to a_ friend o~ his relativ~s or an elderl~, his ethics would be clear from what he says and
how he say sit. A person s personal ethics are revealed in a professional situation through
his behavior. ·
. ~ e s of Personal Ethics
1?/1 . 1.. Includes your personal values and moral qualities.
32. EIncorporated by famil y, fr'iend sand surroundings since your childhood
. xamples: honesty, care, and sincerity. .
-.> 4. Not conforming to these may harm or hurt others.

your personal needs are satisfied by following these Source:
'9fflCiples of Personal Ethics
· f Personal e~cs might also be called morality, since they reflect general expecta , ti'ons
o. till
any .person m. any•socie · ty, acting
· m · any capacity. These are the principles we try to
ms ourcfhildre~, ~-d expect of one an other without needing to articulate the
expectation or ormal1ze 1t many way.
1. Concern for the well-being of others
2. Respect for the autonomy of others
3. Trustworthiness & honesty · ·
4. Wil!~g c~mpliance with the law (with the exception of civil disobedience)
5. Basic JUSbce; being fair · . · •
6. Refusing to take unfair advantage
7. Benevolence: doing good
8. Preventing harm
~ l e s of Personal Ethics f,'
· 1. To not purposely cause harm to any other human being.

2. To promote and demonstrate my ideals through my actions nclthrough enforcing
them on others. ··
3. To respect the ideas, lifestyles, religions, and ideals of others.
4. To abtde by the rules, codes of conduct, and laws of the community around ~e as
long as they are not in conflict with my higher principles. ·
5. To be honest and trust worthy, and to disclose my feelings.
6. To respect the property of others as long as we have the concept of property
7. To promote through self-education, observation, reading; conversation, and
writing the sciences or the understanding of the world around me. And to use this
understanding to the benefit of myself and others through both action and
sharing of knowledge.
8. To give proper credit to others.
9. To honor confidentiality.
10. To promote a highe_r quality of life for myself and others.
11. To live a healthy lifestyle and do things that will aid others in healthy living.
12. To not have others fear me
2. Professional Ethics
Profession~! ethics encompass the personal, organizational and corporate standards
' of behavior expected of professionals.
Basically, ethics are your sense of right and wrong. Your morals and values that
define how you are as a person are_your personal ethics. On the conti:ary, how_ you ~ehave
and conform to the rules in a professional setting are your profess10nal ethics. Still, the
two types of ethics are not limited to how they are defined. A professional environment
may always demand some personal ethics too.
6 Business Ethics & Corporate Governance (T.Y.B.B.I.) (Strn.-V)
Definition .
. 11y accep ted standards of personal
"Professiona . ,, and business -behavior, values anct
guiding principle is called as Professional Ethics.
• I ethics are often established
Codes of professiona . by professional
d" d d . to
organizations
. mem bers ·m
help- gwde • performing
. their job functions accor mg to soun an consistent
ethical principles.
Princif les of Professional Etbics . ..
Individuals acting in a professional capaci~ _take on an additional ~urden of ethical.
•b·1·ty For example, professional associations have codes of ethics that prescribe
respons1 1 i . f . · h d' ·
required behavior with in the conte~t of a pro essi~na1 practice sue as me 1cme, law,
accoun t.mg, or engineering. These written codes
. provide
. rules
• h ·of conduct
l d and standards of
behavior based on the princ~ples of Professional Ethics, whic me u e:
1. Impartiality; objectivity
2. Openness; full disclosure
3. Confidentiality
4. Due diligence / duty of care
5. responsibilities
Fidelity to professional
6. Avoiding potential or apparent confl ict of interest
Even whe.n not written in to n code, principles of professional ethics are usually
expected of 'people in business, employees, volunteers, elected representatives and soon.
Examples of Professional Ethics
1. Strive to achieve the highest quality, effectiveness and dignity in both the process
and products of professional work.
2. To maintain a high level of competence and knowledge in my field.
3. To know and respect laws pertaining to professionaJ work.
4. Accept and provide appropriate professional review.
5. Improve publk understanding of computing and its consequences.
6. Honor contracts, agreements, and assignments.
7. Give comprehensive and thorough evaluations of computer systems and their ·
impacts, including analysis of possible risks.
8. Access computing and communication resources only when authorized to do so.
9. To reject bribery in all its forms.
10. To disclose any conflicts of interest
11. When given the responsibility for a group, I should promote good principles
among the group.
3. Managerial Ethics (November 2016)
Ethical values, translated into active language establishing standards or rules
describing the kind of behavior an ethical person should and should not engage in, are
ethicaJ principles.
The following list of principles incorporate the characteristics and values that most
people associate with ethical behavior :
Principles of Managerial Ethics
1. Honesty: Ethical executives are honest and truthful in all their dealings and they
do not deliberately mislead or deceive others by misrepresentations, ovf!:I
statements, partial tru ths, selective omissions, or any other means.
troduction to Business Ethics 7
2 lnt~grity : .E~hical execu~ives demonstrate personal integrity and the courage of
therr convictions by d_mng what they t ~ is right even when there is great
~ressure to d? otherwise; they are principled, honorable and upright; they will
fight f?~ therr beliefs. They will not sacrifice principle for expediency, be
hypocritical, or unscrupulous. ·
3. Promise-Keeping & Trustworthiness. : Ethical executives are worthy of trust.
They are candid and forth coming in supplying relevant information and
correcting misapprehensions off act, and they make every reasonable effort to
fulfill the letter and spirit of their promises and commitments. They do not
interpret agreements in unreasonably technical or legalistic manner in order to
rationalize non-compliance or create justifications for escaping their
commitments.
4. Loyalty : Ethical executives are worthy of trust, demonstrate fidelity and loyalty
to persons and institutions by friendship in adversity, support and devotion to
duty; they do not use or disclose information learned in confidence for personal
advantage. They safeguard the ability to make independent professional
judgments by scrupulously avoiding undue influences and conflicts of interest.
They are loyal to their companies and colleagues and if they decide to accept
other employment, they provide reasonable notice, respect the proprietary
information of their former employer, and refuse to engage in any activities that
take undue advantage of their previous positions.
5. Fairness: Ethical executives and fair and just in all dealings; they do not exercise
power arbitrarily, and do not use over reaching nor indecent means to gain or
maintain any advantage nor take undue advantage of another's mistakes or
difficulties. Fair persons manifest a commitment to justice, the equal treatment of
individuals, tolerance for and acceptance of diversity, the they are open-minded;
they are willing to admit they are wrong and, where appropriate, change their
positions and beliefs. ·
6. Concern for others : Ethical executives are caring, compassionate, benevolent and
kind; they like the Golden Rµle, help those in need, and seek to accomplish their
business objectives in a· manner that causes the le~st harm ·and the greatest
positive good.
7. Respe~t for others: Ethical exec~tives demonstrate respect for the human dignity,
autonomy, privacy, rights, and ·interests of all those who have a stake in their
decisions; they are courteous and treat all people with equal respect and dignity
regardless of sex, race or national origin.
8. Law abiding : Ethical executives abide by laws, rules and regulations relating to
their business ·activities.
9. Commitment to excellence : Ethical executives pursue excellence in performing
their duties, are well informed and prepared, and constantly endeavor to increase
their proficiency in all areas of responsibility.
10. Leadership : Ethical executives are conscious of. the responsibilities and
opportunities of their position of leadership and seek to be positive et~cal r?le
models by their ·own conduct and by helping to create an environment m which
principled reasoning and ethical decision making are highly prized.
11. Reputation and morale : Ethical ~xecutives seek to protect and ~uil~ the
company's good reputation and the morale of its employees by enga8'n:1g m no
conduct that might undermine respect and by taking what ever actions are
necessary to correct or prevent in appropriate conduct of others.
8 ,r,r,r Business Ethics & Curporate Governance (T.Y.B.B.I.) (Senz __ V)
b.1. . Ethical executives acknowledge and accept personai

, accountab1hty or
themselves, their colleagues, t
14. Social Ethics (}W LL lM-,()1
t
1~ Accounta . i_ ity f . the ethical quality of their decisions and omissions to
h . · •es and their communities.
~ompani '
. •
,
L· Standards that govern how members of· a society

· .are. to. deal with each other on ·issues
.-
. h as faimess,
sue . J·usti·ce, poverty and the-rights of the rnd1v1dual.
• Social Ethics deals with.human desires.
• Social ethics leads us to organize our interests, in view of their meaning and their
consequence, so to decide what we want most.
s. Religious Ethics .
Religious ethics are the moral principles that ~ide re~igi_ons and that set standard
for what is and isn't acceptable behavior. Surpnsrngly Slffillar from one religion to the
next, these fundamental principles flow from the core beliefs and ancient wisdom of
religion, as well as its teachers and traditions. .
The Religious Ethics Area is concerned with. the meaning, mer~ts, and v~li~ity of
religion for the lives of human and non-human animals and the orde~rng_ of ~oc1eties and
ecosystems. As such, the · Area addresses problems of t~e good life, Justice, and .the
common good.
6. Business Ethics
Business ethics is the study of good and evil, right and wrong, and just and unjust
actions in business. '
It is the study of problems, that can arise from the business environment and how
employees, management and the corporations can deal with them ethically.
7. Transactional Ethics
Man is a social animal. He has to act and react with others through different
transactions. The practice of ethics in all these transactions is called as Transactional
Ethics.
All involved parties should reciprocate ethical pr~ctices. The common good ethical
interest are binding the people. It is a win-win approach from all perspective.
For Example .- A medical doctor examines the patients, give sright type of treatment
and charges moderately. The patients also reply on getting the treatment from doctor and
promote word of mouth communication. The principle of honesty is the basic principle
in Transactional Analysis. The interest of both the parties is taken care of. .
8. Participatory Ethics
It is an importantpart of Business Ethics. Guided by common goal, all the parties

