Unit 3rd

UNIT 3rd
Introduction to Business Ethics: the concept, nature and growing

significance of ethics in business, Ethical principles in business, Ethics in
management, Theories of Business Ethics, Ethical issues in Business,
Business Ethics in 21st Century.
INTRODUCTION
In today’s environment, ethics is about the behaviour in humans which is good
or bad. Ethics deals with moral principles and values. With ethics, it can e avoid
ad things and do the good things. It is also the rules of what is right and what is
wrong. There are many ethical issues arising in many aspect of life such as in
business, in workplace, in health care and also in our daily life. Ethics are also
the moral principles that can be classified in certain groups such as legal ethics,
medical ethics, teaching ethics and others. Business is a company or
organization or individual that provides services or goods to customers. I am
focusing on ethics in business. Ethics in business context involves the behaviour
in business transaction. It is also known as corporate ethics which means the
ethical practices and policies that are used in business. Corporate ethics will
give guidelines to a company to measure what is the right and what is the
wrong. Ethics in business can be defined as behaviour, moral principles or value
that applied in the world of commerce. The acceptability of business ethics can
be determined by customer, government regulators, competitors, interest group
and many more. Business ethics are implemented in order to get trust between
customers with the business organization. Ethical will build the trust among
individuals and business relationships. Business ethics are applies in all aspects
in business transaction event that transaction from individual or organization.
There are many ethical issues in business such as fundamental issues, diversity
issues, decision-making issues, compliance and governance issues, and many
more. For example fundamental issues in business are facing with integrity and
trust. Integrity means the way we conduct the business matters with honest and
full commitment in treating the customers. So the company or business will
success and get support from the customers when have ethics in doing business.
It is very important in applying ethics in business because the business can be
successful when get the trust from the customers, vendors, suppliers,
shareholders and many more. Business ethics are essential as they keep business
persons to operate in a moral pedestal and laws that not only give their internal
satisfaction yet increase sales because many people like to deal with an honest
business. So good business ethics should be practice by all businessman because
can leading successful in business and people will trust to business trade that
provide by business individual, company or organization.
VIKAS BHARGAW (ASSISTANT PROFESSOR AT JCDIBM, SIRSA) | 1

DEFINITION AND CONCEPT OF BUSINESS ETHICS
According to HubPages, "Ethics" is a set of principles used to determine what
is "right" when it comes to the conduct or behavior of an individual. This
includes individuals who are acting on behalf of a business entity. Business
ethics involves the application of moral standards to the systems and
organizations through which provide good services to customer and
organizations.
According to http://www.saylor.org in the article that entitled business ethics
and social, business ethics is the application of ethical behaviour in a business
context. Acting ethically in business means more than simply obeying
applicable laws and regulations: It also means being honest, doing no harm to
others, competing fairly, and declining to put your own interests above those of
your company, its owners, and its workers.
According to Grublein, business ethics is a set of corporate values and codes of
principles, which may be written or unwritten, by which a company evaluates
its actions and business-related decisions. As the definition goes, business ethics
can be written or unwritten. This is because most of the time, ethics business
and the criteria for what is good and what is bad is shaped by a company’s best
practices and long-standing culture.
The term of ethics has many differences. It has been defined as inquiry into the
nature and grounds of morality where the term morality is taken to mean moral
judgement, standards and rules of conduct. Ethics also has been called the study
and philosophy of human conduct emphasis on determining right and wrong.
Building on this definition, it can begin to develop a concept of business of
ethics. Most people would agree that high ethical standards require both
business and individuals to conform to sound moral principles. Most definition
of business ethics is reference rules, standards and moral principles regarding
what is right and what is wrong in special situations. Business ethics comprises
the principles, values and standards that guide behaviour in the world of
business.
Ethics is not recent phenomenon. Ethical codes have been prepared along with
the development of human civilization. In olden days, people might have found
some of their actions was wrong and others right. The question what is right and
what is wrong gave birth to ethical and unethical codes.
The word ethics is derived from the Greek word ‘Ethikos’ and Latin word
‘Ethicus’ mean custom or character. The concept of ethics deals with human
beings. So it is a social science. Ethics is a branch of philosophy and is
considered as normative science because it is concerned with norms of human
beings.

In the words of Peter. F. Drucker, ―Ethics deals with right actions of
individuals‖ Ethics includes the following
1. Well based standards: Ethics refers to well based standards of right and
wrong that prescribe what humans ought to do
2. Study and development of one‘s ethical standards: Ethics refers to the
study and development of one‘s ethical standards.
NATURE OF BUSINESS ETHICS

