BUSINESS ETHICS

UNIT 1
BUSINESS ETHICS
 Business ethics is a process of evaluating
decisions, either pre or post with respect to
the moral standards of the society’s culture.
 It is the application of general ethical rules to

business behaviour.
BUSINESS ETHICS
NATURE

ETHICS DIFFER Ethics & Ethical

FROM INDIVIDUAL decisions affect
TO INDIVIDUAL the situations

ETHICS IS ONE’S Consequenti

ETHICS IS BASED
Ethical
OWN al
ONethical
MORAL
Compromise
RESPONSIBILITY STANDARDS
practice
BUSINESS ETHICS
NATURE
 Ethics Differ from Individual to Individual:
◦ Each individual’s views may be based on one’s own
value system and the same may be unique or
otherwise.
◦ Whereas ethical decision do not have unique
solutions.
◦ The question of ethics arises when each
organisation views in terms of one’s own frame of
reference.
BUSINESS ETHICS
NATURE
 Ethics and ethical decisions affect situation:
◦ Many times ethics are situational. When the
situation demands a person may act ethically or
otherwise they may simply follow rules and
regulations or law.
◦ Likewise, simple unethical act of an individual may
tempt or influence others to follow the same and
spread negativity in the organisation or in a
particular situation.
BUSINESS ETHICS
NATURE
 Ethical Compromise:
◦ Two extremes – one extreme involves practices
which lead to maximum profit or personal interests.
◦ In other extreme there is social responsibility or
personal responsibility.
◦ There may be a few cases when profit and
responsibility go hand in hand.
◦ But in all other cases, there need to be a trade-off
or a compromise.
◦ This compromise can be either classified into
ethical or unethical practices.
BUSINESS ETHICS
NATURE
 Consequential ethical practices:
◦ These practices are always ambiguous.
◦ One cannot expect that one’s ethical practice will
definitely bring positive results.
◦ Similarly, when one follows unethical practices, it is
not necessary there will be negative results.
◦ Thus, one just has to follow ethics and not expect
any result.
◦ Only then ethics will do its magic somehow,
somewhere, at sometime.
BUSINESS ETHICS
NATURE
 Ethics is one’s own responsibility:
◦ Taking ethical or unethical decision depends upon
the individual and unique value system, along with
their moral standards.
◦ Whether the decision is ethical or unethical will
depend on their conscience.
◦ Thus, ethics is one’s own responsibility.
BUSINESS ETHICS
NATURE
 Ethics is based on moral standards:
◦ Ethics is trying to seek factual information like
concerning the policies and behaviour of the
organisation.
◦ Later it will be trying to arrive at the moral
judgement which include rightness or wrongness of
the policy, institution or behaviour.
BUSINESS ETHICS
NATURE
 Ethics is beyond law:
◦ An individual or business cannot violate the law in
the society.
◦ The law and regulations established by the
government sets the minimum standards for ethical
behaviour.
◦ Law checks the external activities whereas ethics is
beyond law, which studies internal qualities
BUSINESS ETHICS
NATURE
 Ethics is oxymoron:
◦ Ethics is always contradictory to explain its concept
clearly.
◦ The perception and practice of ethics both by an
individual and business differ
◦ This difference can be based on the standard set by
two types of ethics, namely, old ethics and new
ethics.
◦ Old ethics – “hold responsibility”
◦ New ethics-”Hold rights”
BUSINESS ETHICS
NEED
 Business operates within the society
 Every business irrespective of size exists

more on ethical means or in total regard to

its social concern to survive long
 Business needs to function as responsible

corporate citizens in the country

BUSINESS ETHICS
NEED
 Business operates within the society:
◦ It is a part or subsystem of the welfare of the
society.
◦ In order to survive and develop and excel, business
must earn social sanction of the society where it
exists and functions.
◦ Without earning social sanctions, business cannot
get loyal customers, cannot operate in the market
place, it will soon collapse and die away.
◦ The public takes more interest on the business
once it grows larger which will lead to greater
impact on the community.
BUSINESS ETHICS
NEED
 Every business irrespective of size exists
more on ethical means or in total regard to
its social concern to survive long:
◦ As a statement of purpose, maximizing of profit is
not only unsatisfying, it is not even accurate.
◦ Business needs to remain ethical for its own good.
◦ Unethical actions and taking decisions will shorten
the life of business.
BUSINESS ETHICS
NEED
 Business needs to function as responsible
corporate citizens in the country:
◦ It is that origin of the society which creates wealth
for the country.
◦ Hence, narrow mentality and narrower goals and
motives are to be avoided.
BUSINESS ETHICS
SCOPE
 Ethics is beyond business. Businesses are
supposed to contribute the man’s happiness
and meet his material needs.
 The business houses have become a