follow ethical practice. The important features of Participatory Ethics are :
a) All the parties like consumers, producers and employees maintain some basic
ethical standards. · .
b) The level of participation depends on the degree of motivation in the society.
c) Participation comes from external forces and inner commitments. This can take
place only through the process of creating ethical awareness.
d) The level of participation must be watched by all the groups leading to mutual
chec~ ai_id balan~es. Special attention has to be given to the least powerful and
marginalized sections of the society. ·
e) The growth ~f p~~pation indicates the level of social development. It is the
growth of solidanty _m an angle of individualism. Many socio-economic problems
of developed countries are solved by the ethical practices.
L~
Example : Ford Foundation
9. Recognition Ethic~
As hum~ bein.?s, people are end owed with the ability to understand the problems
of o~e~s. Th!s q~ahty leads to there cognition of individuals, institutions and societies.,
confl_icting situations can be solved by the correct recognition of the situation. This
requ?'es a correct perspective and empathy. The strong is helping the weak. The learned is
h~l~mg th~ l~ssor learned. The experienced is helping to new entrants. Compensation is
g1v~ to victims.
JV™PORTANCE OF .ETHICS
1. Satisfying Basic Human Needs 15 l P-1 E;, - SU l.~ .
Being f~ir, honest and ethical is one the basic hu~an needs. Every employee desires
to be such himself and to work for an organization that is fair and ethical in its practices.
2 Creating Credibility
An organization that is believed to be driven by moral values is ~espected in the
society even by those who may have no information about the working and the businesses
or an organization. Infosys, for example is perceived as an organization for good
corporate governance and social responsibility initiatives. This perception is held far and
wide even by those who do not even know ~hat business the organization is into.
3. Uniting People and Leadership
An organization driven by values is revered by its employees-·also. They are the
· common thread that brings the employees and the de!=,ision makers on a common
platform. This goes a long way in aligning behaviors within the organization towards
achievement of one common goal or mission.
4. Improving Decision Making
A man's destiny is the sum total of all the decisions that he / she takes in course of his
life. The same holds true for organizations. Decisions are driven by valµes. For example an
organization that does not value competition will be fierce in its operations aimwg to
wipe out its competitors and establish a monopoly in the market. ·
5. Long Term Gains _
Organizations guided by ethics and values are profitable in the long run, though in
the short run they may seem to lose money. Tata group, one of the largest business
conglomerates in India was seen on the verge of decline at the beginning of 1990's, which
so on turned out to be otherwise. The same company's Tata NANO car was predicted as a
failure, and failed to do well but the same is picking up fast now.
6. Securing the Society
Often ethics succeeds law in safeguarding the society. The law machinery is often
found acting as a mute spectator, unable to save the f Ociety and the environment.
Technology, for example is growing at such a fast pace that the by the time law comes up
with a regulation we have a newer technology with new threats replacing the older one.
Lawyers and public interest litigations may not help a great deal but ethics can.
Ethics tries to create a sense of right and wrong in the organizations and often when
the law fails, it is the ethics that may stop organizations from harming the s~iety or
environment.
7. Ethics creates integrity
High sense of ethics and values makes a man trustworthy and representable. If a
professionlll individual follows every legal and moral codes, abides by the rules and
regulations of the company and tries to create the maximum profit for the client and for
the company then the said individual represents the increment of integrity of the
company as well as himself/herself.
r. 8
·
Ethics is about feeling for others
Eth"1cs 1s
. a concerned about something
Business Ethics & Corporate Govern
d . h or hsomeone
, other
ance
, . than us and our own des·

. If . t est Ethics is concerne wit ot er peop1es interests with th . . ires
(T
. ,.-
.Y.B.B.J.) (Se- \I
)
an d. se -m er . ' . h" 11 ' h . . ,

So when a person thinks et 1ca y t ey are giving at least som th
e interests of
soc1etythin·.g beyond themselv~s. e ought to
some - ·
_ Ethics guides us like a map
9
M os t moral issues get us pretty. worked
hil up because
b . . these are such emot·10na1 issue
. .
often let our hearts do the arguing w e our rams JUSt go with the flow B t h s
we th · d th t' h h ·1 · u t ere's
another way of tackling . ~se_ issuehs, an ibla s w eakre p i osophers can come in_ they
of~ us ethical ruJ_es and prmcip1es t at ena e us to t e a cooler view of moral problems.
F yus1NESS ETHICS . _. . . . _
Ethics is a pranch of social science. It deals with moral principles and social val
J.
helps us to classify, what is good and what is bad? It. tells us to do good things and :es.
VOl_Idt
doing bad things. .

· So, ethics separate, good and bad, right and wrong, fair and unfair, moral and ;, ·
immoral arid proper · and improper human action. In short, ethics · means a code of :'
conduct. It is like the 10 commandments of holy Bible. It tells a person how to behave with I
another person. _ i l\
So, the businessi:nen must give a regular supply of good quality goods and services at I
reasonable prices to their consumers. They must avoid indulging in unfair trade practices l
like adulteration, promoting 'misleading advertisements, cheating in weights and
measures, black marketing, etc. They must give fair wages and provide good working
conditions to their workers. They must not expl_o it the workers. They must encourage .'
I
competition in the market. They must protect the interest of small businessmen. They _·
. must avoid unfair competition. They must avoid monopolies. They must pay all their
taxes regularly to the government. ·
l
-pefinition of Business Ethics
(1. . According to Andrew Crane -
"Business ethics is the study of business situations, activities, and decisions where .
I
issues of right and wrong are addressed."
2. According to Raymond C. Baumhart
"The ethics of business is the ethics of responsibility. The business man must promise
that he will not harm knowingly."
~ ture / Features of Business Ethics
. . -
·
'·
·
I
0 ( - PR - \t.N -VG, .· .
~ 1. Code of conduct
Business ethics is code of conduct. It tells what to do and what not to do for the
welfare of the society. All ~usinessmen must follow this code of conduct. l
I
2 Based on moral and social values
Business ethics is based on moral and social values. It contains moral an~ social I. _
principles (rules) for doing business. This includes self-control, consumer protection and
welfare, service to society, fair treatment to social groups, not to exploit others, etc.
3. Gives protection to social groups
Business ethics give protection to different social groups such as consumers,
employees, small businessmen, government, shareholders, creditors, etc.
4. Provides basic framework
Business ·ethics provide a basic framework for doing business. It gives the social
cultural, economic, legal and other limits of business. Business must be conducted within
these limits.
Introduction to Business Ethics
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5. Voluntary
. Business ~thics m~st be voluntary. The businessmen must a~cept business ethics on
their own. Busmess ethics must be like self-discipline. Ihnust not be enforced by law.
6. Requires education and guidance · ·
. Busines~men must_ be given proper_ education and guidance before introducing
~usmess ethics. The busmessmen must be motivated to use business ethics. They must be
informed ~bout the advantages of . using business ethics. Trade Associations and
Chambers of Commerce_must also play an active role in this matter. .
7. Relative Term
Business ethics is a relative term. That is, it changes from o~e business to another. It
also chan_ges from one country to another~ What is considered as good in one country may
· be taboo m another country. · .. . ·
. 8. New concept
Business ethics 1s a newer concept. It is strictly followed only in developed countries.
It is not followed properly in poor and developing countries..
j t i iMPORTAN~E OF ETHICS IN BUSINESS $ { S,S - pp.~CtJ£C,'~ - H5 l «
1. Stop business malpractices ·
· Some unscrupulous businessmen do business malpractices by indulging in unfair
trade practices ·like'' black-marketing, artificial high pricing, adulteration, cheating. in
weights and measures, selling of duplicate and harmful products, hoarding, etc. These
business malpractices· are harmful to the consumers:'·Business ethics help to stop these
business malpractices. · · ·
2. Improve custom:ers' ·confidence -
Business ethics are needed to improve the customers' confidence about the quality,
quantity, price, etc. of the products: The customers have more trust and confidence in the
businessmen who follow ethical .rules. They feel that su.ch businessmen will not cheat
them.
3. Survival of businl~ss
Business ethics are1 mandatory for the survival of business. The businessmen who do
not follow it will have 'short-term success, but they will fail in the long run. This is because
they can cheat a consumer only once. After that, the consumer will not buy goods from
that businessman. He will also tell others not to buy from that businessman. So this will
defame his image and provoke a negative publicity: T~s will result in failure of the .
business. Therefore, if the businessmen do not follow ethical rules, he will fail in the
market. So, it 1s always better to follow appropriate code of conduct .to survive in the
market. ·
4. Safeguarding consumers' rights
The consumer has many rights such as right to health and safety, right to be
informed, right to choose, right to be heard, right to redress, etc. But many businessmen
do not respect and protect these ·rights. Business ethics are must to safeguard these rights
of the consumers.
5. Protecting employees and shareholders
Business ethics are required to protect the interest of employees, shareholders,
competitors, dealers, suppliers, etc; It protects them from exploitation through unfair
trade practices. ·
6. Develops good relations
Business ethics are important to develop good and friendly relations be~een
business and society. This will result in a regular supply of good quality goods and
2/I'.Y.B.B.I.-Business Ethics & Corporate Governance (Sem.-V)
, ll ,,,,... B•"""' Elm<> & Co.,.,,.k Goo<"""" (T.Y.8.BJ.)(Sm..-VJ
services at low prices to the society-· II will also result in profits for the businesses thereby
resulting in growth of economy. .
7. Creates
Businessgood iJl\age
'etrocs aeate a good unage for the business and businessmen. If th
businessmen follow all ethical rules, then they will be_fullY accepted and not ~riticised b:
the society- The society will always support those businessmen who follow this necessary
code of conduct.
8. SJl\ooth functioning
If the business follows all the busines5 ethics, then the employees, shareholder,
consumers, dealers and suppliers will all be happy. So they will give lull cooperation t~
the business- ThiS will result in smooth functioning of the business. So, the business will
grow, expand and diversify easily and quickly. It will have more ,iales and more profits.
9. Consumer movement
Blisiness ethics are gaining unportance because of the growth of the consumer
movement. Today, the consumers are aware of their rights. Now they are more organised
and hence cannot be cheated easily. They take actions againSt those businessmen who
indulge in bad business practices- They boycott poor quality, harmfuL high-priced and
counterfeit (duplicate) goods. 'fhen,fore, the only way to survive in business is to be
honest and fair.

10. Consumer
Today, the Satisfaction
consumer Is the l<lng of the market. Any buslnesS simply cannot survive
without the consumers. Therefore, the main aim or objective of business Is consumer
satisfaction. If the consumer Is not sattsfled, then there will be no sale5 and thus no profit,
too- Consumer will be satisfied only II the business follow• all the busines5 ethics, and '
hence are highly needed .
11. Importance of labour
Labour, i.e. employees or workers play a very crucial role in the success of a business.
Therefore, business must use business ethics while dealing with the employees. The
business must give then> proper wages and salaries and provide them with better working
conditions. There must be good relations t,etween employer and employees. The
employees must also be given proper welfare facilities.
12. The
Healthy competition
business must use business ethics while dealing with the competitors. They must
have healthy competition with the competitors. They must not do cut-throat competition.
Similarly, they must give equal opportunities to small-scale business. They must avoid
mo opoly. This is because a monopoly is harmful to the consumers.
AREAS OF BUSINESS ETHICS

