UNIT 1

BUSINESS ETHICS

MEANING:
The term ethics was derived from Greek word ETHIKOS which means character.
Ethics is a branch of philosophy and is considered as normative science because it is
concerned with norms of human conduct.
Business ethics or corporate ethics or applied ethics is the art and discipline of applying ethical
principles to examine and solve ethical dilemmas.

Ethics is a branch of social science. It deals with moral principles and social values. It helps us
to classifying, what is good and what is bad? It tells us to do good things and avoid doing bad
things.
So, ethics separate, good and bad, right and wrong, fair and unfair, moral and immoral and
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 another person.
In short, business ethics means to conduct business with a human touch in order to give
welfare to the society.
So, the businessmen must give a regular supply of good quality goods and services at
reasonable prices to their consumers. They must avoid indulging in unfair trade practices 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 exploit the workers. They must encourage 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.

DEFINITION
FOR ETHICS:
“Ethics is the discipline dealing with what is good and bad and with moral duty and
obligations”.
- According to WEBSTER.

FOR BUSINESS ETHICS

“Business ethics is the study of business situations activities and decisions where issues of
right and wrong are addressed”.
According to ANDREW CRANE
“The ethics of business is the ethics of responsibility. The businessmen must promise that
he will not harm knowingly”.
According to RAYMOND C BAUMHART
IMPORTANCE OF BUSINESS ETHICS:

A. ATTRACTING CUSTOMERS:

 Customer is a person who buys goods and services from business or shop.
 By adopting ethical practices in organization individuals will able to make right
decisions in ethical way.
 With; these customers get attracted to firms prudently.

B. PROTECTION OF CONSUMER RIGHTS:

 Consumer rights are the rights of a consumer (who uses firms product) against false and
misleading claims of business
 The products produced by company should be safe, and then only consumer rights get
protected.
C. REDUCED LABOUR TURNOVER:

 Labor turnover means leaving of employee from; the organization.

 By adopting ethical organization, there will be no discrimination in organization.
With this labor turnover get reduced.

D. SOCIAL RESPONSIBILITY:

 Social responsibility is the responsibility of companies. Regarding welfare of this Society.

 This is done by producing safe products, protection of environment by pollution free activities,
doing development activities for society.

E. REDUCED TAKEOVER:

 Takeover means the act of buying of one company by other company. By following ethical
activities in business?
 Investors get attracted and companies share price will be high thereby business get
protected from takeover.

F. PROMOTES SOCIALISM:

 Socialism means interaction among individuals, with ethics discriminating among individuals
gets reduced by treating everyone equally.

G. LONG RUN SURVIVAL / SUSTAINABILITY:

 Survival / sustainability mean the ability to be maintained at a certain rate of level.

 Unethical practices may give short-term benefits but in the long run it will not lead
to survival. So to have long run survival ethics should adopt.

H. RELATION WITH SOCIETY:

 To maintain good relations with society, ethics should be followed by the business by doing
welfare and betterment activates to society.

I. CONTROLLING FRAUD:

 Fraud means wrongful deception intended to result in financial or personal gain.

 Ethics in business will control fraudulent activities like corruption, harmful products
and improper services.

FUNCTIONS OF BUSINESS ETHICS

A.SOCIAL RESPONSIBILITY:

 Ethical guidelines also help business to demonstrate social responsibility to consumer.

Demonstrate behaviors
 As a provider of products or services a company must choose voluntary actions to be known
for social responsibility.

B. TAKE CARE OF STAKEHOLDERS:

 Stakeholders are these who have direct or indirect relation with business.
 While making decisions an ethical company will consider how its behavior will affect
stakeholders
 A company should take care of its stakeholders.

C. MAINTAIN HONESTY:

 Having code of ethics encourage employees to stay honest.

D.DEMONSTRATE BEHAVIOR :

 Another vital function of business ethics is to demonstrate behavior that is the current norms.
 Actions that were acceptable in past years can because in appropriate in later years.