Ethics can be defined broadly as the study of what is right or good for human
beings. It attempts to determine what people ought to do, or what goals they
should pursue.
Business ethics, as a branch of applied ethics, is the study and determination of
what is right and good in business settings.
Features:-
1) Business ethics seeks to understand the moral issues.
2) Business ethics seeks to understand the moral issues that arise from
business practices, institutions, and decision making and their
relationship to generalized human values.
3) Unlike legal analyses, analyses of ethics have no central authority, such
as courts or legislatures, upon which to rely; nor do they follow clear-cut,
universal standards. Nonetheless, despite these inherent limitations, it still
may be possible to make meaningful ethical judgments. To improve
ethical decision making, it is important to understand how others have
approached the task.
4) Business ethics can be written or unwritten. This is because most of the
time, ethics business and the criteria for what is good and what is bad is
shaped by a company’s best practices and long-standing culture.
5) According to Patil, business ethics is a behaviour that all businesses stick
to, Also known as corporate ethics-
1) Business ethics concepts are concerned with three different kinds
of moral issues. Some concepts are related to issues involving the
conduct of business within the systems where business operates,
including economic, political, legal and other social systems.
2) Other concepts are concerned with corporate issues which is
involving questions related to the conduct of a particular company.
3) Other concepts are concerned with examination of individual
issues which is where questions are related to the behaviour and conduct
of one or more individuals within a company.
6) The utilitarian approach
Business can utilize utilitarian approach to ensuring outcome of various
situations to help the maximum amount of stakeholders in the company.
This approach focuses on using ethical actions or morally right action that
will promote the good value among a society. It is also limiting the
amount of harm to as few people as possible.
7) A rights ethical approach
This approach is based on the belief that all individuals have rights in life
and should be treated with respect and dignity. Morality plays important
role in this because individuals must personally use ethical behaviour in
order to achieve the goal Business ethics theories often use this approach
by not imposing their missions, products, or systems on consumers.
8) Justice as an ethical approach
This approach is where all people are treated fairly through society,
regardless of race, position, rank, class or others. Also known as the
fairness approach. For example, the employee who get awards must the
good performance and e the est among the employess in the companies. It
must fit the criterion in getting awards.
9) The common good approach
This approach is to promote the moral or ethical principles that found in a
society. Today, the ethical principles are different based on the country. It
is based on their beliefs and culture. So, Business owners and managers
must implement these principles based on their country culture because it
easily accept and understand by society itself.
10) Voluntary :
Business ethics must be voluntary. The businessmen must accept
business ethics on their own. Business ethics must be like self-discipline.
It must not be enforced by law.
11) Requires education and guidance :
Businessmen must be given proper education and guidance before
introducing business ethics. The businessmen must be motivated to use
business ethics. They must be informed about the advantages of using
business ethics. Trade Associations and Chambers of Commerce must
also play an active role in this matter.
12) Relative Term :
Business ethics is a relative term. That is, it changes from one business to
another. It also changes from one country to another. What is considered
as good in one country may be taboo in another country.

13) New concept :
Business ethics is a newer concept. It is strictly followed only in
developed countries. It is not followed properly in poor and developing
countries.
14) Based on moral and social values :
Business ethics is based on moral and social values. It contains moral and
social 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.
GROWING SIGNIFICANCE OF ETHICS IN BUSINESS

Business ethics holds a very important and significant role while doing business
trade. There are some importances of business ethics which make its more
significant for the modern business world. The following points of importance
signifies the role of ethics in business.
1) Stop business malpractices
When business ethics is put in the practice, it will stop the business
practices. Not all businessmen involve with business practices but there
are some immoral businessman doing business malpractices. Business
malpractices is involve with unfair trade such as black marketing, selling
clone product, selling harmful product and many more that can be
harmful to customers.
2) Improve customers' confidence
Business ethics are very important in increasing customer confidence
about the quality of product , quantity of products, price of products, and
other products that offered by company or organization. The customers
will have confidence and have a trust in doing business that follows ethics
rules. The will safe when doing business or buy the product with those
companies that follows business ethics.
3) Survival of business
For business survival, business ethics is compulsory. Dealers who do not
follow business ethics usually will have a short term success only. For
example they have cheated the customer at once, but the customer can
remember and they will not buy the goods again from that businessman
besides tell to their friends about that cheating. So the image of that
businessman will be negative and leading to failure in the business or in
the market. From that, it is important to follow the business ethics in
appropriate ways.

4) Safeguarding consumers' rights
Businessman must protect or respects to the consumers right. Example of
consumer right is right to choose, right to complain, right to be informed,
and others. By applying good business ethics among businessman, it will
safeguard the consumers’ right.
5) Protecting employees and shareholders
In business ethics, it is required to protect the interest of employees,
shareholders, dealers, suppliers and many more from exploitation through
unfair trade practices.
6) Develops good relations
In developing good relationship between business and society, business
ethics is essential. This will cause a regular supply of good quality items
and services at lower prices to the community. It will also lead to profit
for the business thereby causing economic growth.
7) Creates good image
If a businessman follows all regulations of ethics, then the user
acceptance is good. People can accept the goods from business and will
not criticized it besides support the business that conducted by those
businessman. It will create good images to society when implementing
good business ethics.
8) Consumer satisfaction
The consumer gives a lot contribution in the market. Without consumer,
the business cannot survive in the market. In business transaction, user or
consumer satisfaction must take seriously. When follows the business
ethics, the consumer will satisfied to the services then the business can
gain lots of profit.
9) Healthy competition
Healthy competition will exist in business when the businessman
implements business ethics while dealing with competitor. For example,
the businessman will avoid monopoly in business when practice the
business ethics.
10) Long-term growth:

Sustainability comes from an ethical long-term vision which takes into
account all stakeholders. Smaller but sustainable profits long-term must
be better than higher but riskier short-lived profits.
11) Cost and risk reduction:
Companies which recognise the importance of business ethics will need
to spend less protecting themselves from internal and external
behavioural risks, especially when supported by sound governance
systems and independent research
12) Anti-capitalist sentiment:
The financial crisis marked another blow for the credibility of capitalism,
with resentment towards bank bailouts at the cost of fundamental rights
such as education and healthcare.
13) Limited resources:
The planet has finite resources but a growing population; without ethics,
those resources are depleted for purely individual gain at huge cost both
to current and future generations.
ETHICAL PRINCIPLES IN MANAGEMNT AND BUSINESS
Indian Ethos
Ethos can be defined as ―the moral ideas and attitudes that belong to a
particular group or society. Indian Ethos is all about what can be termed as
―national ethos. The Indian ethos is the results of Hindu way of life. Indian life
has four fundamental goals (Purushartthas) such as Dharma, Artha, Kama and
Moksha. To fulfill these goals human life is divided into four stages namely
Brahmacharya, Grahasthasrama, Vanaprastha and Sanyasrama. To achieve the
purusharthas, the Indian philosophy states three fundamental ways. They are
Karma (Action), Bhakthi (Devotion) and Jnana (Knowledge). An individual can
select a particular marga which depends upon the degree and level of his
psychological and spiritual evolution, as per his Pravirthi, which comes from
Gunas. A man has Gunas namely Satva (the enlightening force), Rajas (the
kinetic force) or Tams (dark force).
Principles of Indian ethos in management are universally applicable and it is

value based. Indian ethos in management can help an effective and holistic
pattern of management which will assure all round growth in productivity,
marketing and profitability. The work life of an organization is very much
influenced by the ethical and moral values prevalent in the organization.
The Indian ethos consists of:
1. Spirit and matter: Indian ethos places emphasis on both spirit and matter.
Both these are interlinked in holistic approach. This means that man is
permitted to enjoy both internal as well as external quality of life.