1. Personal Responsibilities t " _ L:: \-" ,.,
This refer< to the personal beliefs of an individual. Every individual has certain firm
beliek on certain matters' such as honest)', avoiding criminal acts, obedience to elders,
willing to perform accepted duties, promptly settling the dues etc.
2. Official Responsibilities
Only persons or human beings occupy positions. A person who-is occupying ,
certain pos1hon should stnctly follow certain norms and other standards set f th t
. · 1 • or a
o ff,na capacity.
3. Personal Loyalties
These include loyalties of a subordinate to his superior. So Ion as th .• . •
and honest, the subordinates shall not face any problem. g e superior 1s 1ust
4. · Corporate Responsibilities
Co1:l'?~~tions, as separate leg~ entities, have certain moral responsibilities. The
respons1b1hhes may not be identical with the personal moral codes of the managers who
run the company. These responsibilities may be internal or external.
5. , Organizational Loyalties
Many people develop a deep sense of loyalty towards the organization as an entity
that goes beyond their personal interest. This loyalty has arisen out of love and affection.
This factor can be stimulated effectively. If so, the employees will work hard and help the
enterprise in achieving its objectives.
6. _Economic Responsibilities
This type of morality guides the individual actions of an economic nature. For
instance, some busi_nessmen think it 'immoral to borrow. However, this type of people is
very rare tp see. ·
7. Technical Morality
Professional people should adhere to certain ethical standards established by
competent bodies o:r persons or by customs. The Code of Conduct set for them by the
concerned institutions governing the ·profession binds· lawyers, chartered accountants,
doctors etc.
8. Legal Responsibility
It refers to the responsibility imposed by law. What are all illegal are suppo$ed to be
unethical also. Everyone should be a law-abiding citizen. :
jj?'MEANING OF FUNCTIONAL ETHICS
Types of Ethics According to Functions of Business:
1. Marketing Ethics
'i Definition • · .
/ -Marketing ethics are the moral principles and values that need to be followed during
any kind of marketing communication. They are the general set of guidelines which can
help companies to dedde.on their new marketing strategies. But then it depends on one's
own judgement of.'right' and 'wrong'. Any unethical behaviour is not necessarily illegal.
If a company is making any kind of claims about their products, and are unable to live up
to those claims, it may be called as an unethical behaviour. · ·
Marketing ethics basically promotes fairness and honesty in all their advertisements.
Any kind of false ~laims to the consumers, invading consumer's privacy, stereotyping and
targeting the vulnerable audience (like children and elderly) are considered to be
unethical behaviour by the companies. Even trying to harm the competitor's image is_
considered immoral. ·
(Unhealthy marketing practices includes :
i) Unhealthy competition
ii) Misleading advertisement
iii) Substantial advertisement
iv) Poor after sales service
v) Deceptive communication .
vi) Non-disclosure of substantial risk
vii) Dumping
viii) Creation of monopoly
ix)Unfair pricing strategy
14 dJ1' \:: Bu,;ness EtMcs & c,,,pcrare Governance([. Y.B.B./.) (Stm.-v)
Foreign Trade . Ethics • • · and d ecis10ns

d of business situations, activities, · · .
where
2· .
Business ethics is the stu ~d sed During the past few decades, the globalization
issues of right and wrong arde ad thresrele;ance of territorial bases for social, economic anct
process has progressively ero e d eelati'ons As business became less· f'ixed territonalh,· ·
. act1v~
political. · ·ries, processes
. an edr in overseas
· markets, suddenly . fmdmg
. . ·themselves ,,
corporations _increasing1X;_ngage sometimes even·contradicting ethical demands. Mora}
confronted with new kan f ivgrer:;ted in the home market, may get questioned as soon as
values, which were ta en or .
corporations enter foreign markets. . .
.. . • temational business is such th~t ethics can appear to be a
. ~omp~titiond in 1~ ht irrelevant. Many business people consider that business has
handicap, ~ot . ~w:~ve unethically or fail, and they argue that the survival of the
only two cho1cleds. ~t be 1·eopardized in order to fulfill an ethical obligation when their
company s ou . n . . ·
competitors are not behaving ethically. . . .
Major sources of ethical dilemmas in the international trade with examples : . .
. Corruption : Is it ethical to make a payment to a governme~tal clerk prov1d~g it
1
depends on succeeding in a business? . ·
2. Industrial espionage : Is it ethical to use some information about the competitors'
activity, obtained through methods that are at the edge of the law?
3. Relation ~ith the environment : Is the organizational behavior ethical, though it
has the possibility to go over the environment standards imposed by the '
legislation, staying competitive, is satisfied to respectthem?' . ·
4. Relation with the employees : Is it an ethical behavior for .the organization ~o
apply different personnel ·policies regarding employment, promotion and
remuneration of the employees on different markets where it acts? ·
5. Relation with the consumers : Is .it ethical for the behavior of an organization
w.µich does not completely inform its target consumers about the features of the .
offered product and which has big prices for the key products in order to
maintain the consumers' health and Hfe, even though the legislation in the host
country allows it? t'
3. · Ethics Relating to Copyrights (J;lv'fiJJf
Copyright refers to a form of intellectual property that gives the author of an original :
work exclusive right for a certain time period in relative to that . work, including its
publication, distribution etc. Copyright is described under the umbrella term intellectual .
property along with rights and trade name. Or Copyright refers to laws that authorize the ·
u~e ~f th~ work o~ a creato~, such as author, a~tist, and many more. This includes copying,
d1str1butmg, altenng and literary and other kmd of work. ·unless stated -in a contract, the
author or creator of any work holds the copyright.
• ~opyright can to apply for any work, it must be an original idea or literature that ·
1s put to us~. The idea alone cannot be protected by copyright. It is the physical
use of· that
ht 1 idea, such as a design or a wri'tten no veI, w h'1ch is
· ·covere
· d und er
copyng aw.
• Cot·pyt_rigfht alsof includes for .wide range of creativity like intellectual scientific
ar 1s 1c dances
videos orm o scul
workst which fa 1so me
• 1u des poems, composition of songs,' music,'
' , P ures, so tware and many· m if' II
authority or jurisdiction. ' · ore ·spec ica y vary by concern
• Copyright is given to the author accord mg
work. · to •the law, as soon as he completes
• his
• In order to protect your own work a d . . . .

copyright office. . n idea you need to register the work in the
• Many copyright law infringing copies of entertainment files e.g. MP3 music files,
VCD video files and etc. and _software are often shared by P2P software.
• The act of unauthorized uploading of a copyright works for others to download
may attract civ.il or even criminal sanctions. Unauthorized downloading of
copyright works entails civil liability. , ·
Guidelines
• Do not copy copyrighted software without author's permission.
• Always respect copyright laws and policies.
• Computer ethics is set of moral .principles that govern the usage of computers.
• The common issues of computer ethics is violation of copyright issues.
• Duplicating the copyrighted content without the authors approval acce.ssing
personal information of others are some · of the examples that violate ethical
principles.
• Be aware of copyright issues.while using online information.
fag( rtHICS IN MARKETING . . .. . . I
Ethics are still subjective and should be openly discussed by the companies while
making any marketing decisio11s: Companies following the marketing ethics are able to
gain the trust of the consumers and create a positive image for themselves.
Y, Product Lr P\) . · ·-
Ethical concerns can aries in the development of products/ services. Marketers ·are
supposed to identify and satisfy needs of consumers. Products offered do not always
contribute to satisfying existing needs but sometimes create new needs· through the
promotion of materialism. It appears not to be ethical from marketers to forget the first
. role of marketing at the benefit of mercantilism.
:Ethical concerns can also appear irt the performance of products / services. Ethic~l
marketing activity should prevent poorly made and unsafe products. Products not made
w~ll or products delivering little benefit or less benefit than promised are common place
criticism made to marketers. ·
More questionable is the case ·of harmful products due to poor design or lack of
quality. ¥arketers should refer to the·maxim 'Do unto others, as you: woulq have them do
unto you' to judge whether a product is acceptable or not. quality of a product ·should
always have the priority on economic concerns. Moreover, pre-tests should be conducted
to ensure the compliance of products to safety standards.
Packaging can also be a sourc·e of ethical concerns. Exaggerating packaghlg (for
example through design) or misleading label scan not be considered ethical, because they
aim at deceiving consumers by making them believe a pack contains more product than it
does in reality or by giving unclear / incomprehensible information.
A company sells a litchi/ raspberry juice that clc;tims to be a "refreshing and exotic".
Yet, this fruit juice contains more apple than litchi plus raspberry together. The ·
ingredient label indicates 27% of apple.juice, 15% of litchi juice and 8% of raspberry juice
(plus water, sugar and citric acid). The. product is sold as a raspberry / litchi juice, while it
is closer to an apple juice. ·
2. Promotion (November 2016)
The most common place ethical concern in promotion is dec'eption. The Americ~
Federal Trade Commission (FTC) defines deception as "amisrepresentation, omission, or
practi~e that is likely to mislead the consumer acting reasonably in the circumstances, to
the consumer's aettiment". . .
I
.
Business Eth.,cs & Corporate Governance (f. Y.B.B.I.) (Sem.,v)
16 ,,,,.,,. • • For example, overstatibng a product's
ti·on is common place in advertithi~mgD.eception in advertising can be either~
~~a:r
D
ecep
. rf rmance is contrary to the e cs. le a shampoo tha t helps fig · ht·lllg
feature o;. pe ~f products' attributes (for oxtly after one month) or a unrealistic:
exagg:!t_ 10~ eeks where as results are signif1c 1 a pill that would help lose 30 Lbs. Ul
dand m w d ts' performance (f9r examp e, .
statement about pro uc
one week). b d . to be mentioned : an actress was engaged to
A campaign by a famous beauty r~ t •:he actre:,s wore fake eyelashes in the Ty
romote a false eye lash mascara... u t' feedback from offended consumers.
p any under came nega ive
commercial! The comp tion Consumers desire to obtain more for
. 1 o appear in sa1es promo . fr if . d
Deception can a s . . t sales promotion like ee g t, price re uction
the same price and are th_erefo.r~s:n:~::;o~panies may be tempted to take advantage of
or special offers. 1:1te ethica_l ns d promotions that cannot be kept. ,
stomers by making promises an . . h .
cu f d blems are rigged contests or games (e.g., w en wmners are
Most frequently= end of the contest or when no one wins the game) and the
known by m~ketersfal
use of deceptive or seore promises (e.•g., failure to. provide a promised premium or failure '
to prov1'de a gift in conformity to what was promised). . d lif
An other ethical concern is the invasiveness of .m~rketers m the e~e~ ay of j
consumers and the threats to consumers' rights to privacy. For example, it _1s ~ot e!hical
from marketers to send unwanted spams to consumers, because such emails v10late
regulations about consumers privacy.
' I •
3. Price (November 2016)