E. POLITICS AND PROCEDURES:

 Business ethical also performs functions of reviewing policies and procedure to know
whether they are ethical or not and accordingly changes will be made if there are unlawful
policies and procedures.

F. COMMUNICATION:

 Employees use formal and informal channels of communications to explain each other the
acceptable norms of heavier.
 In ethical organization, all employees will be know how to act in business.

G. ENSURE GOOD EFFECT OF POWER:

 As a business expands opportunities for corruption also grows.

 In some cases this expansions can destroy valuable elements in community.
 With good code of conduct/power a company cans a work to repair possible damage caused.

NATURE OF ETHICS

● Scientific Nature: Ethics is a normative science which determines norms, moral values in a
person and an individual’s character. It is a systematic explanation of what is right and what is
wrong.
● Not Art: Ethics is not art as art deals with the acquisition of skill to produce objects, while
morality deals with motive, intention, purpose and choice which are considered right or wrong
in the light of goodness.
● Variable Nature: Ethics is not static. It is not always the same. Human beings change and
the morality and ethical perspective in them also changes.
● Exclusively for Human Beings: Ethics can only be applied to human beings as we are the
ones who have the capacity for moral judgement. We cannot expect ethical behavior from
animals, as they are not as intelligent as human beings are so ethics is exclusively for human
beings.
● Ethics aims at systematic knowledge: So, ethics is a science. Every science 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 about human conduct. It deals with systematic
explanation of rightness or wrongness in the light of the highest Good of man.
● Ethics is a normative science: It is concerned with what ought to be done rather than what
is the case. It differs from positive science. A positive science, natural science or descriptive
science is concerned with what is. It deals with facts and explains them by their causes. In
positive science there is no question of judging its objects in any way. But ethics does not deal
with fact. Rather it deals with value. Therefore, it is clear that ethics is concerned with
judgments of value, while positive science deals with judgments of facts. That is why ethics is
not a positive science but a normative science. Normative ethics deals with standards or
norms by which we can judge human actions to be right or wrong.
For example, logic, aesthetics are also considered as normative sciences, because logic and
aesthetics are concerned with truth and beauty. So, truth, beauty and value are the three
ideals of logic, aesthetics and ethics respectively.
CONCEPT OF ETHICS
It was developed by moral philosophers over generations and used to distinguished ethical
from unethical behavior.

The 4 concept of ethics:

1. Relativism
● There is no universal standard by which morality can be judged.
● At there what is correct for one society may be wrong for other.
● Ethics and morality are relative.
● There are no absolute/ limits like murder,slavery,torture are also accepted.
● Always directed to meant by a society as a sub- society.
● Leads to conclusion - each person’s opinion is correct.
● Nothing that anyone does is morally wrong.

2. Egoism
● It is one ought to act in his or her own self interest and when it is ethical behavior is that
which promotes one’s own self interest.
● Ethical egoism is the view that what a person ought to do is always what they judge to
be in their individual best interest to do.
● Psychological egoism is the view that everyone, in fact, always does act from a
self interested motive.

3. Utilitarianism
● The morality of an action can be determined by its consequences.
● An action is ethical if it promotes the greatest good for the greatest number.
● The benefits of the action is higher than it’s cost means the behavior is ethical
otherwise it is unethical.
● Restrictions against the majority to protect a minority is not utilitarian.
● In the yes of a utilitarian, any action is justified if it works towards the greatest utility.

4. Deontologism
● Derived from Greek world for Duty.
● Actions are not justified by their consequences.
● Factors other than good outcomes determine the rightness of action.
SCOPE OF BUSINESS ETHICS
Ethical problems and phenomena arise across all the functional areas of companies and at all
levels within the company.

1. Ethics in Compliance
Compliance is about obeying and adhering to rules and authority. The motivation for being
compliant could be to do the right thing out of the fear of being caught rather than a desire to
be abiding by the law. An ethical climate in an organization ensures that compliance with law is
fuelled by a desire to abide by the laws. Organizations that value high ethics comply with the
laws not only in letter but go beyond what is stipulated or expected of them.

