Business Ethics

Dr. Rajinder Kaur

Ethics is the branch of Philosophy which
addresses the issues of morality in society
Greek word-Ethos- means Character or
custom
Conscience, code, morality, moral values
principles
Set of Principles of Human Conduct govern
behavior of individual or organization
Ethics are mainly of two types- Theoretical
and applied
Theoretical Ethics Applied Ethics
What makes a certain action Is action X the right thing to
good? do?
What makes a certain person Is person Y a good person?
good?
What does the word “good” In what ways is action X a
represent? good act?
What does the word “bad” In what ways is action X a bad
represent? act?

What features are relevant According to ethical approach

when evaluating the moral A, is act X a good or bad act?
worth of an action?
Business Ethics
Business ethics (also known as Corporate ethics) is a
form of applied ethics or professional ethics that
examines ethical principles and moral or ethical
problems that arise in a business environment. It applies
to all aspects of business conduct and is relevant to the
conduct of individuals and business organizations as a
whole.
Definition

According to Andrew Crane,

"Business ethics is the study of business situations,
activities, and decisions where issues of right and wrong
are addressed.“
According to Raymond C. Baumhart,
"The ethics of business is the ethics of responsibility. The
business man must promise that he will not harm
knowingly."
Theories
Egoism- the self and its needs
Utilitarianism- overall pleasure and pain for all
concerned
Deontology -duty 
Care Ethics-relationships, vulnerability, and empathy 
 Virtue Ethics-character
Relativism- varies from person to person
Teleological- ends or purpose
Egoism
Famous Proponents: Ayn Rand, Adam Smith
 What makes something good or bad, right or wrong, is
that it satisfies one’s desires, or meets one’s needs
Basic Principle: Self-interest of person doing, considering,
or affected by the action One should chose the action
which most realizes or conduces to one’s own self -interest
Important Variation: should the person look simply to self-
interest, or to enlightened  or rational  self-interest?
Conception of Rational Self-Interest is basic component
of capitalist economy and business models
Egoism
For example, a company provides scholarships for
education to needy students with a condition that the
beneficiary is required to compulsorily work for the
company for a period of 5 years. Although, the
company‘s providing the scholarship benefits the
needy students, but ultimately it s in the company‘s
self interest.
Utilitarianism
Famous Proponents: Jeremy Bentham, J.S. Mill
 What makes something good or bad, right or wrong, is
that it produces the greatest amount of pleasure (or lack
of pain) for the greatest number of people
Basic Principle: “Greatest Happiness Principle”
Maximizing positive outcomes for the largest number
of people, negative outcomes for lowest number of people
One should chose the action which will lead to the greatest
happiness (i.e. pleasure, lack of pain) overall One’s own
pleasure and pain only count as much as any other
person’s affected
Utilitarianism
An example of act utilitarianism is a pharmaceutical
company releasing a drug that has been
governmentally approved with known side effects
because the drug is able to help more people than are
bothered by the minor side effects.
Deontological
Famous Proponents: Immanuel Kant, W.D. Ross
 What makes something good or bad, right or wrong,
is that it conforms to some (rational) duty 
Basic Principle: Fulfilling duties towards self or other
persons One should chose the action which best
conforms to one’s recognized duties
Important Variation: are these duties discovered and
understood primarily by using reason or by
healthy common sense
Deontological
Employees who exhibit a duty-based ethic usually
justify their behaviors in terms of honouring company
policy or satisfying their customers.
Virtue
Famous Proponents: Aristotle, Confucius
 What makes something good or bad, right or wrong, is
that it actually embodies or promotes traits
culturally acknowledged as good or bad (e.g.
courage, justice)
These in turn lead to greater or lesser realization
of potential for fully human lives (“flourishing”)
Basic Principle: actions reflective or productive of good or
bad character, embodied in developed and lasting traits
or habits
Important Variation(s): different traditions and theorists
develop different lists of virtues and vices
If you do make a mistake, you own up to it instead of
trying to blame others for the failure. This makes you a
responsible person in the eyes of your superiors and
they know they can count on you to give your all at
work and they often allow you to have more
responsibilities at work.
Relativism
 It holds that there are no absolute truths in ethics and
that what is morally right or wrong varies from person
to person or from society to society. For example,
killing animals for sport (like bull fightng) could be
right for one culture and wrong in another culture.
Teleological
holds that the ends or consequences of an act
determine whether an act is good or evil. It is also
known as consequential ethics.
 Businessmen commonly think in terms of purposeful
action as in, for example, management by objectives.
Teleological analysis of business ethics leads to
consideration of the full range of stakeholders in any
business decision, including the management, the
staff, the customers, the shareholders, the country,
humanity and the environment.
Care-Ethics
Famous Proponents: Carol Gilligan, Virginia Held, Michael Slote
(developed as feminist response to other ethics–those reflective of
experience of men, not women)
 What makes something good or bad, right or wrong, is that it
involves caring for another, and supports
relationship with other people
Basic Principle: action which is caring towards those who are
vulnerable or need support
One should chose the action which supports or nurtures other people,
particularly those who are most vulnerable(e.g. children, workers)
Note: often viewed as supplement to other ethical theories, rather
than as comprehensive theory in own right
Scope of Business Ethics
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.
ETHICS IN FINANCE
The ethical issues in finance that companies and employees
are confronted with include window dressing, misleading
financial analysis, related party transactions, insider
trading, executive’s compensation, bribery, kickbacks et.al.
ETHICS IN HUMAN RESOURCE
Human resource management plays a decisive role in introducing and
implementing ethics. Ethics should be a pivotal issue for HR specialists.
The ethics of human resource management covers those ethical issues
arising around the employer-employee relationship, such as the duties and
rights owed between employer and employee.
ETHICS IN MARKETING
Marketing ethics is the area of applied ethics which deals with the moral
principles behind the operation and regulations of marketing. The ethical
issues confronted in this area are pricing, anti-competitive practice,
misleading advertisements, content of advertisements, children and
marketing etc.
ETHICS IN 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.
Advantages
 Attracting and retaining talent
INVESTOR LOYALTY
CUSTOMER SATISFACTION
Brand building at international level
Case of Tylenol Crisis
The background
In 1982, Johnson & Johnson (J&J) faced a major crisis that had the potential to
send the company into financial ruin. Tylenol, the country’s most successful
over-the-counter product, with over one hundred million users, was under
attack.
The crisis
Sealed bottles were tampered with and extra-strength Tylenol capsules were
replaced with cyanide-laced capsules. These bottles were then resealed and
placed on shelves of pharmacies in the Chicago area. Seven people died as a
result. Tylenol was called upon to explain why its product was killing people.
The solutions
The company first learned of the deaths from a local news reporter. A medical
examiner had just given a press conference saying people were dying from
poisoned Tylenol. Tylenol had to act fast.
Case of Tylenol Crisis
It is difficult to imagine how else should have Johnson and Johnson reacted at the
time of the crisis except the following ways:
• Recalling all the products whether contaminated or not.
• Alerting all the customers by all available media including toll-free hotlines.
• Appearance of the chairman of the company on the television to publicize the
company’s response and action taken by it to combat the emergency.
• Making public relations programmes to address the issues and concerns all the
internal and external stakeholders.
  • J&J put customer safety first.
Company Chairman James Burke immediately formed a seven-member strategy
team with the goal of determining how best to protect people, and then, how to
save the product. Their first action was to alert consumers nationwide.
        – They pulled all advertising and immediately stopped production of the
product.
        – After finding two more contaminated bottles, the company ordered a
national withdrawal of every capsule. (This showed that no matter the cost to the
company, customer safety was priority number one.)