Marketers should be allowed to charge any price they want provided there is no price
discrimination among consumers and that prices are all inclusive.
However, too high prices are not ethical, when they do not reflect the existing cost
structure but are a mean stotake advantage of consumers. This is especially true in the ·
case of monopolies, oligopolies or.cartels. ·
Besides, advertised prices should always be realistic prices that consumers will find
in stores.
The odd - pricing and partitioned prices practices can also be questionable one thical~
grounds. With odd-pricing, marketers resort to odd numbers (e.g.,29.99€) instead of
rounded numbers (e.g.,30€) because consumers tend to associate 29.99 with 20 rather than
30. Partitioned prices aim at sharing the total price in several sub prices to make
consumers believe the pr~ce is lower t~an in reality. If not used with sensitivity, these
methods cannot be considered as ethical, because marketers manipulate consumers'
expectancies.
4. Plac.e
1 ~onsun:i•~. c; h<; manirula~ without knowing it through sub tlemarketing

ecd 1tques m be1str1 u~ondo~t ets.h or examhple, shelves at lower heights target children,
an s ores can orgaruse m sue away t at it encourages consu t hr
. h
. shelves. Th
more . e eth'1cal concern of such practices is whether subli
mers· 1o •pass t. oug
mora~ly acceptable : would consumer shave bought the products ev ~ a Incentives ~e
techniques had not been used? In that case, is it possible to talk en, those mark~!~g
Can those techniques cause economic hardships to sho e b about. forced purchases ?
~han they can afford? . PP rs Y makmg them buy more
Ethical concerns are also linked with the se e , . ·
process. . gm nting, targeting and positioning
Efforts to target consumer populat ·
1
(e.g. : particularly.
. vulnerable consumer 0 ns can l . be b' t
minorities, and the uneducated). popu ations, su 1ect to unethical attitudes
such as ch1'ld h
ren, t e poorest
Jntroduchon to Business Ethics ....,,. 17
. Fo~ example, the issue of higher insurance premi~ms to people with poor credit
ratings 1s morally questionable. ·
Marketing to children also raises ethical concerns. Wharton marketing professor Lisa
Bolton asks the question: "Can [children] really makefully - informed choices or are they
being flooded with marketing material that is going to alter their behaviour?". That is the
reason why candies have been suppressed from the shelves before the tills in French
supermarkets.
Unethical Marketing Practices in India (Noveinber 2016)
Introduction
Whether one is playing the salesman role for his own business or is hired to market
an employer's products or services, one need to understand the thin line between ethical
and unethic'!l marketing practices.
Ethical marketing entails making honest claims and satisfying the needs of potential
and existing customers. It boosts credibility and trust, develops brand loyalty, increases
customer retention, and prompts customers to spread word about the products or services
of firm's marketing. ,
Unethical marketing, on the other hand, can send wrong signals about products and
services, destroy brand's reputation, and possibly lead to legal problems. This explains
why one should avoid them like a plague.
1.~ hical Marketing Practices in India
1. Making false, exaggerated, or unverified claims
In a desperate bid to compel .potential:and existing customers t<;>. \my their products or
services, some marketers use false statements, exaggerated benefits,_or make unverifiable
claims about their offers. ·
For Example - Thisis common in the weight loss industry, wh,e!,~ marketers convince
potential buyers that a particular product can help them shed so-and-so pounds within
two weeks without exercise or dieting! ·
2. Distortion of facts to mislead or confuse potential buyers
!J This another common unethical marketing pra~!~fe. A typical example is when a
food processing company c;laims that its products are sugar - free or calorie-free when
indeed they contain sugar or calories. Such a company is only trying to mislead _potential
buyers, since they are unlikely to buy the products if it is made known that they contain
sugar or calories. ·
3. Concealing dark sides or side effects of products or services
~ - --- -- -
-
This unethical marketing practice is rife in the natural remedies industry, where most
manufacturers deceive potential buyers that their products have no side effects because
they are "made from natural products". But in reality, most of these products have been
found to have side eff~cts, especially when used over along period. Infact, there's no
product without side effects - it's just that the side effects might be unknown. It's better to
say, "There are no kno:wn side effects" than to say "there are no side effects".
4. Bad-mouthing rival products
Emphasizing the dark sides · of firm's rival's products in a bid to turn potential
customers towards one's own products is another common but unethical marketing
practice. Rather than resort to this bad strategy, one should emphasize on those aspects
that make firm's offer standout from the rest of the pack. That's professional and ethical.
5. Using of women iri irrelevant advertising
The rate at which even reputable brands are resorting to this unethical marketing
practice is quite alarming.
J
,,,,,,. Business Ethics & Corporate Governam.:e 11., ,u.u.,.1 1..,i:rn.-V)
18
For Example-In TV, billboard, and magazine adv~rts, there's something co~on to
·s used to attract attention to the product or service being
d lady l
most o•f thdem;
Whil •t -nak
a half · eht be m· tuitive to use models m . adverts for beauty products and
ad vert1se
• . h · e 1 hmig If naked models in · adverts for generators, h eavy machinery ·
cosmetics, avmg a - roducts not strongly related· to women 1s · b oth non-sens1cal
· and'
smartphones, and o e Pth r .
unethical.
6. Using fear tactics .
· ther common unethical marketing practice among sales persons. Many
s1sano .. "Th' . . z· 'tdt' ,1+. Jrf d,
timesThi
we hear them saying something hke : is pnce is a imi e - ime_ o11 er. ':I yo~ on t buy
ou might have to pay much more to buy it later because the offer will end up.in two days
now, y
time, and the price will group. "The only motive behin. d th,ose statements 1s . ~o prompt the
potential buyer to make a decision on the spot. And thats wrong. Why sub]ect some one to
,undue pressure because you want to make money off him or her? •
7. Plagiarism of marketing messages
Though uncommon, some business owners and sales persons engage in using the
·exact marketing messages of their competitors to market their own products or services.
Creativity is a huge part of 'marketing, and using other businesses' marketing messages
just passes one off as being cr~atively bankrupt and fraudulent.
8. Exploitation
This is charging for much more than the actual value of a product or service. For
marketing efforts to remain with ethical limits; _the prices of.firm's offers must be equal to
or less than the value they give the buyer. If the value is less than the cost, it's unethical.
9. Demeaning references to races, age, sex,. or religion . .
Ethical marketing must be devoid of all forms of discrimination. If on_e ' s marketing
messages contain lines that place people of certain age range, sex, religion, nationality, or
race at a higher level than others, then one is cr?ssing the bounds of ethical marketing.
10. Spamming
Spamming is whei:i one sends unsolicited emails to potential customers, encouraging
them to buy products or services. This is the commonest unethical marketing practiced
one online. The number of time firms ends such emails ·doesn't matter. Whether ones ends
them once, or on oc_ca~io_ns, or frequently, firn:uemains a spammer.
CASE STUDY
Diet Coke- An Example of Unethical Marketing
An increasing trend these days is diet drinks, some of which are lower in calories than 1
regular soft drinks or even calorie- free altogether. However, just because th d ink
have the label ' . diet'' on them, does not mean that you should jump to the conc1::0 : tha: I
they are healthier for you.
Loaded with ~partame, cyc\amates and saccharin, artificial sweeteners in diet drinks
haveth'been
1 determined
k · · animals · o1·e·t Coke 1s
to cause cancer in laboratory
· · an example of
I
On 1ca r mar
une ul etmgkwhere• the company' Coca Cola is mak'mg faIse a d verbsmg· · claims
e par 1c ar mar etmg campaign that Coca Cola launched was e d d j
Lagerfeld, the Chanel designer who claimed to have lost .SO po d n ~~se by Kar
ma~y of Diet Coke. Karlsays "I drink Diet Coke from the . ~I s on_a iet composed
go to be_d .. .I drink nothing else." mmu e get up to the minute I
Targeted towards women, Diet Coke has become an If .
world-renown fashion
· designer as the
· . face of th d u imate fashion
e pro uct Since fu t' ftrend with a
30 years ago, Diet Coke cans have been showin . · cep
11 10n o the product
manicured hand." g up m every model and celebrity's
19
By using stick thin models and fashion designers who are obsessed with body image
only makes the situation worse because it is giving women, especially young women, the
wrong message. They are being told that obsessive dieting is acceptable and that Diet ,
Coke is the key to being thin and beautiful. This is very detrimental to young girls as it has·
negative impacts on their self-esteem and body image.
Coca Cola should not be using Karl Lagerfeld' s radical dieting ways as a means of
promoting their product. Rather, they should limit such extreme statements and use
regular everyday people in their ads so as not to give the wrong message about Diet Coke
: being directly correlated to a "healthy" body. ·
11. ETHICS IN ADVERTISING (TRUTH IN ADVERTISING)

Definition
{1thics means asset of ·moral principles which gove!Il a person's behavior or how the
activity is conducted. . ·
Advertising means a mode of communication between a seller and a buyer.
Thus ethics in advertising means a set of well defined principles which govern the
ways of communicati~n taking place between the seller and the buyer.
Advertisement "Sell hopes and dreams, not only p_roducts and services".
-Professor Alfonso Mendiz Noguera
tf\. good advertisement is one which sells the product without ·drawing attention to
itself'J
, -David Ogilvy
Indian Advertising Industry

Due to the economic slow down, the advertising industry was flat showing almost no .
growth in 2009. This ·came close on the heels of 2008, a year when the performance of this
industry slowed down as compared to the previous years. In 2009, the . advertising.
industry remained at an estimated size of f 216.5 bµlion as compared to f 216 billion in
2008. In the last four years (2005-2009), ,the' industry recorded accumulative growth of
13.5% on an overall basis. The most impressive growth was from the smallest segment of
the industry by size-internet advertising. Though, this segment grew py 20.0% in 2009, it
was well be low the growth of 85 % in 2008. American companies are discovering the
appeal of marketing their products in ,India. With a popµlation of approximately one
billion, and a middle class that's larger than the total population of the United States,
there's definitely money to be made. Local retailers in apparel, food, watches and
jewellery have all increased their averagead spending by almost 50% in the past two
years. Coupled with many other local players big retailing brands are spending to the
tune off 12,000 crores annually on advertising and promotional activities.
Sco~e of Advertising)ndustry in India
The advertising industry in India has several competitive advantages :
• India has a rich pool of strategic planning, creative and med~a services personnel :
Indeed, Indian advertising industry has been exporting senior-level talent to
many countries, particularly to the Gulf, South-East Asia, China, the UK and the
US. Indi~ talent is recognized and respected in global agency networks.
• · No other country has access to so many trained management graduates who can
provide strategic in puts for brand and media planning. ·
• Indians are multicultural : we leam at least two languages and ~hat gives us ahead
· start in understanding cultural diversity.
20
....
11
.
Business Eth.,cs & Corporate Governance (f. Y.B.B.I.) (Se,n ·- •v)•
• •. Most of the top 20 agen~ies in IO bal markets.

'd · diate link to g
.
.
•
.
. . India have a global partner·or owner, which should.
.
. In t
2.
provi e an tmme . 1V d print have improved : With a v1brat\t
• Our production st~dards i.:e hav:1:ccess to this area of TV production.
. animation software industry,
pi
Unethical and Ethical Advertising d falsehoods to deceive the public, ethico.1 a
.. metho s use d ac
Unethical advertising d . the public. In advertisements clear emarcatiol\
thful facts to eceive 1 . f
advertising uses tru . If d rtisements changes persona trait o consumers ¥.
1 sl
of true and false is not_ poss1bue.in a i:~aviour by misguiding, misinfo~g, thel\
and affects their desrred b Y g aru·pulations slightly exaggerated claims and "' 3
. ethical. But some m , . . . ..
advertisements are un . t permissible It is not considered as unethical. So
=~;:~::f
. f uft in advert1semen s are · d b
pinch o p e~ est Most Often Used, Mostly Recommende . y .0 octors, Long I
products advertised as ,d thical So small manipulations, slightly exaggerated a
a;:re~ : . ::: :i1 li~s. but are. accepted ~y the society because the t
demarcation is based on relativity of ethics than ethical absolutism. .
Moral Principles of Advertising
a) · Respect Truthfulness (Deception Objection)
· 1. Never directly intend to deceive.
2. Never use simply untrue advertising. .
3. Do not distort the truth by implying thi~gs that are not so or withholding relevant
facts. · ,. · · ·
4. "Puffery" is: acceptable' -~here it is consonant with recognized and accepted
rhetorical and_symbolic practice.
b) Respect the Dighlty of each human person (Attacks Autonomy Objection)
1. Do not expipit our" lower inclinations" to compromise our ·capacity to reflect or 1
decide either through its content or through its impact : using appeals to I1:1st, .
-v anity, envy and greed, and other human weakness.
2. Give special care to the weak and vulnerable : children, young people, the elderly,
. the poor, artd the culturally disadvantaged.
c) Respect Soc!aJ Responsibilities (promotes ·consumption, empties communication,
objections) / ' · · .. · . ·
~ical Issues in Advertising .