2. Ethics in Finance
The ethical issues in finance that companies and employees are confronted with include:
• In accounting – window dressing, misleading financial analysis.
• Related party transactions not at arm’s length
• Insider trading, securities fraud leading to manipulation of the financial markets.
• Executive compensation.
• Bribery, kickbacks, over billing of expenses, facilitation payments.
• Fake reimbursements

3. Ethics in Human Resources

Human resource management (HRM) plays a decisive role in introducing and implementing
ethics. Ethics should be a pivotal issue for HR specialists. The ethics of human resource
management (HRM) covers those ethical issues arising around the employer-employee
relationship, such as the rights and duties owed between employer and employee.
The issues of ethics faced by HRM include:
• Discrimination issues i.e. discrimination on the bases of age, gender, race, religion,
disabilities, weight etc.
• Sexual harassment.
• Affirmative Action.
• Issues surrounding the representation of employees and the democratization of the
workplace, trade.
• Issues affecting the privacy of the employee: workplace surveillance, drug testing.
• Issues affecting the privacy of the employer: whistle-blowing.
• Issues relating to the fairness of the employment contract and the balance of power
between employer and employee.
• Occupational safety and health.
Companies tend to shift economic risks onto the shoulders of their employees. The boom of
performance-related pay systems and flexible employment contracts are indicators of these
newly established forms of shifting risk.
4. Ethics in Marketing
Marketing ethics is the area of applied ethics which deals with the moral principles behind the
operation and regulation of marketing. The ethical issues confronted in this area include:
• Pricing: price fixing, price discrimination, price skimming.
• Anti-competitive practices like manipulation of supply, exclusive dealing arrangements,
tying arrangements etc.
• Misleading advertisements
• Content of advertisements.
• Children and marketing.
• Black markets, grey markets.

5. Ethics of Production
This area of business ethics deals with the duties of a company to ensure that products and
production processes do not cause harm. Some of the more acute dilemmas in this area arise
out of the fact that there is usually a degree of danger in any product or production process
and it is difficult to define a degree of permissibility, or the degree of permissibility may depend
on the changing state of preventative technologies or changing social perceptions of
acceptable risk.
• Defective, addictive and inherently dangerous products and
• Ethical relations between the company and the environment include pollution,
environmental ethics, and carbon emissions trading.
• Ethical problems arising out of new technologies for eg. Genetically modified food
• Product testing ethics.
The most systematic approach to fostering ethical behavior is to build corporate cultures that
link ethical standards and business practices.

CONCEPT OF VALUES, TYPES AND FORMATION OF VALUES

Generally, value has been taken to mean moral ideas, general conceptions or orientations
towards the world or sometimes simply interests, attitudes, preferences, needs, sentiments
and dispositions. But sociologists use this term in a more precise sense to mean “the
generalized end which has the connotations of rightness, goodness or inherent desirability”.
These ends are regarded legitimate and binding by society. They define what is important
worthwhile and worth striving for. Sometimes, values have been interpreted to mean “such
standards by means of which the ends of action are selected”. Thus, values are collective
conceptions of what is considered good, desirable, and proper or bad, undesirable, and
improper in a culture.
According to M. Haralambos (2000), “a value is a belief that something is good and desirable”.
For R.K. Mukerjee (1949) (a pioneer Indian sociologist who initiated the study of social values),
“values are socially approved desires and goals that are internalized through the process of
conditioning, learning or socialization and that become subjective preferences, standards and
aspirations”. A value is a shared idea about how something is ranked in terms of desirability,
worth or goodness.
Familiar examples of values are wealth, loyalty, independence, equality, justice, fraternity and
friendliness. These are generalized ends consciously pursued by or held up to individuals as
being worthwhile in themselves. It is not easy to clarify the fundamental values of a given
society because of their sheer breadth.

