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BUSINESS ETHICS

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

AND CORPORATE
GOVERNANCE
LECTURE BY: VEENA A.L
DEPT. OF COMMERCE
VIDYAVAHINI PG COLLEGE
UNIT -1
2
Ethics in Business
CONTENTS

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

 INTRODUCTION TO BUSINESS ETHICS
 MEANING,NATURE,SCOPE,IMPORTANCE OF BUSINESS ETHICS
 TYPES OF ETHICS
 FACTORS INFLUENCING ETHICAL DECISIONS
 MODEL OF ETHICS
 ETHICAL PERFORMANCE IN BUSINESS
 ETHICAL CONGRUENCE
 MANAGERIAL VALUES AND ATTITUDES
 MANAGERIAL PHILOSOPHY AND CODE OF ETHICS
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INTRODUCTION

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

 Moral Standards – Standards that an individual has about what is
right or wrong
 Values – Long lasting beliefs that guides society’s decisions and
actions towards variety of situation
 Ethics – The branch of knowledge that deals with moral principles,
values and behavior
 Business Ethics – Application of ethical principles in day-to-day
conduct of business to examine and solve complex moral dilemmas
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Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

 The word ‘Ethics’ comes from Greek word ‘Ethos’
pertains to character.
 Ethics refers to the evaluation of moral values,
principles and standards of human conduct and its
application in daily life to determine acceptable human Meaning of
behaviour.
 Ethics is a set of values about what is right or wrong, Ethics
true or false, fair or unfair, proper or improper what is
right is ethical and what is wrong is unethical.
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Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

 Ethics is a subject that deals with
Nature of human beings.
 Humans by their nature are capable of
Ethics judging between right and wrong, good
and bad behaviour.
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Objectives of

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

Ethics 


Ethics deals with human behaviour.
Ethic assesses whether a particular act
or decision taken by an individual is
moral or not.
 To establish moral standards and norms
of the behaviour.
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Meaning of Business Ethics

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

 Business Ethics originated in U.S.A. – 1970
 “Business ethics is generally coming to know what is right or wrong in the
work place”.
 Examples : Charging fair price from customers, Using fair weights for
measurement of commodities, Giving fair treatment to workers and earning
reasonable profits.
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Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

 Impartiality
 Compliance with law
 Practice fair business
Principles of  Accountability

Business  Trust & honesty

 Due diligence
Ethics  Social obligation
 Stakeholder’s interest
 Justice and equality
BRANCHES OF ETHICS 9

ETHICS

NORMATIVE APPLIED
META ETHICS
ETHICS ETHICS

TELELOGICA DEONTOLOGIC CONSEQUENTIALI ETHICS BY

L ETHICS AL ETHICS ST ETHICS VIRTUE

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof,

Vvfgc, Tumkur
META ETHICS 10

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

 Purely descriptive branch of ethics
 Tends to study the meaning of moral judgements
 It do not prescribe any particular action but tries to analyse the fact that made you act
in certain way
 It deals with understanding the basis on which we distinguish right from wrong
 Focuses on foundation of moral values, attitudes and behaviour
NORMATIVE ETHICS 11

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

 Prescriptive branch of ethics
 Investigates the set of questions that arise when considering how one ought to act in
any particular situation
 Examines and suggest what actions are right or wrong morally
 Trends to arrive at conclusion about acceptable behaviour in the society
 Includes formulation of moral rules and obligations
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DEONTOLOGICAL
ETHICS

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

 Deon means obligation or duties
 Deontological ethics is normative ethical theory
 It specifies what are an individual’s moral duties and
obligation
 This theory holds that an action would be morally right
only if one complies with his / her duties and work
 Focuses on compliance with rules and regulations
 Example – killing is wrong even if you do that to
protect your family
 TELEOLOGICAL ETHICS 13
 Derived from the Greek word “telos” meaning end goal or purpose

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

 Branch of normative ethics
 According to this if one need to find out how one should behave morally the
ultimate goal of ethics should be kept in consideration
 For example stealing is bad, but according to teleological theory one may say, “
I’m stealing to feed my family, which is good, so the action is good”.
 Focused on outcome of an action
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ETHICS BY VIRTUE

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

 Also referred as character based ethics
 Signifies that goodness is not in act but in person
 It states that if person is by character good or virtuous person he will always
act in manner which is morally right
 Honestly, courage, compassion, generosity, integrity, fairness and self-control
are all examples of virtues
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APPLIED ETHICS