1. et~ca~ ad is the one which doesn't lie, doesn't make fake or false claims and is
m the hm1t of decency
N?w a days, ads are more' ex~ggerated and a lot of puffing is used. It seems like the
advertisers lack knowledge of ethical norms and principles. They just d 't d d
and are unable to decide what is correc~ and what is wrong. on un erSt an
· The main ar~ a of interest for advertisers is to increase their sal . ·
customers, and increase the demand for the d b · es, gain more and more
uf£ d . pro uct y presenting 11 d d
P e and colorfulad. They claim that their product is . a we ecorate ,
th
than the competitors, more cost effective, and inore be ~ _best, having unique qualities
found to be false, m~sleading customers and unethical. neficiaL But most .of these ads are
The best example of these types of ad . h . ·
kid th 1 · · s is t e one which h -
s, ey ~se co onng and gluing to make th s ows evening snacks for the
consumers who are watching the ad .e_ product look glossy and attr cti t the
1
without giving a second tlioughtl s on te ev1S1on and convince them to bu/thev:r~ud
. Introduction to Business Ethics 21
2. Ethics in Advertising is directly related to the purpose of advertising and the

nature of advertising
Some times exaggerating the ad becomes necessary to prove the benefit ef the
product. For e.g. a sanitary napkin ad which shows that when the napkin was dropped in
a river by some girls, the napkin so aked whole water of the river. Thus, the purpose of
advertising was only to inform women about the product quality. Obviously, every
woman knows that this cannot practically happen but the ad was accepted. This doesn't
show that the ad was unethical. ·
3. Ethics also depends on what we believe
If the advertisers make the ads on the belief that the customers will understand,
persuade them to think, and then·act on their ads, then this will lead to positive results
and the ad may not be called une thical. But at the same time, if advertisers believe· that
they can fool their customers by showing any impracticalt hings like just clicking fingers
will make your home or office fully furnished or just buying a lottery ticket will make you
a millionaire, then this is not going to workout for them and will be called as ~ethical.
4. One sided Truth
Generally, big companies never lie as they have to prove their points to various ad
regulating bodies. Truth is always said but not completely. Sometimes its better not to
reveal the whole truth in the ad but at times truth has to be shown for-
betterment.
.
For Example-Pharmaceutical Advertising they help creating ,awareness, but one
catchy point here is that the advertisers show what the medicine can cure but never talk
about the side effects of that same thing or the risks involved in intake of it.
5. Use of Children ,.
Children are the i:,najor sellers of the ads and the product. They have the power to
convince the buyers. But when advertisers are using children in their ad, they should
remember not to show them alone doing there work on their own like brushing teeth,
playing with toys, or infants holding their own milk bottles as everyone knows that no
one will leave their kids unattended while doing· all these activities. So showing parents
also involved in all activities or things being advertised will be more logical.
6. Use of Alcohol
Till today, there hasn't come any liquor ad which shows any one drinking the original
liquor. They use mineral water and sodas in their advertisements with their brand name.
These types of ads are called surrogate ads. These type of ads are totally unethical when
liquorads are totally banned. Even if there are no advertisements for alcohol, people will
con~ue drinking.
7• . Cigarettes and Tobacco
These products should be never advertised as consumption of these things is directly
and badly responsible for cancer and other severe health issues. These as are already
banned in countries like India, Norway, Thailand, Finland and Singapore.
8. Ads for social causes
.These types of ads are ethical and are accepted by the people. But ads like condoms
and contraceptive pills shoajd be limited, as these are some time sun ethical, and are more
likely to loose morality and decency at places wherethere is no educational knowledge
about all these products. _ -
~lime Do's and Don'ts in Advertising ,
1. Should not mislead the consumer.
2. What it promises ·must be there in the performance of products.
3. Ad should not be indecent and obscene. As advertising is also a social process, it
must honor the norms of social behavior, and should not offend our moral sense.
• Ethics & Corporate Governance (T~Y.B .B.I.) (Sern .~· \I)
-
Busmess
22 ,,.,,.,,. Ad rtising Standards Council of India) regulates the Ii
F How the set guidel!nes ASCI ( ve ethics and standards to , be followed il'\
4. o .. . . India Some more
advertising m · -'i
1
advertisements: . ted where objects are completely or largely religious
a) Permission ._will not bAedgreanrtisements cannot be directed towards any religious or
r · 1m nature
or itica d
v
to gain mileage of any form.
pohtical en , or , h d
or services that are advertised should r:iot ave any efector
b) Any. go~ds f form declared in the Consumer Protection Act 1986.
deficiencies o any . . . : .
. h Id not be portrayed m a way that misleads the pubhc to infer that
c) Pro~ucts hs ousome special miraculous or a super natural ·quality, which is any
the item as. ' .
ways difficult to prove. .
.
d) P1ctµre and the audible matter of the advertisement video should not be
excess.ively 'loud'. .
e) Advertisement should not endanger the safety of children or produce any ~ort of ,
perversion or interest that prompts them to adopt orimitate unhealthy practices. ·
f) Any type of offensive, indecent, suggestive, vulgar, repulsive themes and/ or i .
treatment must be avoided under all circumstances. t
g) Good creative adyertise~ent will always attract people's attention, but they
should-have meaningful visual content. One shouldn't have an attitude to play
with people's sentiments and emotions.
' '
~ e s of Unethical Adyertis~n,1,~~~s
1. Surrogate Advertising . ,
In certain places there are laws against advertising products like cigarettes or alcohol.
Surrogate advertising finds ways . to remind consumers of these products without
referencing them directly.
2. Exaggeration . . .
Some _advertisers use false claims_about a product's quality or popularity: A Slogan .
like. "get coverage every wl,,.ere. on. earth" advertises
.
features
'
that cannot be delivered.
3. Puffery
When an advertiser relies on subjective rather .than objective claims, they are puffing
up their products. Statements like "the best tasting coffee" cannot be confirmed
objectively. ·
4. Unverified Claims
Many product~ promise to ~eliver results without providing any scientific evidence.
Shampoo co1:11mercials that promise stronger, shinier hair do so without telling consumers j
whyorhow. . ·
5. Ste~eo typing Women . · I
. Women in ad~e~tising ~av~ often been portrayed as sex objects or domestic servants.
This type of adverhsmg traffics m negative stereotypes and tr'b
. . con i utes to vu1gar culture. ·
6. False brand comparisons
Any time a company makes false o . 1 d. 1. . .
are spreading misinformation. r mis ea mg c aims about their competitors they
7. Children in advertising .
Children consume huge amounts of adve . . . . . .
objectively. Exploiting this o . rt1smg without being able to evaluate it
; cence 1s one of the m t
mn·
practices. . os common un~thical marketing