2. Relationship between man and universe: Indian ethos emphasizes the
holistic aspect between men and cosmic. There is intimate relationship between
man and universe, between men and nature. This view states that all human
beings and nature are inter connected and interdependent.
3. Co- Operation: Indian ethos stresses on co-operation amongst other at work

and otherwise. Excessive competition within the organization and organization
to organization has destroyed many young minds and family life. Co-operation,
mutual trust and respect, joint efforts and team spirit can lead an all round
prosperity and success to everyone.
4. Self management: Indian ethos states that man should be able to control
himself before he controls others. So every manager must manage himself
before controlling his subordinates. He must know what are his strengths,
weakness, dreams, goals and ambitions.
5. Meditation: Excellence in work can be achieved through Yoga. Meditation

helps to concentrate and to solve many complicated problems of the
organizations. Mediation results in calm mind which helps one to focus on
problems in a clearer frame of mind.
6. Dharma: As per Indian philosophy Dharma means duty. It stands for all
those ideals, philosophies, purposes, influences, teachings and experiences that
shape our character. Every organization is required to follow its own dharma.
7. The spirit of sacrifice: Renunciation results in mental peace, inner growth

and spiritual growth. It results in a higher level of consciousness.
Indian Ethos in Management (IEM)
Formally, the body of knowledge which derives its solutions from the rich and
huge Indian system of ethics (moral philosophy) is known as Indian Ethos in
Management (IEM). Is IEM some kind of Hindu concept of management?
Certainly not. Management is behavioural science and it has to be culture
specific. IEM has as its basis, the culture base of India and as a country whose
culture has its roots in religion - it does draw its lessons from the religions of the
land - be it Hinduism, Buddhism, or any other.

The salient ideas and thoughts of Indian Ethos in Management revealed by our
ancient scriptures are:
1. Atmano Mokshartham, Jagat hitaya cha: All work is an opportunity for

doing well to the world and thus gaining materially and spiritually in our lives
2. Archet dana manabhyam: Worship people not only with material things but
also by showing respect to their enterprising divinity within.
3. Atmana Vindyate Viryam: Strength and inspiration for excelling in work

comes from the Divine, God within, through prayer, spiritual readings and
unselfish work.
4. Yogah karmashu Kaushalam, Samatvam yoga uchyate: He who works

with calm and even mind achieves the most.
5. Yadishi bhavana yasya siddhi bhavati tadrishi: As we think, so we

succeed, so we become. Attention to means ensures the end.
6. Parasparam bhavayantah shreyah param bhavapsyathah: By mutual

cooperation, respect and fellow feeling, all of us enjoy the highest good both
material and spiritual.
7. Tesham sukhm tesham shanti shaswati: Infinite happiness and infinite

peace come to them who see the Divine in all beings.
8. Paraspar Devo Bhav: Regard the other person as a divine being. All of us
have the same consciousness though our packages and containers are different.
Basic principles of Indian Ethos for Management (IEM):
` The following are the six principles of Indian Ethos for management:
1. Basic principles:
(a) Tat Tvam Asi : You are the supreme that everybody can make himself a
genius.
(b) Aham Brahmasmi : I have immense potential. I can make the impossible
possible.
2. Why Work?
Atmano Mokshartham, Jagat Hitaya Cha: For my personal growth and for
the welfare of the world.

3. What is work?
(a) Yagnaya Charatah Karma- work is to be done with the spirit of Yagna
(Team work, selflessness)
(b) Parasparam Bhavayantah –Nurture each other(Win – win Approach)
4. How to work?
Seva and Tyag –Serve others and give your best for the good of other.
5. Spirit of Work
Yogah Karmasu Kaushalam –Dexterity and excellence in action is yoga.
6. The Resources:
(a)Sukshma or subtle subjective, intangible factors are equally important than

Sthula or gross, concrete tangible factors. One must develop one‘s Third eye,
Jnana Chaksu, the Eye of Wisdom, Vision, Insight and Foresight. Inner
resources are much more powerful than outer resources. Divine virtues are inner
resources. Capital materials and Plant & Machinery are outer resources.
(b) Karma – Kshetra is Dharma. Kshetra implies that one should treat the work
place as sacred and keep it clean and bring in orderliness and cleanliness.
ETHICAL PRINCIPLES IN BUSINESS
The Principles of business ethics developed by well known authorities like

Cantt, J. S.Mill, Herbert Spencer, Plato, Thomas Garret, Woodrad, Wilson etc
are as follows
1. Sacredness of means and ends : The first and most important principles of
business ethics emphasize that the means and techniques adopted to serve the
business ends must be sacred and pure. It means that a good end cannot be
attained with wrong means, even if it is beneficial to the society.
2. Not to do any evil: It is unethical to do a major evil to another or to oneself ,

whether this evil is a means or an end.
3. Principle of proportionality: This principle suggests that one should make

proper judgment before doing anything so that others do not suffer from any
loss or risk of evils by the conducts of business.
4. Non co-operation in evils: one should not be a partner in crime by co-

operating in evil acts.
5. Co-operation with others: This principles states that business should help
others only in that condition when other deserves for help
6. Publicity: According to W. Wilson, anything that is being done or to be

done, should be brought to the knowledge of everyone. If everyone knows, none
gets opportunity to do an unethical act.
7. Equivalent price: According to W. Wilson , the people are entitled to get

goods equivalent to the value of money that he will pay.
8. Universal value: According to this principle the conduct of business should

be done on the basis of universal values.
9. Human dignity: As per this principle , man should not be treated as a factor
of production and human dignity should be maintained.
10. Non violence: If businessman hurts the interests and rights of the society
and exploits the consumer by overlooking their interests this is equivalent to
violence and unethical act.
Some other ethical principles in business are:
11. Commitment orientation
12. Self discipline
13. Excellent working conditions
14. No outside interference in the organization
15. Low rate of absenteeism
16. No deterioration of general moral standards
17. Recognition of merits by top management.