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

 Applied ethics refers to practical application of ethics in various fields of life
 It attempts to identifies correct course of action with respect to particular field in which
an individual works like medical ethics, environmental ethics, business ethics etc.
 For example, the bioethics community is concerned with identifying the correct
approach to moral issues in the life sciences, such as use of euthanasia
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MAJOR  Insider trading

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

UNETHICAL  Bribery and corruption

ISSUES  Discrimination
 Injustice
 Window dressing
 Adulteration
 Unfair pricing
 Market manipulation
 Fraudulent activities
SCOPE OF BUSINESS ETHICS 17

Ethical issues are everywhere, at all levels of business activity. Business ethics

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

concern the ground rules of individuals company and societal behaviour.
a) Societal Level
i. Concern for poor and down-trodden.
ii. No discrimination against any particular section or group.
iii. Concern for clean environment.
iv. Contributing to better quality of life.
b)Stakeholder’s Level 18
i. Employees
 Security of job

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

 Better working S conditions
 Better recommendation
 Participative management
 Welfare Facilities
ii. Customers
 Better quality of goods
 Goods and services at reasonable price.
 Not to practice discriminatory pricing. 19
 Not to make false claims about products in advertisements.

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

iii. Shareholders
 Ensure capital appreciation
 ensure steady and regular dividends
 Disclose all relevant information
 Protect minority shareholder’s interests
 Not to window dress balance sheets
 Protect interests in the times of mergers, amalgamations and takeovers.
iv. Banks and other Lending institutions
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 Guarantee safety of borrowed funds.
 prompt repayment of loans.

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

v. Government
 Complying with rules and regulations.
 Honesty in paying taxes and other dues.
C) Internal Policy Level
i. Fair practices relating to recruitment, compensation, layoffs, perks,
promotions, etc.
ii. Transformational leadership to motivate employees to aim at better and higher
in life.
iii. Better communication at all levels.
d) Personal Policy Level
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i. Not to misuse others for personal ends
ii. Not to spoil promotional chances of others

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

iii. Not to use office car, stationary and other facilities for personal use
iv. Promise keeping
v. No violence, i.e. preventing or not causing physical harm to others
 IMPORTANCE OF BUSINESS ETHICS 22
 Stop business malpractices

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

 Longer survival of business
 Protection of consumer right
 Healthy competition
 Goodwill of business
 Customer satisfaction
 Societal welfare
 Avoidance to legal problems
 Model of ethics 23
1. Façade – A façade is an exterior side of a building, usually, but not always, the

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

front. The word comes from the French language, literally meaning “frontage” or
“face”.
2. Walk their Talk –Walk their Talk considers the consumer’s ethical intention and
the ethically minded consumers rarely purchase ethical products.
3. Opportunist –Opportunist are people who see a chance to gain some advantage
from a situation, often at the expense of ethics or morals. An opportunist seizes
every opportunity to improve things for himself/herself.
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4. Salt of the Earth –Salt of the earth is the most worthy of people; a very good

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

or worthy person.
Example: Mrs. Jones is the salt of the earth. She is the first to help
anyone in trouble.
Ethical performance in business 25

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

1. Ethical performance of Tata steel
Ethical behavior is fundamental to the way we conduct our business and is
part of our legacy from the founder of the Tata Group, Jamshedji Tata, who
believed that business must operate in a way that respects the rights of all its
stakeholders and creates an overall benefit for society.
I. Risk management
II. Human rights
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III. Business Ethics and code of conduct

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

2. Ethical performance of Infosys
The company expects to exercise good judgement to ensure the safety and
welfare of Info scions and to maintain a cooperative, efficient, positive,
Harmonious and productive environment and business conduct.
I. Honesty and Ethical Conduct
II. Equal opportunity workplace free of Discrimination or Harassment
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III. Safety at the workplace

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

IV. Dress Code
V. Drug Alcohol and Weapons Abuse
3. Ethical performance of Reliance Resources Ltd.
Reliance Resources Ltd. Is committed to conducting business in accordance with all
applicable laws, rules, regulations and stock exchange policies and the highest
standards of business ethics.
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I. Compliance with Laws, Rules and Regulations