~~ ction to Business Ethics
23
,J;Jfff~rent Ways of Unethical Advertising
1. Puffery/ Fraudulation
Ve?' often,~e ~~ar that advertisement exaggerates about the product qualities. Now
a days puff~1:f I.e. me!apho~ of idea" forms to be main element in advertising. On the
one h~d cnhcs ~ccu~ It, while on. the other defenders i.e. advertisers and advertising
professmnals opined It as a helping agent to differentiate their brands from the
competitors. .
Puffery is considered ·to be an 'opinion' and not a 'factual information'. Advertisers
claim that the consumers are intelligent enough to distinguish between truth and
exaggeration. Moreover they are not blindly going to believe everything as such presented
in an advertisement.
E.g. In the advertisement of 'Force 10' shoes the copy is "I am walking on air" .This
metaphor that tells the lightness of the shoes, is unbelievable that one can "walk an air".
But the studies reveal~ that often many people start believing them & buy those
products that have exaggerated claims in their advertisements. ~ith the use of special
effects exaggerating the "quality" and using various appeals" advertisers dramatized their
products to such an extent that reality takes a back seat.
E.g. "Hajmola Anardanafl is not going to increase your retention power or drinking
"Mirinda" you.will .not for get anything or 'VIP Franchie" would not get a girlfriend for
you. Like wise, the advertisements of 'Wheel" & "Vim" bars show lemons on their
package & products advertisers claim that it contain real lemon while it is found that they
only have Lemon flavor in them. These kinds of deception cases are more in India as well
as in the world.
Puffery, though legal, but is not harmful to an extent. But false claim and dishonesty
are unethical practices and regular deception,.lea<l:s to losing costumers .trust & confidence
2 Untruthful or Deceptive
A number of studies have shown a general mistrust of advertising among consumers.
Deceptivenes·s is defined as not only as false and misleading statements but also as
false impressions conveyed, whether intentional or not. False and subjective claims
about the products, is some times believed but are untruthful and · misleading. The
problems of µntruthful or fraudulent ad~ertising exists more at the lo~al level an~ _in
specific are as such as mail order, telemarketing and other forms of direct marketing.
Advertisement should be informative and should be use puffery or embellished messages.
The following acts are considered unfair or deceptive practices :
a) False promises
b) Incomplete Descdptive
c) Misleading Comparisons
d) Bait and Switch Offers
e) Visual Distortions
f) False Testimonials
g) False Comparisons
h) Partial Disclosures
i) Small-Print Qualifications
j) Laboratory Application
3. Offensive or in Bad Taste
Another one of the major complaints against advertisements is offensive, tasteless,
irritating, boring, & soon. Taste is subjective i.e. what is goo_d taste to one may be bad for
. & corporate Governance (1. r .v.v .l.) <
~eni.~v
Business Ethics )
,,.,,.,,. as what is offensive today may not he J
24 •th time even f
else. Tastes changes w1d d by advertising in a number o ways.
some one an be offen e 1 hygiene are ·
tomorrow. Consumers c ducts like contraceptives or persona . not
The advertisements for praroketers often use nudity in their advertisements.
E·g· nsumers as m f 1
accept'!-ble to some co table by some of the. people The type o_ appea or the
· Ads are not accep A peal m Deodorant
Condoms . often irritates consumer. E.g. Fear P . &f s,
manner of presen!a:ondruff shampoo ads are criticized to create anxiety ear to he
Mouthwash & ~ti- an
rejected in the society.
4 Creates Maten 1
·ar stic Demand ·
·
le who have need
· Advertising provides a variety o,f _alternatives to choose from peop s.
. m·g creates derives and fantasies for the consumers. . .
Ad ve rtis f ltural and sprritu 1
Some people crave for material possessions and others or cu ·t· . tha
. h b f h trum Many en ics c1aun at
enhancement. Here Advertisers at t e oth end o t e spec _
the advertising encourages materialism.
Few critics attribute to advertising that : -
· • h rod uct or service fulfills
a} Seeks to create needs rather than merely showing ow a P
them;
· ·· d · vince show th
b) Surrounds consumers with the images of good life an _con e
materialistic possessions leads to happiness in life. ·
c) Portrays th.~se p~ssessions as symbol of status, success, social acceptance,
popularity _and soon. _ .
Formerly we di.d ,-~ot have h~~se with garages, but now everyone wants a .garage or
two. Advertising differentiated between simple & formal sandals. It informs us about
twin-packrazors, Leo , & Barbie range of toys. Advertising keeps pace with dynamic
market. It is a motivating force to exert harder to create and satisfy our new & novel
needs.
5. Makes People_Buy the Things not Needed
Advertising creates artificicµ needs. Advertises motivates and persuades consumers
to buy the things that ~e no~ needed even. Accor~ing to many critics advertising should
not persuade by playmg with consumers em~t10ns, anxieties, psychological needs &
desires such as status, self esteem, attractiveness & others but should · · t · ·d
information · ful · kin h . . . JUS prov1 e
use m ma g pure ase decisions such as price per£ - & h
. · ·t · c ·t· - . - , ormance ot er
obJective en ena. r1 ics .say persuasive advertising foster discont t
encourage them to purchase products & services to solve dee· enblamong consumers &
·· . per pro ems.
Defenders beheve that very informative ad is oft ·. · . ·
ad will not be permitted then there will be no d en vdery p_e:suasive and if persuasive
- · - a as a verhsm ' ·
persuade. People buy DVDs, Frozen Oran e Juices _ _g s main objective is to
_People spend and status or self-actualizati~n t : Cars~ soon, _even if they not need it.
actualization. . o satisfy their self-esteem and status or self·
6. Comparative Advertising
Comparative advertising .
fraudulent and deceptary adv /s. ano ther unethical practice 0 f d ..
. Th . . er ismg. a vertismg besides
E .g. . e advertiseme t f .
. n so Peps· f C
brand s & the series try to cut t 1 o ~ca Cola : Both the hr _-
ads -of captain Cook Salt & Ta he features shown in their ad ~ds try to compare their
presented the advertiseme t . ta Salt. The new introd t vert1sements. Severally the
:e ~rand loyalty & nation::s: a h':1111orous way. In th:~eo{ brand 'Captain Cook Salt'
aking the packaging or the . This led to an ad-war b t!, y, Tata Salt's ad talked about
names so,unding similar toe th een t~e two brands. Similarly
. . , e ma1or hr d .
· , ·· - ___ _ _ an s m the market
the competitor's sells their brands like GOLOFLAKE for GOLDFLAKE. Comparative
advertising has become a major weapon though it is very risky.
Likewise, claiming & playing with numbers & facts while comparing with
competitors in form of testimonials sometimes can lead the advertisers to the legal
authorities e.g. The Pepsodent people were asked to ban their ad of 'being 102% better
than their competitor" by MRTP commission on the complaint of Colgate.
Plagiarism or imitation in advertising copy is also flourishing in advertising world
today. One copy says, "Believe in the best" & another better than the best. One claims for
the flattest screen, other flatter than the flattest.
7. Stereotype
Advertising is often criticized of creating & perpetuating stereotypes thro_ugh
portrayal of women, ethnic minorities & other groups. It involves presenting a group of
people in a pattern or manner that lacks individuality. In our society, we have many
stereotypes like South Indians are intellectuals; Punjabi's are boisterous & soon. Mother-
in-law & daughter-in-law always fight, father out o'f house management etc. ·
Women : The most controversial of the stereotypes portrayed in advertisements is
that of women & failing to recognize the changing role of women in our society. Gritics
accuse advertisers to often depict women as preoccupied with beauty, household duties
and motherhood or show them as decorative objects or sexually provocative figures.
Moreover, houaewives are portrayed, as they are just concerned about the cleanliness of
their homes, health of family members & soon. Young girls occupied with beauty & boys.
Very few ads recognize the diverse role of women in society. Males .are generally shown
knowledgeable, active and aggressive than females. Feminist groups such as the National
Organization for Women (NOW) and Sexual Assault Prevention & 'Awareness Center
argue against such advertisements. ··
While sex is mand stereo typing still exists, but advertising's portrayal of women is
improving in many parts of the world. Advertisers are now portraying women
realistically.
8. Advertising and Gender
Critics often accuse advertising for portrayal of women as glamour props. Sex in
Advertising is the most controversial aspect, which is much of social issue than an ethical
issue. As discussed earlier about the stereotype inportraying women as housewives let us
now discuss about objectifying women in the advertisements. .
Women in advertisements of suitcases, Shaving foams or creams, tyres, pens, shoes
etc. does not make any sense at all E.g. In the advertisement of 'GelPen' the exposure of
women & copy saying 'sab kuchh dikhta hai' is a matter of critique. Similarly ad of Tuff
Shoes portraying the male & female models wearing tuff shoes and a python draped
around their nude bodies is not sensible. This ad was banned.
9. Improper Language
One ofthe major complaints against advertising is that the a,dvertising copy is too
breezy, too casual i.e. improper. It is believed that the advertisements have destroyed the
dignity of the language.
The research in advertising shows that consumer's better responds to the simple and
down to earth language than to the more dignified & formal copy. A successful copy is
that which is descriptive, colourful and pictures are as warm, human & personal.
10. Excessive
In today's world on an average customers are exposed to 1000 commercial messages
per day. The advertising clutter is even worrying the advertising professional about the
negative impact of advertising proliferation. With the increase in brand and the mass
media options to choose from, there is a boom in advertising industry.
,,.,,,F Business Ethics & ·c
6 tlve Effects o_
'Y f Fa_l•• ~dv~sing_ . . ''POrate Gov.rn,nc,
. (f. Y.8.BJ.) (Se ~--~
15 th
~ •s;,alseTadvertising . ~isleadint g wti d_clauns that aren't substantiated by evidence "
d Comm1ss1on se s s an ards fo d · 'lle
Federal ra e . r a Vertising to reduce exposu,,
misleading
th or unfair adverhsements._ An advertiser Who knowingly makes false claillls
·se falsifies advertising faces financial and . . dd't• or
loyalty
o el'Wlfrom previous . customers. 1ega1repercussions, m a 110n to Iosi~i
t. Investigation
ff a marketing10campaill? i~ suspected of being false advertising, the FTC Ills

inveshgate further deternune if _the company violates any laws. The FTC review, ~
content of ~e ad fro~_the_ standpoint of a consumer to determine if the actual or hnplj~ 1
claims constitute falsif1ca11on. The Frc also evaluates information that is le/tout, such a,
failing to report side effects of a new medication. .
2 Cease-and-Desist Orders · ·
In_ some·cases, the company may receive a cease-and-desist order to stop the falsiJie,
advertisement from tunning. The advertisements must be brought upto FTC standard,
before ~ey :"" all?wed to -run •gain, This may include correcting any false information
and addmg m the information omitted from the advertisements. In addition, the company
may have to include additionat disclaimers in future advertisements or let anyone Who
purchased the item that the company used Qeceptive practices.
3~ Financial loss
False advertising ends up costing the company a significant amount of money ij

caught. If the ads are pulled, th'e company loses out on the money it spent to_ develap
those ads. The company is sometimes charged a fine for both current false advertising and
any future incidents of deceptive advertising. If the company issued, additional ""J>enses
suit. in the form of legal fees and money that must be paid to consumers who filed the
come
4. Broken Trust
A company that engages in false advertising gives the impression that ii isn't a !rust
worthy business. Both existing ilnd new cusll)mers may feel betrayed and are more likclY
to go somewhere else for the same products or services. The lost loy~lty from e,as~
customers cuts into business. The comp"'.'y may also get a bad reputahon as a decephve
· organization, which means decreased business m the future.
S. Consumers Suffer
1
The first and most noticeable negative effect of deceptive advertising is that it leads
consumers to make unin(ormed decisions. If consumers are not being told the whole truth
or are being shown images that contradict or overshadow the actual traits of a product oi
service, they are unlikely to make the best decisions for themselves. They may wastel
money on a product_ or service that can't provide what they are looking for, or they might
I be unaware of the pitfalls involved in the product or service. Harmful, deceptive ads may
1
I involve apparent
costs or serious guarantees
health risks. that are contradicted
. in fine print, false warranties, hidden
I 6. Businesses Suffer
1 g1:"e, it might seem like deceptive advertising hanns consumers and endl
At fir~t
up benef bng ~messes that employ the practice. But deceptive ad'Vertising often doe,
sigruftcant,_even atat, harm to_comparues that use it. Consumers do not like bein conned,
and often tunes they \Vlll retaliate agamst co · h · · g ·
fall forf the same trick more than O M mparues t at trick them; Most people will not
nee.0 f oreover
will o ten retaliate with negative Word . th ' an angry and
. dISappointe
• . d custom
. er ·
lawsuits. · mou 'attacks on socraJ media and, on occasion.
7. Employees Suffer
,Employees of companies that use deceptive advertising can end up bearing the
consequences. They get stuck between the customer and the advertising. The employees
usually don't t write the ads or endorse them, but when consumers are angered by
deceptive advertising, they have to deal with unhappy people. Customers might direct
their ire at employees who can't possibly live up to the unrealistic expectations generated
by deceptive ads. They may even be directly blamed for a malfunctioning product. When
employ~s are subjected to unpleasant conditions, they are likely to leave or to not work
as hard, providing more problems for the company.
8. Distorted Competition
The effect on co~petition might be one of the worst results of deceptive advertising.
Competition between companies should benefit the consumer by providing better
products at lower cost. It can benefit entire industries by encouraging innovation and
exploration. Competition forces companies to get creative and to spend money on
researching and developing newer and better services and products. However, if
yourcompetitor is spending money on ·making false but attractive claims about their
products, for example, it may seem .prudent and competitively . intelligent for your
company to invest iJ\ deceptive advertising rather than in innovation and creativity.
ASCI GUIDELINESl!(Advertis_ing Sta~dards C~imcil of India) for Markete~s ~t'\J ·
1. To ensure the· truthfulness and honesty of representations and ~!aims made by
advertisem~ijts and to safeguard against misleading advertising. ·
2. To ensure thctt advertisements ate not offensive to generally;,a,ccepted standards of
public·decency.
3. To safeguard~ gainst indiscriminate use of advertising for promotion of products
which are re.grJ.l'ded as hazai:dous to society or to individuals to a degree or of a
type which i£,.y.nacceptable to society in large.
4. To ensure t4at advertisements observe fairness incompetition so that consumers
need to be informed on choices in the market place and the canons of generally
accepted com}:?etitive behavior in business are both served:
Under the ASCI Code, complaints against the advertisements can be made by any
person who consider&+them to be false, misleading, offensive, or unfair. The complaints
are evaluated by an in,d,ependent Consumer Compl_aints Council (CCC). CCC decides on
complaints from the g~neral public including government officials, consumer groups, etc.,
complaints from one advertiser against another and even complaints from the member of
the ASCI Board, CCC, or the Secretariat. The CCC usually decides upon the complaints
within a period of 4 to 6 weeks once the party concerned is afforded an opportunity of
presenting its case. '
Regulatory Laws in India
The following are the statutory_provisions which regulate advertisements in India :
1. Sec. 292(2) (d) of Indian Penal Code, 1860, makes i t a punishable offence to
publish, distribute, sell, hire or circulate any obscene a~vertisement.
2. Sec. 294-A of Indian Penal Code, 1860 says publication of any advertisement
related to any lottery other than as tatelottery is a punishable offence.
3. The Young Persons (Harmful Publications) Act 1956 makes it a punishable
offence to advertise a harmful publication.
4. The Emblems and N~mes (Prevention of Improper Use) Act, 1950 prohibits the
use of certain emblems and .names of national orintemational significance for
commercial purposes.
3/f.Y.B.B.I.-Busmess Ethics & Corporate Governance (Sem.-V)