THEORIES OF BUSINESS ETHICS
What is an ethical theory?
The aim of ethical theories is, among other things, to presentand defend
systematic answers to the two following questions:
(1) What moral standards (norms and values) should we takeinto account when
assessing actions, decisions and institutions?
(2) How should such moral standards be justified?
There are various views for giving the answers to above cited questions. These
answers perhaps presents the theories pertaining to business ethics which are as
under:
1. Consequentialism maintains that the majority of an action depends on the

nonmoral consequences that the action brings about. Morality of an action
consists of the ratio of good to evil that the action produces. We should perform
right and only right action in terms of good and evil, as each individual defines
good and evil, and right and wrong. There is no objective right and wrong or
good and evil. The person defines these.
You bump into a car at the mall. You could leave a note, but since there were no
witnesses and the owner is not around, you decide not to because you recognize
that the damage is low (probably only a couple of hundred dollars). The car
owner probably has insurance, and it would be such a hassle for the owner to
contact you and your insurance company.
You may have to end up paying higher premium, the owner may think ill of you
—all of which are nonmoral reasons that may be unpleasant for you. Ethical
egoism state that you should always act so that your actions produce what is in
your own best long-term interests.
Personal egoism states that an individual should always act in his or her own
best long-term interests, but that does not say how others should act.
Impersonal egoism states that an individual should always act in his or her own
best long-term interest.
2. Values Clarification (Philosophical Relativism) teaches that the most

important aspect is not what one believes, but being aware one’s own feelings,
beliefs, and values systems. People thus consider alternative models of thinking

and acting. By acting thusly and making one’s own choices, one develops one’s
own values.
In this setting, a value is what a person likes to do. It is NOT an ought-to-do, but
rather a want-to-do. Values clarification puts a heavy emphasis on feelings—so
much so that it virtually equates values with feelings. It also reflects a
philosophical relativism— the belief that there are no moral or ethical absolutes
—everything is relative. Concluding what is right or wrong is basically
anybody’s guess. Proponents of this systems say that they use the Socratic
method—every ethical question is a question of either this or that choice.
Unfortunately, Socrates and Plato had distinct beliefs about truth and ethics
which the proponents of this methodology do not possess.
3. Utilitarianism states that the moral standard should be promotion of the best
long term interests of everyone concerned. Many utilitarianists say that which is
intrinsically good is pleasure and happiness (known as the hedonistic calculus).
Others say there are other things which are intrinsically good such as beauty,
power, knowledge, etc.
Act Utilitarianism states that the right utilitarian act is the one that produces the
greatest ratio of good to evil for all concerned. Rule utilitarianism teaches us
that certain actions almost always have a great utilitarian value and thus general
rules are formulated to help us see that we follow these rules of action.
A few doctors decide that a number of experiments on a few people, even if

most of them died, would be worth it if they could find a cure for a disease that
would relieve the suffering of millions of people. Utilitarianism would give the
approval for such because it produces the greatest good for the greatest number
of people.
4. Legalistic Moralism (Moral Absolutism) states that there are pluralities of

absolutes (or norms) with each one covering an area of human experience.
These absolutes never conflict with each other. An action that is evil under one
absolute is evil under every other absolute and could never be seen as good
under any absolute.
Some call this the ethic of absolute ends because we do what is right and trust
God or fate or destiny or the forces of good to work things out. There is no
personal responsibility for the consequences of morally right acts. We do them,
not because they bring us pleasure, but because they are “right”…this is called
the “categorical imperative”.

A madman shows up at your door with a weapon raving, asking where your
loved one is, that he intends to kill the person. You answer truthfully because it
would be wrong to lie. You trust that since you have told the truth, things will
work out. Perhaps the neighbours have called the police, or someone will
intervene, or something will happen.
5. Situation Ethics shows that since legalistic Moralism is encumbered with a

bundle of predetermined rules and regulations and while antinomianism says
that there are no absolutes, then decision making must be based on a “middle
ground”. That middle ground then says the guidelines for decision-making must
be 1) absolute love (agape) 2) general guidelines of helpfulness (sophia) 3)
particular moment (kairos).
Love and justice are the same. If love is the end result, then the ends justifies the
means. This is not a selfish love, but a love that desires the neighbour’s best
good at all times. There are four working principles involved—a) Pragmatism
(love gives concrete practical, workable answers) b) Relativism (everything is
relative to love) c) Emotivism (each person desires his or her own values) and
d) Personalism (persons are the ultimate value).
A man finds himself in an unfulfilled marriage, looking for a person with whom
he can deeply connect. A woman is trapped in a marriage that is abusive and
filled with pain. They find each other and after a while one things lead to
another until they are in love. Love being the ultimate goal, they being
consenting adults, then they are morally right in having an affair.
6. Ethical Realism (as espoused by Reinhold Neibuhr)(the lesser of two

evils) states that when absolute norms come into conflict (as they will
eventually do) one must decide which to follow. Each solution offers limited
alternatives, so the solution which produces the less of two evils is the one to be
chosen.
Unavoidable moral dilemmas occur because our world is not perfect. Neibuhr’s
theory, The Origin of Moral Dilemma, comes from a Christian perspective
stating that we live in a “fallen” world since sin entered it. Thus there is an
excusable and pardonable sin because people did not cause that dilemma by
their own acts. Every decision will have some sinful consequence of which God
will forgive. Thus people must make the choice that is the lesser sin and then
ask God’s forgiveness.
Neibuhr talked of a world. War. The Soviet Union was an evil and brutish
dictatorship over millions of people, forcing them into horrific, hellish
conditions. Yet to oppose them in an outright war would bring massive
destruction through nuclear weapons. Instead of direct opposition, we chose
indirect opposition (the cold war) through economics and alternative means.
7. Ethical Hierarcicalism (Graded Absolutism) is the view that there are