dominant form of modern business

organisations.
 Business and society interact with each other

and are mutually dependent on both internal

and external factors.
BUSINESS ETHICS
SCOPE
BUSINESS ETHICS
FRAMEWORK FOR SCOPE OF BUSINESS ETHICS
 Criminal behaviour and legal framework:
The employee in a business needs to be
trained sufficiently regarding legalities of the
business and the consequences of their
actions would have upon them and the
business.
BUSINESS ETHICS
FRAMEWORK FOR SCOPE OF BUSINESS ETHICS
 Human values and personal behaviour:
Employees should be given training to
interact with people, customer, suppliers and
competitors.
They need to behave with people at
different levels and any inappropriate
behaviour will have adverse consequences.
BUSINESS ETHICS
FRAMEWORK FOR SCOPE OF BUSINESS ETHICS
 Corporate and business ethics:
Though the study refers to business
ethics, this strictly pertains to the corporate
ethics, ethical policies for business and
actions that are going to be under check.
They need to be in compliance with legal
framework and standards.
BUSINESS ETHICS
BENEFITS

EMPLOYE CUSTOME
INVESTO
BETTER E R LONG
R
ETHICAL COMMIT SATISFAC TERM
LOYALTY
CLIMATE MENT & TION & BENFITS
& TRUST
TRUST TRUST
BUSINESS ETHICS
ARGUMENTS FOR AND AGAINST
 One school of thought believe that rather
than imposing individual values on business,
if organizations produce as per the values of
the members of the society, it would yield
greater benefits.
BUSINESS ETHICS
ARGUMENTS FOR AND AGAINST
 But this opens up many controversies since
what some members value may not be
acceptable to others.
BUSINESS ETHICS
ARGUMENTS FOR AND AGAINST
 If the company want to focus on producing
high quality products for the benefits of the
society, poor people cannot afford the high
price for the high quality of product, and an
ethical decision cannot be taken to satisfy
the entire society.
BUSINESS ETHICS
ARGUMENTS FOR AND AGAINST
 But, on the other hand, higher the profits and
company can declare high rate of dividend
which satisfies the shareholders through
which company can grow and can expand its
business with high market price and its
impact on investment.
BUSINESS ETHICS
ARGUMENTS FOR AND AGAINST
 Another school of thought says that
measures taken to maximize profits may
harm society, result in over production which
may lead to every additional usage of
machine, men, material, and money in turn
increasing the degree of pollution levels,
causing burnout among people and wasting
up the natural resources in various ways.
BUSINESS ETHICS
ARGUMENTS FOR AND AGAINST
Another point of view says that every
employee has to abide by the policies of the
employer irrespective of self-interest.
 This is where professional code of conduct

comes into play.

BUSINESS ETHICS
ARGUMENTS FOR AND AGAINST
 Why Business Ethics are important?
◦ Ethics correspond to basic human needs:
 As a person at the helm of business, they should
realize that the decision made have wider implications
impacting lives of thousands of people.
BUSINESS ETHICS
ARGUMENTS FOR AND AGAINST
 Why Business Ethics are important?
◦ Ethics creates Credibility:
 An organisation perceived by the public to be ethically
and socially responsive will also be honoured and
respected.
BUSINESS ETHICS
ARGUMENTS FOR AND AGAINST
 Why Business Ethics are important?
◦ Values give management credibility with employee:
 Values are supposed to be a common language to
bring leadership and its people together.
BUSINESS ETHICS
Arguments For Business Ethics
BUSINESS ETHICS
Arguments For Business Ethics
BUSINESS ETHICS
Arguments Against Business Ethics
STRUCTURE & BUSINESS ETHICS
 Corporate social responsibility recognise that
business firms have not one but many
different kinds of responsibility including:
◦ Economic issues
◦ Competitive issues
◦ Legal and regulatory issues
◦ Philanthropic issues
 The concepts of ethics and social
responsibility are often interchangeable.
STRUCTURE & BUSINESS ETHICS
Economic Issues
 Business firms have legal and regulatory
responsibilities. One of these is to act as a
judiciary, managing the assets of the
corporation in the interests of shareholders.
 They also have numerous legal
responsibilities to employees, customers,
suppliers and other parties.
STRUCTURE & BUSINESS ETHICS
Economic Issues
 The concept of corporate social responsibility
is often expressed as the voluntary
assumption of responsibilities that go beyond
the purely economic and legal responsibilities
of business firms.
 The corporate objective of earning a
satisfactory level of profit and a willingness to
forego a certain measure of profit inn order
to achieve non-economic end in a consistent
way should be the motto
STRUCTURE & BUSINESS ETHICS
Competitive Issues
 Competitive bidding is a well established
practice in purchasing.
STRUCTURE & BUSINESS ETHICS
Competitive Issues
 It can lead to many ethical problems
associated with deception on the part of the
vender or with unfairness on the part of the
buyer in choosing a vendor.
 When companies compete for a similar
product, they sometimes engage in unethical
activities in order to wipe out a competitor
from the market.
STRUCTURE & BUSINESS ETHICS
Legal and regulatory Issues
 Laws and Regulations are established by
governments to set minimum standards for
responsible behaviour.
STRUCTURE & BUSINESS ETHICS
Legal and regulatory Issues
 Consumers, Interest groups, Competitors and
Legislators believes that business must
comply with society’s standards.
 Such laws regulate competitions, protect