28 ,,.,,.,,. Business Ethics & Corporate Governance.(T. Y.B.B.I.) (Seni.-vi
5. The Drugs and Magic Remedies ~Objectionable Advertisements) Act, 19S4
prohibits advertisements of drugs for certain purpos es and of treatme nt of certait\
diseases.
The Act also pr~hibits misleading advertisements related to drugs and of magical.
remedies for treatme nt of certain diseases.
6. The Indecent Repre~entation of Women (Prohibition) Act 19~6 prohibi ts the
publication of adverti sement s containing an indecen t represe ntation of women.
7. The Prenatal ~iagno stic Techniques (Regulation and Preven tion of Misuse) A.ct
1994 prohibits adverti sement s related to prenata l determ ination of sex.
8. The Transplantation of Human Organ Act 1994 makes it·a punish able offence to
issue advertisements inviting persons to supply human organs for paymen t.
9. The Drugs and Cosmetics Act 1940, makes it an offence to use any repo~ ~fa tes1
or analysis made by central drugs laboratory for the purpos e of adverti sing any
drug or cosmetics.
10. The Prize Compe tition Act 1955 prohibits the publica tion or distribu tion
of
adverti sement s of prize competition where the pr~ze offered exceed s f 1000/-in
any month: ·
11. The Motor Vehicles Act 1998 entitles the State Govern ment to empow er police
to
remove adverti sement s which can obscure a traffic sign . or misleading
adverti sement s which appears to be a traffic sign or which distrac t the
concentr~tion or attentio n of a driver.
12. The Prize Chits and Money' Circulation Schemes (Banning) Act 1978 prohibi ts the
printin g or publica tion of advertisements of prize chits and money circulation
scheme s. .·.
13. The Cigaret tes and other Tobacco Products (Prohibition of Advert isemen t and
Regula tion of Trade and Commerce, Production, Supply and Distrib ution) Act
2003 prohibi ts the advertisements of cigarettes and other tob~cco produc ts.
14. The Repres entatio n of People _Act, 1951, prohibi ts political adverti sing 48 hours
prior to polling time. ,
15. The Cable Television Networks (Regulation) Act, 1995, prohibi ts the transmission
. of adv~rtisements on the cable network which are not in confor mity with the
Advert isemen t Code. . ·
Legal actions can be taken against advertisements that enco h f
practices : . . urages t e ollowin~
1. Ridicule caste, race, nationality, colour and creed.
2. Goes agaipst any provision of the Indian Constitution.
3. Incite people towards criminal activity · .
violence in the country. ' provocative, cause disord er and/01
4. Breach laws and/ or glorify obsce ·ty .
5. Glorify terrorism, communal ru or violence· f
. m any orm,
massacres and • .
6. Ridicule the father of the nat' '. cnmma lity and soon.
image of national I d ion, the national embl
.t ea er
7. Depic women in a d or a state dio-nita o4...
ry
.
em, part of Consti tution or thf
manner that is obscenee~recat~g. manner. Female s sh .
8. Display distasteful v· , xploitahve or vulgar. ould not be .portra yed in i
taste and dece isual content that go b . .
9 . ncy. es eyond th b .
. Exploit and . . e esta hshed norms of goOir
encourage . .
system. social evils like child m ..
arriage , bride burnin g and do~
29
~c al Issues in Finance
~~ ;c s in Financial Services por t a
ust ry pro vid es ess ent ial ser vic es, which are fundamental to sup
The Finance ind providing domestic
eco nom y and soc iety , suc h as safeguarding money and haz ard s
mo dem
, giv en the vita l rol e tha t fina ncial institutions play, the moral
lending. Howe ver subject to higher
mo re acu te and it is the ref ore logical that the ind ust ry should be
may be
rcial sectors.
ethical sta nda rds than other comme uld
al pri nci ple s tha t any eth ica l financial services ind ust ry sho
The fundament ·
include : · .
the
. exp ens e of everything else including reputatio
n.
1. No t pur sui ng pro fit at
ts
is ma rke d by inte gri ty, fair dea ling and acting in the best interes
2. Behaviour tha t
of clients.
of technical exce11ence.
3. Commitment to and delivery y conflict. .
the instructions of clients wh ere the
4. Prioritizing goo d ethics ove r to act in a
ng bey ond he que stio n of wh at is legal-i.e., being pre par ed not
5. Looki
unethical, even tho ugh it is legal.
certain wa y on the basis tha t it is
ste nt app lica tio n of pos itiv e eth ical behaviour across the ind ust ry
6. Consi
in Financial Organisations
Suggestions for Ethical Practice
1. Cultural change ted from the
al cha nge to occ ur wit hin an organisation; it mu st be stim ula
For cultur level. Responsibility for
of the hie rar chy , 'ma ins tre am ed' dow n and .embedded at each an ethics
top
can not be del ega ted . The boa rd mu st und ers tan d the nee d for
cultural change inc lud ing at boa rd
and be com mi tted to mo nit ori ng its effectiveness. Senior staff, .
policy
de an exa mp le of if the ir beh avi our fa11s sho rt of ethical compliance
level, mu st be ma
2. Codification . require eve ry
fin anc ial ins titu tio ns alr ead y ·have codes of ethics inplace and d
Ma ny e read and complied withit. In dee
a reg ula r ba$ is tha t the y hav
employee to certify on FSA' s Statements of Principle for
Ap pro ved
son s are alr ead y sub jec t to the
app rov ed per to be subject to the
s and me mb ers of tra de and professional bodies are also likely
. Person
bod y' scode of practice. t
hav e sho wn , sim ply hav ing a code ~f ethics in place is no
However, as events er they :
sho uld per iod ica Uy rev iew the ir codes and ask themselves wh eth
enough. Firms a
con sum ers (no t jus t sha reh old ers) sho uld be pro tec ted -no t as
• ·add res s ho w
way;
token gesture, but in a meaningful
ns in a consistent
ce on day-to-day .~thical questio
• contain de ar practical guidan
and rigorous manner; and
wh ich is sim ply req uir ed to com ply wit h the law and regulation.
• go ~eyond tha t
high-level
a nee d to ma int ain a bal anc e between prescriptive detail and
There is.
it right.
sta tem ents. It is im por tan t tha t firms get
ployees
3. Education and Training to Em dua te
uld be com mit ted to reg ula rly training employees in ethics at gra
AU firms sho iness and ethics
sen ior ma nag em ent lev el, in all areas wh ere the interests of the bus ficult
level to
quc t des ign ), so as to inf use ase nse of ethical sensitivity. It is dif
may conflict (eg, pro
ac~, but education can help.
to change the wa y people think and
4. Monitoring and adjudicat
ion
h applicable law
s in place to police compliance wit
Firms sho uld already have system wever, firms
and res olv e que stio ns wh ere there are uncertainties. Ho
and regulation
30 ,,.,,,,,, Business Ethics & Corporate Gavemance (T. Y.B.B.l.) (Sem,- \I)
should ask themselve s whether their systems enable the discovery, adjudicati on and
resolution of unethical behaviour , as well as technical non-compliance.
Firms should also ensure there is an appropriat e mechanism for employees .to discuss
ethical dilemmas and report unethical behaviour without the risk of being penalised.
Firms cannot adopt a tick-box approach to _compliance if they wish to meaningfu lly
address unethical behaviour. Indeed such an approach is already discourage d by the FSA
as it can, and does, enforce against transgressions of its principles in circumstan ces where
breaches of specific rules have not occurred.
5. Secondments in to compliance functions
The routine secondment of employees in busin~ss roles, into ~ompliance function~,
could be away to help align interests in business and ethics· / complianc
inf
e. If such
thi al ons1b1hty
Is m?~~
· .
made compulsor y for career development, this woul~ help to use e c resp
into those seeking senior positions within firms. The transition would not ne~essaril ! be
an easy one, and firms should be able to call on the regulator for assistance if_required.
th
This is perhaps something that could be achieved· on a firm-by-firm basis, rather an
being mandated by the regulator.
Ethics for Finance Manager
A. Introduction
·Ethics are principles based on doing the right thing. They are the moral values by
which an individual nr business operates. In theory, a business or individual can act
ethically and still attain ultimate success. A history of doing the right thing can be used as
a selling point to heighten a person's or organization's reputation in the communit y. Not
only are ethics morally valued, they are backed' by legal repercussi ons for failure lo. act
within certain guidelines. ·
B.Ethics for Finance Manager
The ethics of a finance manager should be above approach. This includes more than
just acting in an honest, above-board manner. It means establishing boundarie s that
prevent professional and personal interests from appearing to conflict with the interest of
~e em~loyer. A . finance manager must provide · competent, accurate and timely
information that fairly presents any potential disclosure issues, such as legal ramificatio ns.
The manager is also ethically responsible for protecting the confidentiality of the employer
~ staying within the boundaries of law. ·
~ - Important Points to be considered by Finance Manager . _
1. Legal Issues
Some laws are specifically designed to address unethical actions ·of fin · .
For example, if afinance manager is aware of business activity that will affe:ce ~~age_rs.
and uses that information to buy or sell stocks for ·financial gain, h e h as b roaks oc pnce
·th hi 1 d b k en a trust
w1 . s emp oy~r an ro en 1aws established by the Se<;:urities and Exchan e Board of
India (SEBI). A finance manager who is aware that his g
may be held legally responsible for a crime. company may be breal.<ing the law
2. Balancing Act
managers co, mes m · • the need to act
· bal ancmg
The dilemma faced . by many finance ·
e thi cally w hile fulfill mg the needs of the employer Th 1 , •
maximize earnings, and the drive to m k . e emp oyer s ultimate goal is to
a e money may cause an em 1 t0
unethically. If a manager believes his company may have crossed an . P ~yee . _act
step should be to take it up with his employer If he fe I th e_th1cal lme, his first
· · h h uld d · · e s e actions warrant legal
interventio n, e s o o so without fear of repercussion.
3. Whistle blowers ·
If a discussion with an employer does not resolve the ethical issues facing a finance
manager, he can report the activity to the appropriate government agency· for
investigation. This is known as whistle blowing. Under current laws, an employee has the
right to report suspicious activity without fearing for his job. While the activity may put a
strain on his working relationship, he is protected by law.
4. Competence ·
Finance managers must have skills, knowledge and proper certification to practice
their trade. Clients, investors, employees and others takeholders rely on their expertise to
manage money, oversee accounts, prepare balance sheets, provide financial advice and
perform other fiscal . tasks. Ethical finance managers pledge to ensure competency by
staying on top of changes in the profession and meeting stakeholders' expectations. They
also pledge to offer financial information or advice only when they are competent to do
so.
5. Professionalism .
For ethical finance managers, professionalism is about business protocol, not just
finance know-how. They have to treat all stakeholders respectfully and transact businessin
good faith at all times. They extend the same respect to fellow finance professionals and
compete with them fairly and honorably. They refrain from practicing other disciplines
unless they have expertise in those areas. Since finance managers, need credentials for ·
some activities, such as selling commodities or insurance, they .pledge to maintain the
licenses, insurance, certification and permits the law requires_."1n addition, finance
managers agree to present all fees for s~rvices in writing. These agreements are to state
clearly the details of specific services, the dates and times services. are to be performed,
clients' payment options and invoice schedules.
6. Integrity
Finance managers' first .priority is to act in their clients' best interest and provide
exceptional service that builds honest, trustful relationships. Finance professionals are
entrusted with funds and other assets, and take responsib,ility for protecting assets against
fraud, theft and general mismanagement. They have .·to correct manual or electronic
procedures that prevent raw financial data for: being properly analyzed, processed and
recorded. They report in consistencies in ledgers or finance procedures to the proper
authorities.
7. Confidentiality .
Finance managers handle sensitive information that must be kept confidential.
To protect clients' privacy and comply with privacy laws, they disclose confidential
information only with clients' consent or when obligated to do so by law. · Finance
managers ensure that clients give their consent in writing,verbally or through power-of-
attorney signatures before information is released. Finance professionals never access
clients' confidential information for personal use.
/ Code of Conduct for Financial managers
1. He should act with honesty and integrity, avoiding actual or apparent conflicts of
interest in personal and professional relationships.
2. He should . provide constituents with information that is accurate, complete,
objective, relevant, timely, and understandable. He must disclose information' to
all relevant constituents, both positive and negative, that is necessary to present
an' accurate picture of financial statusand to ensure the effective running of
business.
3. He should comply with rules and regulations of Central, state, provincial, local
governments, and other appropriate_private and public regulatory agencies.
. & .Corporate Governance (T. Y.B.B.I.) (Senz
Business Ethics •'VJ
. .,,. "bl with due care, competence, a
32
• W . ood faith, r~spons:te;ial facts or allowing indepenct:4
4. He should act in g . representJJlg m t\t
dT ce without nus d
1
. igen 't be ~ubordinate · . f information acquired in the course of hi ,
Judgment o t the confidentiabty o otherwise legally obligated to discio s
5 He must respec
· t when auth Onzed or f k h Id .be not used fse·
. d ·n the course o wor s ou
work excep . n acqulI'e 1 Ot
Confidential informat10
ersonal advantage. d maintain skills important and relevant to "'
P kn wJedge an . ••1y
6. He must share ds o . .
constituents' nee · mote ethical behavior as a responsible partner amon
7 He should proactid·v_elytpsroin work environment and community. He should&
. d ubor ).Ila e . . . .
peers an s 'd a safe environment for subordinates to report, unethical/ in
promot~ and::io: or suspected fraud and will not condone or a~cept any
approp?ate in:t those subordinates for reporting these activities.
retribut10n aga
d achieve responsible use of and control overall assets and resources
He sho ul
8· em lo ed by or entruste d to him. H e mus t recogruze· his f'd .
1 ~c1ary d u t·1es m
. the
ens~g of effective internal co~trol systems and a control environment.
86l'ancing Act and Whistle Blowing .J.J'/V\
~ One of the main objective of whistle blower protection systems is to promote and
facilitate the reporting of illegal, unethical .or · dangerous activities. The precise
classification of elements . of disclosure that warrant protection is vital for clarity and
public confidence in the process.' The legal framework should clearly provide the a clear
definition of the protected disclosures and specify the acts that constitute the violation to
any codes of conduct, regulations or laws, gross waste or mismanagement, dangers.to the
public health or safety or corrupt acts. . .
How ever balance should exist between being overly prescriptive, which makes it
difficult to discloseor requires the _discloser to ~ave relevant knowledge of relevant legal
provisions and being overly relaxed which allows for unlimited disclosures that ·that in
the end may not encouragere solutions of issues within an organization. UK legislation
provides a Balanced Approach with a detailed definition including exceptions.
The concept of Balancing Act is based on Concept of whistle blowing.
()
~stle Blowing JJ-l""'f . . .