many universal norms, but they are not all intrinsically equal. Thus when a
conflict takes place, we must obey the “higher” norm…we choose the greater of
the two goods.
Geisler Hierarchical Calculus is:
· Persons are more valuable than things
· God is more valuable than an incomplete person
· A complete person is more valuable than an incomplete person
· An actual person is more valuable than a potential person
· Potential persons are more valuable than actual things (fetus vs

appendage)
· Man persons are more valuable than a few persons
· Personal acts which promote personhood are better than those which
don’t
Why should a person be held responsible for committing a crime if the crime
was a lesser norm? Is it wrong for a man to steal money to purchase a life-
saving machine for his child who is dying? Perhaps the system is at fault and
not the person.
8. Principle Ethics states that principles are merely value states or guidelines
to actions (as opposed to rules or laws). Thus when principles encounter each
other in conflict it is not a conflict of norms, but rather an exercise in reasoning
and logic.
Principle ethics is the most difficult to study because it demands the area test
study and the most incisive analysis of principles and cases with the goal of
determining which principles apply to which case. The decision that is made is
based upon test of logic, reasoning, and rationale.
9. Cognitive Moral Development (as espoused by Lawrence Kohlberg)

states that ethics education is possible. Just as people develop mentally,
physically, and emotionally, they develop a moral cognizance. Using critical
thinking tactics such as the Socratic method, people can solve their ethical
dilemmas.
Kohlberg taught that there were six stages of ethical thinking, each stage being
of greater maturity than the previous one. By delineating these levels, we are
allowed to know and test each our own thinking. This helps us know ourselves
better and challenges us to move on to a higher level of thinking. This assumes
a sort of natural goodness and integrity in the child whereby he or she will
always want to do the right thing—if only they had the time to reason tings out.
This is the idea that people suffer from a character defect if they are void of
logical thinking.
ETHICAL ISSUES IN BUSINESS
Although a business may appear to be successful and prosperous, there are

harmful ramifications when behaving unethically. One might appear to be a
successful contractor, when in fact that person's focus is on cheating the
customer. That may result in more income, but the associated negatives include
damaged health, client hassles, and legal actions, not to mention a highly
undesirable reputation within the local community. Likewise, a business activity
can be reputable, disreputable, or shady. Some actions are predatory, while
others are outright criminal. Though the ethical dilemmas faced by certain
companies may be specific to their industry or company, other types of ethical
issues are common to all types of companies. Handling ethical decisions with
wisdom is especially important for small businesses, given the potentially
devastating effects these companies may face if such issues aren't handled
correctly.
Broadly speaking, ethical issues in business include the rights and duties
between a company and its employees, suppliers, customers, and neighbors, and
its fiduciary responsibility to its shareholders. Issues concerning relations
between different companies include hostile take over’s and industrial
espionage. Related issues include corporate governance; corporate social
entrepreneurship; political contributions; legal issues, such as the ethical debate
over introducing a crime of corporate manslaughter; and the marketing of
corporations' ethics policies.
In the complex global business environment of the 21st century, companies of

every size face a multitude of ethical issues. Businesses have the responsibility
to develop codes of conduct and ethics that every member of the organization
must abide by and put into action. Some of the common ethical issues
pertaining to business are as follows:
1) Fundamental Issues
The most fundamental or essential ethical issues that businesses must

face are integrity and trust. A basic understanding of integrity includes
the idea of conducting your business affairs with honesty and a
commitment to treating every customer fairly. When customers perceive
that a company is exhibiting an unwavering commitment to ethical
business practices, a high level of trust can develop between the business
and the people it seeks to serve. A relationship of trust between you and
your customers may be a key determinate to your company's success.
For example, suppose you're a partner in a business and see a great deal
of profitability on the horizon. You don't believe that your partner
deserves to profit from the business' future success, because you don't
like his personality. You may wonder if you could simply take his name
off the bank accounts, change the locks and continue without him. If you
proceed with this course of action, you would likely be in violation of
your ethical and legal obligation to act in good faith concerning your
partner. The better course of action may be to simply buy out his interest
in the business.
2) Diversity Issues
According to the HSBC Group, "the world is a rich and diverse place full
of interesting cultures and people, who should be treated with respect and
from whom there is a great deal to learn." An ethical response to diversity
begins with recruiting a diverse workforce, enforces equal opportunity in
all training programs and is fulfilled when every employee is able to
enjoy a respectful workplace environment that values their contributions.
Maximizing the value of each employee’s contribution is a key element
in your business's success.
3) Decision-Making Issues
According to Santa Clara University, the following framework for ethical

decision-making is a useful method for exploring ethical dilemmas and
identifying ethical courses of action: "recognizes an ethical issue, gets the
facts, evaluates alternative actions, makes a decision and tests it and
reflects on the outcome." Ethical decision-making processes should
centre on protecting employee and customer rights, making sure all
business operations are fair and just, protecting the common good and
making sure individual values and beliefs of workers are protected.
4) Compliance and Governance Issues
Businesses are expected to fully comply with environmental laws, federal

and state safety regulations, fiscal and monetary reporting statutes and all
applicable civil rights laws. The Aluminium Company of America's
approach to compliance issues states, "no one may ask any employee to
break the law, or go against company values, policies and procedures."
ALCOA's commitment to compliance is underpinned by the company's
approach to corporate governance; "we expect all directors, officers and
other Alcoans to conduct business in compliance with our Business
Conduct Policies."
5) Health and Safety
One area of ethical consideration for employers is how to balance

expense control with the health and safety interests of employees.
Manufacturing plants and other workplaces where employees use
dangerous equipment or engage in physically demanding work should
have strong safety standards that not only meet federal requirements, but
that also makes eliminating accidents a priority. Even standard office
workplaces pose health risks to employees who are asked to sit or stand
all day. Unfortunately, certain organizations opt to cut corners on safety
controls, equipment and training to save money. This is both unethical
and potentially damaging in the long run if major accidents occur.
6) Technology
Advancements in technology and the growth of the Internet in the early