Characteristics:
Values may be specific, such as honoring one’s parents or owning a home or they may be
more general, such as health, love and democracy. “Truth prevails”, “love thy neighbor as
yourself, “learning is good as ends itself are a few examples of general values. Individual
achievement, individual happiness and materialism are major values of modern industrial
society.
Value systems can be different from culture to culture. One may value aggressiveness and
deplores passivity, another the reverse, and a third gives little attention to this dimension
altogether, emphasising instead the virtue of sobriety over emotionality, which may be quite
unimportant in either of the other cultures. This point has very aptly been explored and
explained by Florence Kluchkhon (1949) in her studies of five small communities (tribes) of the
American south-west. One society may value individual achievement (as in USA), another
may emphasise family unity and kin support (as in India). The values of hard work and
individual achievement are often associated with industrial capitalist societies.
The values of a culture may change, but most remain stable during one person’s lifetime.
Socially shared, intensely felt values are a fundamental part of our lives. Values are often
emotionally charged because they stand for things we believe to be worth defending. Often,
this characteristic of values brings conflict between different communities or societies or
sometimes between different persons.
Most of our basic values are learnt early in life from family, friends, neighbourhood, school, the
mass print and visual media and other sources within society. These values become part of
our personalities. They are generally shared and reinforced by those with whom we interact.

The main functions of values are as follows:

1. Values play an important role in the integration and fulfillment of man’s basic impulses
and desires in a stable and consistent manner appropriate for his living.
2. They are generic experiences in social action made up of both individual and social
responses and attitudes.
3. They build up societies, integrate social relations.
4. They mould the ideal dimensions of personality and range and depth of culture.
5. They influence people’s behavior and serve as criteria for evaluating the actions of
others.
6. They have a great role to play in the conduct of social life.
7. They help in creating norms to guide day-to-day behavior.
Types:
Values can be classified into two broad categories:
(1) Individual values:
These are the values which are related with the development of human personality or
individual norms of recognition and protection of the human personality such as honesty,
loyalty, veracity and honor.
(2) Collective values:
Values connected with the solidarity of the community or collective norms of equality, justice,
solidarity and sociableness are known as collective values.
Values can also be’ categorized from the point of view their hierarchical arrangement:
(1) Intrinsic values:
These are the values which are related with goals of life. They are sometimes known as
ultimate and transcendent values. They determine the schemata of human rights and duties
and of human virtues. In the hierarchy of values, they occupy the highest place and superior to
all other values of life.
(2) Instrumental values:
These values come after the intrinsic values in the scheme of gradation of values. These
values are means to achieve goals (intrinsic values) of life. They are also known as incidental
or proximate values.
How are Values Formed?
Value formation is the confluence of our personal experiences and particular culture we are
entwined in. Values are imposed from our family in childhood and reinforced through culture
and life experiences. The value of, for example, kindness was imposed on me from my parents,
and reinforced throughout early childhood. Then I applied that value on the school playground
and experienced how it helped me create greater social bonds with my school mates. My
personal experiences growing up reinforced the value of kindness as I experienced the
adaptive effects of showing kindness and the maladaptive effects when choosing malice over
kindness. All through my upbringing, both my personal experiences and cultural surroundings
both reinforced the value of kindness.
Having been born and raised in Dallas, Texas, the values of rugged individualism, church, and
God was ingrained in my psyche from birth. Each of those three values, as I grew older,
eventually formed the foundation of my worldview and politics. In a sense, our values, imposed
upon us early in childhood, become the spectacles in which we view and judge the world.
Our culture plays a huge role in our value formation. Culture gives us a community and shared
reality so that we can cooperate in activities and customs that give meaning, purpose, and
significance to our existence. Culture gives us prescriptions for appropriate conduct so that we
can learn best how to get along with others. All you have to do is travel to another country to
see how values ebb and flow with culture. You can travel to China and see how they elevate
the group and family over the individual in contrast to most Americans; you can see how South
Americans elevate hospitality and care for their elderly unlike most Americans; and how
Hawaiians elevate relaxation and balance unlike most urban metropolitan cities in the U.S.
Values and Behavior
Behavior influences social values, so if you care about how you act and follow rules of society
(behavior) your social values will climb and others will see this as the norm and follow suit, just
like today its the opposite, people are shortcutting the rules (no texting while driving, speeding,
even smoking – you know it causes cancer and other diseases but you still smoke) and others
follow along thinking its ok to do this because others do it.
Values can be incorporated into the beliefs-behaviors-consequences relationship.
consequences can shape both beliefs and values, and it is true both beliefs and values lead to
particular behaviors. The critical point for a leader to understand when attempting to change
the culture of their organization, is that focusing on values is a much more powerful lever than
simply focusing on beliefs.
One value – two entirely opposite behavior's.
Does this mean you should drop values to focus on behavior's? Not quite. Here are some of
the reasons for using one or the other.