Whistle blowing is an attempt by a corporate employee to disclose wrong doing in an
organisaiton for achieving the organizational benefit. It may be ~ternal i.e. reporting a
corruptactivity through higher authority to the organization for it may be external
i.e. informing to government or media or police authories. . ·
Origin
Whistle blowing was first used by the Government employees who go to public with
complaints of corruption or market in Government agencies.
Later on it was used in private sector also.
Meaning
It is an attempt by a member or ex•member of an organization to disclose wrong
doing in or by the organisation. . . • .
Types of Whistle Blowing
Internal External
Whistle Blowing Whistle Blowing
-
33
Interna~ Whistle Bl ow ing

d zation
It is wh en wr on g doing. 1•~ reporte only to higher authorities in the organi
through formal pro ced .
. ure existmg m the organisation
External W his tle Bl ow ing
.
It is wh en wr. ong doi ng ts ·
reported to externalGrind ividuals or bodies such as
ps.
ver nm ent age nci es or ne ws papers or Public Interest ou
Go
Benefits
barrassing
mp an y to dea l· wi th mi sco nduct and thus prevent em
i) It helps a co e.
· pu~lic disclosur
on.
d that they will no t suffer relati
ii) Employees will be assure can take
ge t the ben efit fro m lea rning about problems and
iii) Co mp ~ie s ~an .
problems be come public issue
corrective actions before the wrong
ne l of com mu nic ati on to empl~yees for responding to
iv) It ?ro ~id es chan
domg m the organisation.
ow ing Policy ·
Components of Whistle Bl
for voting
a) A clearly defined procedure
for .the employees.
b) Statement of responsibility s.
receive and investigate report
c) Well trained personnel to
priate action.
d) Commitment to take appro
nt practice.
e) Guarantee against fraudule rs :
st be made for wh ist le blowe
Fo llo wi ng arrangements mu
protected against termination.
i) ·Whistle blower shc:mld be n
n of cla use 49 mu st be don e. It has to be included certai
ii) Proper implementatio 'to be formulated and disclose
its whistle
up on -lis ted com pan ies
obligations
corporate governance.
blower policy in the report of wers.
ect ors or top ma na ge me nt must empower the ~h ist le blo
iii) The dir interest an d
uld arr ang e sem ina rs and workshops for increasing the
iv) Company sho g.
are ne ss am on g em plo yee s in the concept of Whistle Blowin
aw ll of Whistle
Pro gra mm es mu st · be arr anged for developing the ski
v) Training
Blowing. of defection of
sho uld pla y a pro pe r rol e for explaining the procedure
vi) Media ·
frauds by whistle blowers. ical
t an d no n go ver nm ent org anization try to develop eth
vii) Various governmen of the society Whistle Blowing is an
example of
g the dif fer ent cla sse s
'values amon
t.
such ethical behaviour concep
QUESTIONS
I. Answer the fol low ing :

1. Define E~hics? Discuss its types?
ics?
2. Describe the 'importance of Eth
in Marketing.
3. Discuss the unethical Practices
in Advertising.
in Finance.
.
34 Busin ess Eh ' & Corporate Gavern
t ,cs ance (T.Y:B.B.I.) (Se
. '11,.
II. Write Short Notes on
:
1. Features of Business
Ethics
2. Types of Unethical A
dverti~ements
3. Importance of Ethics
in Bus~ess
4. Principles of Manager
ial Ethics
5. Whistle Blowing
OBJECTIVE QUEST
IONS
I. Fill in the blanks :
1. Th e word ethics is deriv ed from Greek w or
d _ _.
(Ethos/Ethenic/Enthu
siastic) . .
2_ ._ Ethics believes in W
ha t an in di vi du al be
. · .
(Professional/ A pp lie lie ve s ab ou t m or al ity •
d/ Pe rs on al )
3. Business ethics ai
ms at _ _ co ns um
er s' rights.
·(P ro te ct in g/ D am ag
in g/ N on e of these)
4. _. _ ethics are
the m or al principles
kind of marketing co an d valu~s th at ne ed
to be fo llo w ed du ri
(Foreign Tr ad e/ C op
mmunication. ng an:
yr ig ht /M ar ke tin g)
5. Surrogate adverti
sing is a ty l'e o f _ . _ advertising: .
(Ethical/Unethical/B
oth)
[Ans.: (1) - Ethos; (2
) - Personal; (3) - Pi
:o te c~ g; (4) - Marke
ting; (5) - Unethical
] ·
II. State whether th
e fo llo w in g statem
~nts are True or Fa
1. Ethics does no t lse : ·
he lp in gaining an y
2. Ethical decision ki nd of kn~wledge.
s ha ve m ix ed outcom
es. ·
3. Foreign.tr ad e et
hics de al s w ith ethi
cal problems re la te d
4. Whistle bl ow in to globalisation.
g is an at te m pt by a
or ga ni sa tio n for achi co rporate employee to
eving organisationa disclose w ro ng do in
l benefits. g in an
5. Professional ~t
hics do es no t aim at
achieving impartial
[A ns .: T ru e: 2, 3, 4; ity an d op en ne ss .
False: 1, 5]
III. Match th e co lu
m ns :
Group A
1. Ethics · GroupB
2. "Personal Ethics a) Unethical m ar ke tin
g Pr ac tic e
3. Religious Ethics b) Related to intellectua
l pr op er ty
4. C op yr ig ht ·Ethics c) Branch of Ph ilo so ph
y
5. . Exaggeration in ad d) Concerns for th e wel
ve rtising l be in g of ot he rs
[Ans. : (1 - c ; 2 - d e) Moral principles gu
) ( ),• (3 - e), (4 - b), (5 - id in g -r el ig io ns
a)]
-

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Business Ethics & Corporate Governance ([. Y.B.B.l.) (Sem.

3. Ethics is not a practical science

K MEANING OF ETHICS AND MORALITY G'),

-.> 4. Not conforming to these may harm or hurt others.

· 1. To not purposely cause harm to any other human being.

b.1. . Ethical executives acknowledge and accept personai

L· Standards that govern how members of· a society

It is an importantpart of Business Ethics. Guided by common goal, all the parties

, . than us and our own des·

an d. se -m er . ' . h" 11 ' h . . ,

doing bad things. .

honest and fair.

AREAS OF BUSINESS ETHICS

Foreign Trade . Ethics • • · and d ecis10ns

• In order to protect your own work a d . . . .

3. Price (November 2016)

1 ~onsun:i•~. c; h<; manirula~ without knowing it through sub tlemarketing

11. ETHICS IN ADVERTISING (TRUTH IN ADVERTISING)

Indian Advertising Industry

• •. Most of the top 20 agen~ies in IO bal markets.

~ical Issues in Advertising .

2. Ethics in Advertising is directly related to the purpose of advertising and the

practices. . os common un~thical marketing

ff a marketing10campaill? i~ suspected of being false advertising, the FTC Ills

False advertising ends up costing the company a significant amount of money ij

3/f.Y.B.B.I.-Busmess Ethics & Corporate Governance (Sem.-V)

~stle Blowing JJ-l""'f . . .

Interna~ Whistle Bl ow ing

I. Answer the fol low ing :

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