21st century have produced a slew of ethical dilemmas for companies.
Company leaders have to balance the privacy and freedom of workers
while also maintaining standards that require that company technology
use is for legitimate business purposes. Certain companies go so far as to
monitor all online use and email communication from employee
computers and work accounts. A company may have this right, but its
leaders need to understand the potential concern about privacy and
autonomy among employees.
7) Transparency
Prominent business and accounting scandals have made it imperative that

companies operate with openness and transparency. For public
corporations, this includes honest, accurate and complete reporting on
mandated financial accounting reports. For large and small businesses,
transparency includes communicating messages, including marketing
messages, that aren't open to misinterpretation and that clearly represent
the intentions of the company and its messages. Being caught in a lie or
avoiding full disclosure may cause irreparable harm to small businesses.
8) Fair Working Conditions
Companies are generally expected to provide fair working conditions for

their employees in the business environment, but being responsible with
employee treatment typically means higher labor costs and resource
utilization. Fair pay and benefits for work are more obvious elements of a
fair workplace. Another important element is provision of a non-
discriminatory work environment, which again may have costs involved
for diversity management and training.
9) Employee Behaviour
From large corporations to small businesses, individuals involved in all

types of business often face ethical issues stemming from employee
behaviour. For example, whether an employee can spend work time
checking personal email accounts, how a manager deals with claims of
harassment and to what extent a manager can "groom" a certain employee
for a promotion are all examples of ethical issues regarding employee
behaviour. There are legal consequences for some unethical employee
behaviour. For example, if a supervisor discriminated against an
employee based on her gender, religion or ethnicity when making
recommendations for a promotion, legal action could be sought. Small
business owners can help to prevent ethical problems stemming from
employee behaviour by drafting a clear, attorney-reviewed set of
standards that dictate behaviour policies for employees at all levels.
10) Supplier/Customer Relations
In addition employees and business owners must consider the ethical

issues involved with their relationships between suppliers and customers.
Business owners in particular must consider whether it is ethical to do
business with suppliers who have unethical practices. When dealing with
customers or clients, business people must ensure that they use their
information correctly, do not falsely advertise a product or service, and
do not intentionally do sub-standard work.

11) Small Business Ethics
Although there are ethical issues like discrimination that apply to all areas
of business, each business area has its own ethical concerns. For example,
business people who act as consultants must ensure they are giving sound
advice. In the area of small business, some major ethical issues result from
hiring, firing and dealing with employees. For example, conflicts of
interest may cause ethical issues in small businesses, especially if they are
family run. When personal family issues interfere with business decisions,
this is a conflict of interest and an ethical concern.
12) Side Deals
You're a business manager with an employment contract. The contract

requires you to work solely for your employer and use your talents to
attract new clients to the business. If you begin attracting more clients than
you believe your employer can reasonably handle, you may wonder if
there would be an ethical issue with your diverting that excess business
elsewhere and taking the commission. If you don't, at minimum, disclose
the idea to your employer, you will likely be in breach of both your
contractual and ethical duties.
13) Gross Negligence
You're on the board of directors for a publicly traded corporation. You and
your fellow board members, in hopes of heading off early for the holidays,
rush through the investigatory process involved in a much-anticipated
merger. As a board member, you have a duty to exercise the utmost care
respecting decisions that affect the corporation and its shareholders.
Failing to properly investigate a matter that affects their interests could be
viewed as gross negligence supporting a breach of your ethical and legal
duty of care.
14) Accounting Practice Ethics
In the wake of corporate scandals involving unethical accounting

practices from publicly traded companies, including Enron and Tyco,
many consumers are justifiably distrustful of investing in businesses. The
federal government responded with the Sarbanes-Oxley Act in 2002 to
mandate new financial reporting requirements to protect consumers,
though with 90 demonstrators arrested during the "Occupy Wall Street"
protest in 2011, it would seem to indicate distrust and anger still persists
at time of publication, according to the "Financial Times" website.
Accountants and financial advisers must avoid skirting ethical boundaries
when making financial reports to the federal government and investors to
help repair the wide rift between business investment and consumers.
15) Social Networking Ethics
Comments regarding employers or co-workers posted on social networking

websites are costing employees jobs across the country. The ethical and
legal challenges surrounding the use of social media and its consequences
in the workplace affects the business industry as a whole because
employers across the nation are setting policies regarding employee use of
these websites while working and even what these workers can say when
off the clock. According to the Business Ethics website, as of 2010
software developer Cisco Systems Inc. even has a program, Cisco Social
Miner, designed to help employers monitor their employees' social
network site status updates, forum posts and blog posts in real time. The
line between an employer's right to monitor employees and an employee's
right to privacy can easily blur in this climate.
16) Harassment in the Workplace
Maintaining professional workplace relationships between employees is a

continuing challenge for employers regardless of the industry. This
challenge can become more difficult when the image companies choose to
project has a significant sexual charge. This creates an ethical dilemma
about what images companies use to sell products and the conduct
expected of employees in the workplace. There's never an excuse or a
justifiable reason for harassment of any kind in any workplace, though a
willingness to use sexually charged imagery in advertising may indicate a
working climate where harmful behaviors can occur with costly lawsuits
resulting from permissive climates, reports the Business Ethics website.
17) Paying Employees Unequally
Even though federal and state laws require workers to receive equal pay
for performing similar work regardless of gender, race, age, ethnicity,
disability or religion, the problem still persists in many industries.
According to the National Committee on Pay Equity, as of 2010 a
$10,784 gap in annual salary still persists between men and women
nationwide. The ethical dilemma arises when some companies choose to

men higher wages than women while at the same time espousing
messages of equality and fair play.
BUSINESS ETHICS IN 21ST CENTURY
Ethics have become an organizational priority. In the 21st century, ethics is

neither a luxury nor an option. There is a growing impatience within society
with selfish and irresponsible actions that impoverish some, while enriching the
crafty.
Hewlett Packard demonstrated its commitment to ethical integrity under the

leadership of Carly Fiorina. The former CEO of Hewlett-Packard said of her
six-year tenure, “Some of the most important choices I ever made were firing
people who weren't conducting themselves with integrity” (Weil, 2007). In
contrast, R. J. Reynolds Tobacco Company was caught covering up knowledge
about the addictiveness of nicotine. Tolerating bad behavior to improve the
bottom line and justifying it as “not really illegal” creates a climate that
ultimately becomes corrosive.
In addition to social responsibility, there are other compelling motivations for