Values
• Values are an essential part of culture and are needed to describe it at the deepest
level – They are part of the BE level, along with feelings and beliefs.
• Values underpin behavior's – It is difficult to change behavior's without going to the BE
level.
• Employees are used to discussing values because they have been part of the
corporate landscape for many years. In fact, many organization's used to focus solely on
values to shape their culture.
• Values are easy to express conceptually in one word.
• Values hierarchy is at the core of how we behave – the most common hierarchies sit
behind the main cultural archetypes we use to describe culture at Walking the Talk.

Behavior's
• Behaviors are what makes culture do-able. They translate values into tangible,
observable and measurable elements that can be implemented, assessed and
improved.
• Because (as my earlier story shows) there can be many, sometimes
opposite, behavior's for a single value, working with behaviours can avoid ambiguity.
• One behavior, on the other hand, can represent several values.
• Behaviors are easy to observe, they are what people do – what we call the DO level.
As a consequence, employees can easily self-correct.
• Behavior's make it easy to define standards – this, in turn, makes culture do-able.
 DEVELOPMENT OF ETHICS
Dated back to Code of Hammurabi some 4,000 years ago, business ethics is a social science,
whose main aim is to define and examine the responsibilities of businesses and their agents
as a part of the general moral environment of a given society.
Business ethics refers to how ethical principles guide a business’s operations. Common issues
that fall under the umbrella of business ethics include employer-employee relations,
discrimination, environmental issues, bribery and insider trading, and social responsibility.
While many laws exist to set basic ethical standards within the business community, it is
largely dependent upon a business’s leadership to develop a code of ethics. Practicing strong
ethics keeps a business within the parameters of the law; as well as building goodwill and
brand equity. Popular social issues largely drive business ethics; as different issues come to
the forefront, organizations respond by bringing their ethical tenets in line with the new social
norms.
Business Ethics in the ’60s
The 1960s brought the first major wave of changes in business ethics. Cultural values were
shifting, with individualism and fierce dedication to social issues such as environmentalism and
world peace coming into vogue. While young workers were idealistic and wanted to make the
world a better place, employers found their work ethic, compared to that of previous
generations, to be lacking. Drug use was rampant, and the new focus on individualism caused
many workers to look upon their employers with disdain.
Companies responded by beefing up human resources departments and establishing mission
statements and codes of conduct. In response to the changing desires of their employees,
however, businesses also began embracing social responsibility at a level not previously seen;
the 1960s saw companies trumpet environmental friendliness for the first time and find new
ways to give back to their communities.
Major Events in the ’70s and ’80s
During the 1970s and 1980s, two events shaped changes in business ethics: defensecontractor
scandals that became highly publicized during the Vietnam War and a heightened sense of
tension between employers and employees. In response, the government implemented stricter
policies governing defense contractors, and companies revamped contracts with employees to
focus less on rigid compliance and more on values; popular management philosophy shifted
from pure authoritarianism to more collaboration and working on equal footing.
The ’90s and Environmentalism
The 1990s saw a rebirth of environmentalism, social responsibility reaching new heights and
graver legal ramifications for ethical missteps. Tobacco companies and junk food
manufacturers faced heightened scrutiny, along with several highly publicized lawsuits, over
the public health ramifications of their products. Oil companies and chemical companies had to
contend with increasing public pressure to answer for environmental damage. Class action
lawsuits rapidly gained in popularity; in response, businesses were forced to spend more on
their legal departments.
The Online Realm in 2000+
From the year 2000 forward, business ethics have expanded to the online realm. The big
ethical dilemmas of the 21st century have mostly centered on cybercrimes and privacy issues.
Crimes such as identity theft, almost unheard of 20 years before, remain a huge threat to
anyone doing business online—a majority of the population. As a result, businesses face
social and legal pressure to take every measure possible to protect customers’ sensitive
information. The rise in popularity of data mining and target marketing has forced businesses
to walk a fine line between respecting customers’ privacy and using their online activities to
glean valuable marketing data.