consumers and the environment, promote

safety and equity and in the work place,
provide incentives for promoting good
conduct
STRUCTURE & BUSINESS ETHICS
Philanthropic Issues
 Businesses contribute to the local community
and society and as such philanthropic issues
touch on business’s social responsibility.
STRUCTURE & BUSINESS ETHICS
Philanthropic Issues
 Companies contribute significant amount of
money to education, the arts, environmental
causes and the disadvantaged by supporting
local and national charitable organisation.
STRUCTURE & BUSINESS ETHICS
Philanthropic Issues
 The ethical aspects of business competition
would be severe from the rivalry among
businesses for customers and profits.
 If the competition is not fair enough, other

competitors may be adversely affected.

FRAMEWORK FOR ETHICAL DECISION MAKING

1 •Describe the Problem

2 •Determining Ethical issue or Ethical Dilemma

3 •Rank the key values and principles

4 •Gather the information

5 •Review any applicable code of ethics

6 •Determine the options

7 •Select a course of action

8 •Plan into Action

9 •Evaluate the Results

FRAMEWORK FOR ETHICAL DECISION
MAKING
 STEP 1 :Describe the Problem
◦ Ethical problems are always embedded in a context
◦ Circumstances impact upon the problem definition
◦ Beware of the tendency to look toward the purely
legal perspective for guidance.
FRAMEWORK FOR ETHICAL DECISION
MAKING
 STEP 2 :Determining ethical issue or ethical
dilemma
◦ Dilemma becomes ethical when the good or bad
options seem to have a moral component
◦ Terms of ethical dilemma must be ethical in nature,
not legal
◦ If something is a law, then have the ethical choice to
follow the law or not
FRAMEWORK FOR ETHICAL DECISION
MAKING
 STEP 3 :Rank the key values & Principles
◦ What reasons can provide for prioritizing one
competing value over another?
◦ Understand that a resolution to a dilemma which
goes against an individual’s personal set of values
has very little chance of success.
FRAMEWORK FOR ETHICAL DECISION
MAKING
 STEP 4 :Gather the information
◦ Collecting all the known facts
◦ Understanding the applicable laws or legalities
◦ Reviewing all the relevant policies available
◦ Making clear about the individual’s views and
personal values
FRAMEWORK FOR ETHICAL DECISION
MAKING
 STEP 5 :Review any applicable code of ethics
◦ Not legal documents, but professionals are bound
to tenets and can be sued for breach
◦ Codes can be revised or updated as needed
◦ Look for the following
 Mission statement
 Value base of the organization
 Ethical principles to guide practice
 Ethical standard
FRAMEWORK FOR ETHICAL DECISION
MAKING
 STEP 6 :Determine the Options
◦ List all possible actionable options
◦ Weigh the cost/benefit of each option
◦ Seek out additional point of view
FRAMEWORK FOR ETHICAL DECISION
MAKING
 STEP 7 :Course of Action
◦ Discard the least desirable option.
◦ Discard any which cannot put into action
◦ Discard any options which violate the value system
of those affected
◦ Recognize that the final choice will be impacted by
personal values.
FRAMEWORK FOR ETHICAL DECISION
MAKING
 STEP 8 :Plan into Action
◦ Reflect on the outcomes with a sense that have
truly approached the ethical dilemma with the best
of intentions and to the best of the ability
FRAMEWORK FOR ETHICAL DECISION
MAKING
 STEP 9 :Evaluate the Results
◦ Evaluate the consequences for each person
involved.
◦ Consider submitting the most difficult cases to an
ethics review board or peer consultants for
feedback.
MORAL PHILOSOPHIES ON ETHICAL
DECISION MAKING
 Ethical issues intensity is defined as the
importance of the ethical issue in the eyes of
the individual, work group, organisation.
MORAL PHILOSOPHIES ON ETHICAL
DECISION MAKING
MORAL PHILOSOPHIES ON ETHICAL
DECISION MAKING
 The first step is to recognize that an ethical
issue requires that an individual or work
group choose among several actions that will
be evaluated as ethical or unethical by
various stakeholders
MORAL PHILOSOPHIES ON ETHICAL
DECISION MAKING
 In the work place, an organisation’s values
often have greater influence on individuals
decisions than that person’s own value.
MORAL PHILOSOPHIES ON ETHICAL
DECISION MAKING
 Moral philosophy is a set of principles setting
forth what is believed to be the right way to
behave.
 Role is something that is moral conforms to a
standard of acceptability.
MORAL PHILOSOPHIES ON ETHICAL
DECISION MAKING
 A Philosophy is a study of general principles
of a subject, such as morality.
 Individuals learn the principles through
socialisation by family members, social
groups and formal education
MORAL PHILOSOPHIES ON ETHICAL DECISION MAKING
Suggestions for Ethical Decision Making
MORAL PHILOSOPHIES ON ETHICAL DECISION MAKING
Suggestions for Ethical Decision Making
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UNIT 1 – THE END