21st century organizations to make ethical values a priority.
1) It’s About Responsibility.
Political strategist James Carville coined the phrase, “It’s the economy, stupid,”
which became widely used in Bill Clinton’s 1992 successful presidential
campaign against George H. W. Bush (“It’s the economy, stupid,” 2007). With
the nation in a recession at the time, the catchy slogan helped Clinton connect
with Americans on a critical issue. In today’s crisis of ethics, a similar message
might well be sent to organizational leaders, “It’s about responsibility, stupid!”
The issue of responsibility is foundational to understanding organizational

ethics. It seems almost too basic to merit mention, but irresponsible behavior is
so common that the obvious must be stated. Fueled by selfish ambition, greed
can cause leaders to lose perspective and rationalize unethical behaviors. The
bad news for offenders is that society is more alert than ever before to ethical
recklessness that benefits some, while injuring others.
Kilcullen and Kooistra (1999) exposed the sins of the R.J. Reynolds Tobacco
Company in their article titled, At Least Do No Harm: Sources on the changing
role of business ethics and corporate social responsibility. An internal memo
distributed throughout the R.J. Reynolds Tobacco Company read, “Happily for
the tobacco industry, nicotine is both habituating and unique in its variety of
physiological actions.” As if this was not bad enough, at the time that this memo
was circulating, the CEO of R.J. Reynolds publicly declared that, “Cigarette
smoking is no more addictive than coffee, tea, or Twinkies.”
Apparently, Americans believe more corporate executives should be fired.

According to the Business Ethics Index (BEI) there was a nearly 6% drop in the
BEI rating from 2004 to 2006. This was attributed to a fall in consumer
expectations of the future ethical behavior of businesses (Tsalikis & Seaton,
2007).
One definition of business ethics is “a set of principles that guides business

practices to reflect a concern for society as a whole while pursuing profits”
(Kilcullen & Kooistra, 1999). The phrase “concern for society as a whole”
indicates a growing impatience with the selfish and irresponsible actions of so
many organizations today.
2) Ethics as a Priority
More than simply a legal or moral responsibility, ethics need to become an

organizational priority. Organizational leaders have a lot on their minds in
today’s highly competitive world. They must keep abreast of rapid
technological advancements, competitor’s products and services, the effects of
globalization, and opportunities and threats within their own industry, to name
the most obvious. Leaders must also keep a constant eye on the mission, vision,
values, culture, strategy and goals of their own organizations. In the midst of all
of this complexity, it’s not easy to find room on the organizational plate for
another major priority. However, to succeed in the 21st century, organizations
will have to figure out how to make ethics a priority.
Priorities are those few things that are deemed most important. Many things are
important, some more and some less important, but only a few things are most
important. Ethical values need to achieve recognition as among the elite, most
important success factors in modern organizations.
As an organizational priority, ethics will not only affect decision-making but

also, and ultimately, institutional culture. To achieve this ideal, there must be an
alignment process that integrates business ethics with mission, vision, values,
strategies and goals. Ethical values are essentially social in nature, therefore,
this alignment process will be concerned with relationships and defining
relational expectations. The goal of an ethical organizational culture is the
greater good of all. Internal relationships between leaders and followers, as well
as external relationships with clients, customers, vendors and the community are
all prized. As a result, people are treated well consistently and an ethical culture
emerges.
3) Beyond Responsibility and Priority to Opportunity
Today’s organizations need to advance beyond a view of ethics as necessary for

safeguarding their reputation and thereby avoiding bad media coverage; or as
mere compliance with forced regulations. A great opportunity awaits
organizations alert to the potential of ethical values in shaping the future.
One illustration of this kind of possibility thinking is found in a challenge put to

the International Olympic Committee. The challenge originates from a growing
disillusionment with the Olympic Games, which has become characterized by
the worst features of the competitive culture: winning at any cost, corruption
and the unfair advantage of advanced nations (Milton-Smith, 2002). Almost
simultaneously on another front, disenchantment with the social and ethical
consequences of globalization is occurring. Milton-Smith identifies the Olympic
Games as being in a unique position to influence society, “It is difficult to
conceive of another institution with the same capacity as the Olympic Games to
positively shape popular culture on a global scale” (Milton-Smith, 2002, p.
131).
Society’s desperate need for an ethical culture is every organization’s

opportunity to influence social culture, through the institutionalization of ethical
values. When this occurs, communities benefit from the positive influences
employees take from their workplace back to families, friends and associates.
4) Values-Based Culture
In the 21st century, ethics is neither a luxury nor an option. More than
competence, experience, intelligence and drive, people at all levels of an
organization need ethical values. According to Kidder (2001), “The principle
task of this decade is the creation and nurturing of a values-based culture.” Due
to the extensive amount of time people spend at work, much of that nurturing
must take place in the business environment.
Rushworth M. Kidder is the founder and president of the Institute for Global
Ethics, an organization whose research has identified four key factors in
creating a values-based culture. These factors include:

a) Shared core values
According to Kidder (2001), there are five core values found in some form in
every culture worldwide. They are honesty, respect, responsibility, fairness and
compassion. A values-based culture will make these core values the driving
force in decision-making.
b) Common language
Employees need a language of ethics that allows them to communicate readily

and comfortably about issues that are typically sensitive and difficult to discuss.
Effective ethics training programs provide the common language needed.
c) Commitment at the top
Ethics training is meaningless without top-level executives who walk the talk.
When leaders consistently reward those who choose to do what is right, it helps
to create an ethical culture more than anything else could.
d) Moral courage
Kidder (2001) describes moral courage as “the quality of mind and spirit that
enables one to face up to ethical dilemmas and moral wrongdoings firmly and
confidently, without flinching or retreating.”
Ethics, lifestyle and culture must become so interwoven that they cannot be
separated. Together, they constitute how people relate to one another in the
home, the workplace and every part of society.
5) Being more global business
While business ethics emerged as a field in the 1970s, international business

ethics did not emerge until the late 1990s, looking back on the international
developments of that decade. Many new, practical issues arose out of the
international context of business. Theoretical issues, such as cultural relativity
of ethical values receive more emphasis in this field. Other, older issues can be
grouped here as well. Issues and subfields include:
a) The search for universal values as a basis for international commercial behavior.
b) Comparison of business ethical traditions in different countries, with

comparisons made on the basis of their respective GDP and corruption rankings.
c) Comparison of business ethical traditions from various religious perspectives.