RELEVANCE OF ETHICS AND VALUES IN BUSINESS

Need for Business Ethics:
Business ethics is important for the following reasons:
1. Business organization's are economic and social institutions that serve customers’
needs by supplying them right goods at the right place, time and price. This is possible if
the institutions engage in ethical practices.
2. Business ethics help in long-run survival of the firms. Unethical practices like paying
low wages to workers, providing poor working conditions, lack of health and safety
measures for employees, selling smuggled or adulterated goods, tax evasion etc. can
increase short-run profits but endanger their long-run survival. It is important, therefore,
for firms to suffer short-term losses but fulfill ethical social obligations to secure their
long-term future.
3. Business houses operate in the social environment and use resources provided by
the society. They are, therefore, morally and socially committed to look after the
interests of society by adopting ethical business practices.
4. Ethical business activities improve company’s image and give it edge over
competitors to promote sales and profits.
5. Legal framework of a country also enforces ethical practices. Under Consumer
Protection Act, for example, consumers can complain against unethical business
practices. Labour laws protect the interests of workers against unethical practices. Legal
framework of the country, therefore, promotes ethical business behavior. Business
houses want to avoid Government intervention and, therefore, follow ethical practices.

Barriers to Management Ethics:

1. Chain of command:
If employees know that superiors are not following ethical behavior, they hesitate in reporting
the matter up the hierarchy for the fear of being misunderstood and penalized. The chain of
command is, thus, a barrier to reporting unethical activities of superiors.
 2. Group membership:
Informal groups lead to group code of ethics. Group members are strongly bonded by their
loyalty and respect for each other and unethical behavior of any member of the group is
generally ignored by the rest.
3. Ambiguous priorities:
When policies are unclear and ambiguous, employees’ behavior cannot be guided in a unified
direction. It is difficult to understand what is ethical and what is unethical.

Solutions to Barriers:
The following measures can improve the climate for ethical behavior:
1. Organizational objectives and policies should be clear so that every member works
towards these goals ethically.
2. The behavior of top managers is followed by others in the organization. Ethical
actions of top managers promote ethical behavior throughout the organization.
3. Imposing penalties and threats for not conforming to ethical behavior can reduce
unethical activities in the organization. Formal procedures of lodging complaints help
subordinates report unethical behavior of superiors to the concerned committees.
4. Educational institutions also offer courses and training in business ethics to develop
conscientious managers who observe ethical behavior.

Values:
Values are a set of principles that people cherish. They enhance the quality of individual and
collective life. They involve personal and community discipline and sacrifice of immediate
gratification needs. Quality of life is a product of physical, social, environmental, mental and
spiritual health and wholeness. Values refer to intrinsic worth or goodness.
They are the beliefs that guide an individual’s actions. They represent a person’s belief about
what is right or wrong. Values lay standards against which behavior is judged. They determine
the overall personality of an individual and the organization he is working for. His family, peer
group, educational institutions, environment and the work place develop values in him. Values
apply to individuals and institutions, both business and non-business.

Values and Behaviour :

Values remain embedded in our minds since childhood. As children, we are taught what is
good, bad, right or wrong by parents, educational institutions and social groups. These values
become part of our behaviour and personality when we grow up and are transmitted to future
generations, thus, creating a healthy society.
In the business world, every person, whether manager or non-manager, whose behaviour is
value-based shapes the culture of the organisation. Organisation is a group of people
responsible for its formation, survival and growth. How good an organisation is depends upon
how good are the people managing it.
Good people are those whose actions and behaviour are based on a sound value system and
ethical principles. Value system is a combination of all values that an individual should have.
Values lay foundation for organisational success.
They develop the attitudes, perceptions and motives that shape the behaviour of people
working in the organisation. This develops a sound organisation culture that promotes image
of the organisation in the society. Values in individuals develop a value-based organisation,
society, nation and the world as a whole.

