Business Ethics: An

Overview
 What is Ethics?

Ethics:
• is a branch of philosophy.
• is a normative science because it is concerned with the norms of
human conduct.
• as a science, it must follow the same rigours of logical reasoning as
other sciences.
• as a science, involves systemising, defending and recommending
concepts of right and wrong behaviour.
 Principles of Personal Ethics

Personal ethics refers to the application of values in everything one

does. Principles of personal ethics include:

1. Concern for the well being of others;

2. Respect for the autonomy of others;
3. Trustworthiness and honesty;
4. Willing compliance to law;
5. Basic justice: being fair;
6. Refusing to take unfair advantage;
7. Benevolence: doing good; and
8. Preventing harm to any creature.
 Principles of Professional Ethics

The basic principles people are expected to follow in their professional

career are the following:

• Impartiality: Objectivity;
• Trustworthiness and honesty;
• Openness: Full Disclosure;
• Confidentiality: Trust;
• Due Diligence: Duty of care;
• Fidelity to professional responsibilities; and
• Avoiding potential or apparent conflict of interest.
 What is Business Ethics?

Business ethics is the application of general ethical ideas to business

behaviour.

It is based on the principle of integrity and fairness and concentrates on the

benefits to the stakeholders, both internal and external. Stakeholder includes
those individuals and groups without which the organization does not have
an existence. It includes shareholders, creditors, employees, customers,
dealers, vendors, government and the society.
 What is not Business Ethics?

1. Ethics is different from religion.

2. Ethics is not synonymous to law.
3. Ethical standards are different from cultural traits.
4. Ethics is different from feelings.
5. Ethics is not a science in the strictest sense of the term.
6. Ethics is not just a collection of values.
Code of Conduct and Ethics for Managers

Managers must observe the following ethical values while performing their
duties:

• Impartiality
• Responsiveness to public interest
• Accountability
• Honesty
• Transparency
• Integrity
 Evolution of Business Ethics over the years
The 1970s saw papers from the academic circle. Businessmen became more
concerned with their public image and addressed ethics more directly.

1974: The first conference held at the University of Kansas.

1975: Business ethics became institutionalized at many levels through
writings and conferences.
1979: Three anthologies on business ethics appeared:

(i) Ethical Theory and Business by Tom Beauchamp and Norman Bowie;
(ii) Ethical Issues in Business: A Philosophical Approach by Thomas
Donaldson and Patricia Werhane; and
(iii) Moral Issues in Business by Vincent Berry.
Evolution of Business Ethics over the years
(contd.)

• 1980s: The subject was taught in several universities in the US and

Europe. There were also, by this time, many journals of business ethics,
apart from centres and societies established to promote ethical practices.
• 1982: Richard De George brought out Business Ethics, and Manuel G.
Velasquez published his Business Ethics: Concepts and Cases.
Evolution of Business Ethics over the years
(contd.)

• 1990: Business ethics as a management discipline was well-

established.
• Parallel to these academic pursuits, the late 1980s and early 1990s saw
increased concern for consumer rights, quality, safety, price, customer
service and environment in Britain.  
• Simultaneously, with these developments, religion also lent its
powerful voice.
 Importance and Need for Business Ethics

• A business organization competes in the global market on its own internal

strength, in particular, on the strength of its human resource and on the
goodwill of its stakeholders.

• The value-based management and ethics that an organization uses in its

governance enables it to establish productive relationship with its internal
customers, and lasting business relationship with its external customers.

• Real type situations (Tata Steel and Infosys) show that use of ethical
practices in business creates high returns for companies.
 Values and Ethics in Business

A value is a view of life and judgement of what is desirable. It is very

much part of a person’s personality and a group’s morale.

Business ethics relates to issues of “what is right” and “what is wrong”

while doing business. What values are to individuals, ethics are to
business.

Business ethics operates as a system of values, relating business goals

and techniques to specific human ends.
Distinction Between Values and Ethics

Values Ethics

Personal in nature Generalized value

(e.g. a belief in system (e.g. avoiding
providing customer discrimination in
satisfaction and being recruitment and
a good paymaster) adopting fair business
practices).

Offer alternatives to Provides general

choose from. guidelines within which
the management can
operate.
 Why should Businesses act Ethically?

The reasons for an organization to be ethical include:

• To protect its own interest,

• To protect the interests of the business community as a whole so that the
public will have trust in it,
• To keep its commitment to society to act ethically, and
• To meet stakeholder expectations.
Why should Businesses act Ethically? (contd.)

The reasons for an organization to be ethical include:

• To prevent harm to the general public,

• To build trust with key stakeholder groups,
• To protect themselves from abuse from unethical employees and
competitors,
• To protect their own reputations,
• To protect their own employees, and
• To create an environment in which workers can act in ways consistent with
their values.
 Ethical Decision-making

Norman Vincent Peale’s and Kenneth Blanchard’s suggestions to conduct

ethical business.

• Is your decision fair?

• Is it a win-win situation for all?
• Is your decision legal? If it is not legal, it is not ethical.
• The Eleventh Commandment: “Thou shall not be ashamed when found”,
meaning when hauled up for unethical behaviour, if one’s conscience is
clear, then there is nothing to be ashamed of.
 How Corporations Observe Ethics in Their
Organizations?

• Publish in-house codes of ethics to be strictly followed by all their

associates.
• Employ people with a reputation for high standards of ethical behaviour at
the top levels.
• Incorporate consideration of ethics into performance reviews.
• Give rewards for ethical behaviour.
How Corporations Observe Ethics in Their
Organizations? (contd.)

• SEBI, CII and such other organizations representing corporations issue

codes of best practices and enjoin their members to observe them.
• IIMs and highly rated B-schools give extensive and intensive
instruction in business ethics, corporate social responsibility and
corporate governance as part of their curriculum.
• Conduct an Ethics Audit.
 Corporate Governance Ethics

• Corporate governance is a set of rules that governs the administration and

management of companies.
• Its goalposts are transparency, integrity, full disclosure of financial and
non-financial information, and protection of stakeholders’ interests.
Benefits from Managing Ethics in Workplace

The many benefits that arise from managing ethics in the workplace are:
• Attention to business ethics improves society.
• Ethical practice contributes towards high productivity and strong team
work.
• Changing situations require ethical education.
• Ethical practices create strong public image.
• Strong ethical practices act as an insurance.
Characteristics of an Ethical Organization

Mark Pastin provides the following characteristics of ethical

organizations:
• At ease while interacting with diverse internal and external
stakeholder groups.
• Obsessed with fairness.
• Individual responsibility, with individuals assuming personal
responsibility for actions of the organization.
• See their activities in terms of purpose.
 Recognizing Ethical Organizations

There are certain characteristics by which we will be able to identify an

ethical organization:
• On the basis of corporate excellence
• In relation to the stakeholders
• In relation to corporate governance