d) Ethical issues arising out of international business transactions (e.g.,
bioprospecting and biopiracy in the pharmaceutical industry, the fair trade
movement, transfer pricing).
e) Issues, such as globalization and cultural imperialism.
f) Varying global standards (e.g., the use of child labor).
g) The way in which multinationals take advantage of international differences,

such as outsourcing production (e.g., clothes) and services (e.g., call centers) to
low-wage countries.
h) The permissibility of international commerce with embargoed states.
Conclusion
Many organizations are aware of the critical need for ethics in their cultural
fabric. However, there is still a great deal of room for improvement. First,
organizations must see ethics as a social responsibility to which they are
obligated. No matter how cleverly done, hurting others for personal gain is
unacceptable. Next, ethics will only find its proper place in organizations that
make it a priority by creating relational expectations that work for the good of
everyone. Finally, the best organizations will seize the opportunity to shape the
future by influencing culture through the institutionalization of ethical values.
By creating a values-based culture within the organization, society can be
improved by positive influences that perpetuate outside the organization.

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UNIT 3rd

Introduction to Business Ethics: the concept, nature and growing

VIKAS BHARGAW (ASSISTANT PROFESSOR AT JCDIBM, SIRSA) | 1

VIKAS BHARGAW (ASSISTANT PROFESSOR AT JCDIBM, SIRSA) | 2

NATURE OF BUSINESS ETHICS

VIKAS BHARGAW (ASSISTANT PROFESSOR AT JCDIBM, SIRSA) | 4

GROWING SIGNIFICANCE OF ETHICS IN BUSINESS

VIKAS BHARGAW (ASSISTANT PROFESSOR AT JCDIBM, SIRSA) | 5

10) Long-term growth:

ETHICAL PRINCIPLES IN MANAGEMNT AND BUSINESS

Principles of Indian ethos in management are universally applicable and it is

The Indian ethos consists of:

VIKAS BHARGAW (ASSISTANT PROFESSOR AT JCDIBM, SIRSA) | 7

3. Co- Operation: Indian ethos stresses on co-operation amongst other at work

5. Meditation: Excellence in work can be achieved through Yoga. Meditation

7. The spirit of sacrifice: Renunciation results in mental peace, inner growth

Indian Ethos in Management (IEM)

VIKAS BHARGAW (ASSISTANT PROFESSOR AT JCDIBM, SIRSA) | 8

1. Atmano Mokshartham, Jagat hitaya cha: All work is an opportunity for

3. Atmana Vindyate Viryam: Strength and inspiration for excelling in work

4. Yogah karmashu Kaushalam, Samatvam yoga uchyate: He who works

5. Yadishi bhavana yasya siddhi bhavati tadrishi: As we think, so we

6. Parasparam bhavayantah shreyah param bhavapsyathah: By mutual

7. Tesham sukhm tesham shanti shaswati: Infinite happiness and infinite

Basic principles of Indian Ethos for Management (IEM):

VIKAS BHARGAW (ASSISTANT PROFESSOR AT JCDIBM, SIRSA) | 9

(b) Parasparam Bhavayantah –Nurture each other(Win – win Approach)

Yogah Karmasu Kaushalam –Dexterity and excellence in action is yoga.

(a)Sukshma or subtle subjective, intangible factors are equally important than

ETHICAL PRINCIPLES IN BUSINESS

The Principles of business ethics developed by well known authorities like

2. Not to do any evil: It is unethical to do a major evil to another or to oneself ,

3. Principle of proportionality: This principle suggests that one should make

4. Non co-operation in evils: one should not be a partner in crime by co-

6. Publicity: According to W. Wilson, anything that is being done or to be

7. Equivalent price: According to W. Wilson , the people are entitled to get

8. Universal value: According to this principle the conduct of business should

Some other ethical principles in business are:

11. Commitment orientation

12. Self discipline

13. Excellent working conditions

14. No outside interference in the organization

15. Low rate of absenteeism

16. No deterioration of general moral standards

17. Recognition of merits by top management.

VIKAS BHARGAW (ASSISTANT PROFESSOR AT JCDIBM, SIRSA) | 11

What is an ethical theory?

(2) How should such moral standards be justified?

1. Consequentialism maintains that the majority of an action depends on the

2. Values Clarification (Philosophical Relativism) teaches that the most

VIKAS BHARGAW (ASSISTANT PROFESSOR AT JCDIBM, SIRSA) | 12

A few doctors decide that a number of experiments on a few people, even if

4. Legalistic Moralism (Moral Absolutism) states that there are pluralities of

VIKAS BHARGAW (ASSISTANT PROFESSOR AT JCDIBM, SIRSA) | 13

5. Situation Ethics shows that since legalistic Moralism is encumbered with a

6. Ethical Realism (as espoused by Reinhold Neibuhr)(the lesser of two

7. Ethical Hierarcicalism (Graded Absolutism) is the view that there are

Geisler Hierarchical Calculus is:

· Persons are more valuable than things

· God is more valuable than an incomplete person

· A complete person is more valuable than an incomplete person

· An actual person is more valuable than a potential person

· Potential persons are more valuable than actual things (fetus vs

· Man persons are more valuable than a few persons