Values in Business Management:

There are many ways in which the basic human values – truth, righteousness, peace, love and
non-violence can be practiced in the day-to-day conduct of business. There are different
aspects of management such as marketing, finance, industrial relations, etc., but the most
important aspect is “man-management.” Each country has its own historical and cultural
background and Indian managers should not mechanically copy practices from abroad but
should keep in mind the Indian milieu and our national ethos.

Values of Managers:
Management is a systematic way of doing work in any field. Its task is to make people capable
of joint performance, to make their weaknesses irrelevant and convert them into strengths. It
strikes harmony in working equilibrium, in thoughts and actions, goals and achievements,
plans and performance, products and markets.
Lack of management will cause disorder, confusion, wastage, delay, destruction and even
depression. Successful management means managing men, money and material in the best
possible way according to circumstances and environment.
Most of the Indian enterprises today face conflicts, tensions, low efficiency and productivity,
absence of motivation, lack of work culture, etc. This is perhaps due to the reason that
managers are moving away from the concept of values and ethics.
The lure for maximizing profits is deviating them from the value-based managerial behaviour.
There is need for managers to develop a set of values and beliefs that will help them attain the
ultimate goals of profits, survival and growth.
They need to develop the following values:
1. Optimum utilization of resources:
The first lesson in the management science is to choose wisely and utilize optimally the scarce
resources to succeed in business venture.
2. Attitude towards work:
Managers have to develop visionary perspective in their work. They have to develop a sense
of larger vision in their work for the common good.
3. Work commitment:
Managers have to work with dedication. Dedicated work means ‘work for the sake of work’.
Though results are important, performance should not always be based on expected benefits.
They should focus on the quality of performance. The best means for effective work
performance is to become the work itself. Attaining the state of nishkamakarma is the right
attitude to work because it prevents ego and the mind from thinking about future gains or
losses.
Managers should renounce egoism and promote team work, dignity, sharing, cooperation,
harmony, trust, sacrificing lower needs for higher goals, seeing others in you and yourself in
others etc. The work must be done with detachment. De-personified intelligence is best suited
for those who sincerely believe in the supremacy of organisational goals as compared to
narrow personal success and achievement.
Value based managers do the following to discharge their duties well:
1. Cultivate sound philosophy of life.
2. Identify with inner core of self-sufficiency.
3. Strive for excellence through ‘Work is Worship’.
4. Build internal integrated force to face contrary impulses and emotions.
5. Pursue ethico-moral righteousness.
6. Vision:
Managers must have a long-term vision. The visionary manager must be practical, dynamic
and capable of translating dreams into reality. This dynamism and strength of a true leader
flows from an inspired and spontaneous motivation to help others.
Vision includes the following:
(a) Forming a vision and planning the strategy to realize such vision.
(b) Cultivating the art of leadership.
(c) Establishing institutional excellence and building an innovative organization.
(d) Developing human resources.
(e) Team building and teamwork.
(f) Delegation, motivation and communication.
(g) Reviewing performance and taking corrective steps whenever called for.
The management gurus like Lord Krishna, Swami Vivekananda and Peter F. Drucker
assert that managers should develop the following values:
1. Move from the state of inertia to the state of righteous action.
2. Move from the state of faithlessness to the state of faith and self-confidence.
3. Their actions should benefit not only them but the society at large.
4. Move from unethical actions to ethical actions.
5. Move from untruth to truth.
6. ‘No doer of good ever ends in misery’. Good actions always produce good results and
evil actions produce evil results.
7. Take the best from the western models of efficiency, dynamism and excellence and
tune them to Indian conditions.
ARGUMENT AGAINST BUSINESS ETHICS
Businesses are not real: They are conceptual, abstractions. The big change that moved us
towards the huge multinational businesses we see today was the legal decision to allow
businesses to be treated as their own entities and we should honor that separation.
The same is true of government when people talk about government morality.