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

II. Conflicts of Interest
III. Disclosure in Reports and Documents
IV. Compliance with the Code of Ethics
V. No Rights Created
4. Ethical Performance Of Maruti Suzuki India Limited
As a responsible corporate citizen, Maruti Suzuki India Limited has always
believed in following highest standards of corporate governance, Being a listed
company, every act of the company, its Board members and its employees is the
focus of public attention and accordingly, there is a need to reinforce Maruti’s
commitment towards maintaining highest standards of Corporate Governance.
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MANAGERIAL VALUES AND ATTITUDES
 Managerial value refers to the application of value analysis techniques for

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

improvement of business effectiveness and efficiency.
 According to Dr. Athreya value based management is a good recipe for long-term
success of corporate.
 Living on principles and values is a must for every corporate manager.
 Values and ethics are the key elements for the success of a business.
 Management must work continuously to develop organizational values.
 Excellent organization must have values and it is the duty of management to shape
values that are service oriented and ethical.
 Without values there is no guideline for direction. 30
 The key ingredient of any culture is values.

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

 Ethical or unethical behavior of individual employees is influenced
in the workplace both by their own moral development and the
influence that the organization culture exerts on them.
 MANAGERIAL ATTITUDE 31

Managerial attitude is an organization, regardless of its structure,

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

depends upon an effective combination of managers supervising the
performance of their direct reports and all employees making their
contribution towards organizational goals.
Attitude at Work Place
1. Job Satisfaction : Job satisfaction is the positive emotional
state resulting from the appraisal of one’s job or job
experience.
2. Organizational Commitment : Organizational commitment is the
strength of an individual’s identification with an
organization.
There are three kinds of organizational commitment : affective, continuance and
normative.
 Affective commitment refers to an employee’s intention to remain in an organization because of
a strong desire to do so. 32
 Continuance commitment is based on the fact that an individual cannot afford to leave.

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

 Normative commitment refers to a perceived obligation to remain with the organization.
Ethical congruence 33

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

 Ethical congruence refers to a situation where one’s decision
is consistent with, aligns with, the applicable set of values.
 Under these circumstances, a choice to take some action will
harmonize with the decision-maker’s values.
Ethical Conflict and Ethical Congruence
 In the broadest terms we characterize the motivation behind
feeding the hog and the Silent Saboteurs as various forms of
ethical conflict.
 The term we use for the condition where the values of the
organization, the values of the employees and the perceived
criteria for success as manifested in the formal and informal
systems of the organization are misaligned.
 Managerial philosophy 34

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

Managerial philosophy is that set of rational principles which form the basis for
guiding or controlling the operation or performance of a business activity.
Managerial philosophy cornerstone : People Matter
The most important asset of a business is its employees. No business operates
without employees.
No business can achieve its potential unless each employee has the ability and the
right, to achieve their individual potential.
 profits are a Good Thing 35
The objective of any business is to stay in business and you do that by generating

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

profits.
• Customer Service is Job One
Customer are just as much a part of a business as employees. How we treat them is
an integral part of our Management Philosophy.
Products and service must meet the actual and perceived needs of the customer.
 Business 36
Conditions Constantly Change
While everyone might agree with this statement, the successful business uses

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

it as one of the cornerstones of its management philosophy.
The successful business assumes it assumes it must change and looks for
opportunities to change.
 The Right Information Leads to Significant Improvement
Information is the key to the identification of strength and weakness.
 Organizations Must be taken to its Lowest Level
Each business function is important. Some may be identified as more important, but
none is inconsequential. Each person in a business is important. Each customer is
important. The company must be structured so that each person or department has the
tools it requires to achieve maximum effectiveness.
Factors
 influencing ethical decisions 37
1. Personal Code of Ethics

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

2. Legislation
3. Government Rules and Regulations
4. Ethical Code of the Company
5. Social Pressures
6. Ethical Climate of the Industry
7. Social Environment
8. Government and Legal Environment
9. Professional Environment
10. Work Environment
11. Personal Environment
12. Individual Attributes and Values
13.Social Norms
14. Religious Beliefs 38
15. Upbringing

Veena AL, MBA, Mcom, Pgdhrm, Asst. Prof, Vvfgc, Tumkur

16. Laws
17. Individual Values
18. Individual Morals
19. Personal goals
20. Friends and family.
21. Personality.
22. Leadership
23. Strategy and performance
24. Corporate strategy
25. Business strategy
26. Functional strategy
27. Corporate culture