The sole purpose of any business is to make money.
The sole purpose of a government is to retain stability, order and retain power.
Ethics are personal. This is not to say they aren’t important, they are. They should be
venerated to the degree that wealth and youth are in western society, even if they aren’t.
Businesses and democratic governments are abstractions we created to fulfill human needs
and desires. We want to have lots of money and not have a dangerous, chaotic environment.
Politics and business leverage evolution. We have created artificial environments with
artificial rewards. Organisms that can’t get enough food, keep themselves safe and attract a
mate die. This works remarkably well and has for a very very long time. It is the only
successful way to create an efficient economy that can improve quality of life, alternatives like
communism fail in the large scale because they can’t provide this evolutionary simulation.
Business has a clear metric – money. If you make a profit you survive, if you don’t you ‘die’
(bankruptcy). Businesses can breed (merge), they can grow. A characteristic of any living
organism has to be passed on through breeding but business ideas that work spread
regardless. Think agile programming, or the idea of specialisation at work even at a more
basic level. Businesses that implemented them had a greater chance of success, more of
them survived. Now most surviving businesses implement them.
So where does ethics come in? Two places. Businesses should be ethical if it makes them
money. There are defined markets for ethical goods. People are attracted by fair trade labels,
they will (sometimes) pay more to know the workers who made their clothes live acceptable
lives.
The second is people in the business. They have the responsibility to ethical because they are
people, real people, not abstract concepts.
Which has two implications:
1. People should not be overly celebrated for being rich. This is not a virtue.
2. People should be celebrated for their ethics.
The reverse obviously being true for companies.
The problem is a western culture that overvalues entrepreneurs, apologies entrepreneurs.
There are many dangerous side effects of this.
When evaluating the success of a company you might say how wonderful apple is for example.
They hit the $1 trillion valuation today. You remark about how great their profit margins are.
How wonderful they are at marketing their products. How good they are at turning relatively
cheap hardware into a product that feels and seems to react in a premium way. How good they
are at trapping people in their ecosystem.
But there is no point judging apple by its ethics because it isn’t designed to be ethical.
But this DOESN’T transfer to the person in charge, or the people in charge. It is strange. Why
judge those peoples success on their ability to generate wealth, which is their profession and
not judge an engineer by his ability to write code or build bridges? It doesn’t make any sense.
Someone making lots of money is neither good nor bad. Whether they make that responsibly
is entirely different.
People whinge all the time about businesses not being ethical, when it isn’t their purpose to be
ethical. It is, purely, people shirking their responsibility to exercise ethics. You can’t defer the
problem by blaming these other entities. That leads to the weak thinking that there is no point
trying to be ethical because these huge entities are evil and have all the power.
The key for people is to remember you have no control businesses or anyone else, all you can
do is attempt to exercise self control and act ethically, as well as encourage everyone else to
do the same. This applies at work and at home
The key for business ethics is for the workers to exercise ethics and to remember that the
business is the abstract concept, made of people making decisions. It is NOT the case that
you are just ‘a cog of the system’ and thus your role is purely profit driven, because it isn’t the
case.
Whether or not the company is considered “ethical” with the positive connotation we normally
give this word is another matter that involves judgments based on morality. Such a label is
subjective, but the business community, as a whole, looks at key factors to decide whether or
not a business is practicing good business ethics:
• Business structuring
• Moral decision making
• Ethical business principles
One of the foundations of business ethics is the theory of utilitarianism. Utilitarianism states
that, when weighing all options, the option that produces the greatest net benefits for the least
net cost, is the most ethical option. Which factors are considered in this cost/benefit analysis,
however, could greatly skew the results one direction or another. Successful companies
recognize the need for fair and responsible ethical behavior, not just from a moral standpoint,
but from a business standpoint, as well.