ETHICAL ISSUES IN

BUSINESS
Chapter 5
WHAT ARE BUSINESS ETHICS ?

 Business ethics are moral principles that guide the way a business behaves.
 Acting in an ethical way involves distinguishing between “right” and “wrong”
and then making the “right” choice.
 Ethics is a branch of philosophy which seeks to find answers about the moral
concepts like bad, good, evil, right, wrong, etc.
 Business ethics is the study of business situations, activities, and decisions
where issues of right and wrong are addressed.
Continuation

 Fairness in business dealings means being objective and having an interest in

creating a win-win situation for both parties whether that is employer-
employee or company-client.
 Honesty applies to every part of running a business while making a profit.
 Personal ethics are usually considered as the foundation for running ethical
businesses.
Continuation

 Ethical behaviour and corporate social responsibility can bring significant

benefits to a business.
 For example:
 Attract customers to the firm's products, thereby boosting sales and profits
 Make employees want to stay with the business, reduce labour turnover and
therefore increase productivity
 Attract more employees wanting to work for the business, reduce recruitment
costs and enable the company to get the most talented employees
 Attract investors and keep the company's share price high, thereby protecting
the business from takeover.
ETHICAL ISSUES IN BUSINESS

 Due to increased emphasis on the business ethics over last three decades, this
field is suffering and is troubled by the lack of proper directions and is struck
in the issues like logic, reasons etc.
 The past conception of the companies about the ethical issues in business was
related to the administration of rules, regulations in the organizations.
 Today, people from the top management level and the business owners have
understood that this concept of ethical issues in business is far superior than
handling the rules and regulations and their effective implementation.
Continuation…

 There are wide ranges of issues related to the business ethics currently
observed by the market analysts. today,
 Ethical issues can be varying in nature.
• professional ethics .
• Employee right issues which can be further divided into
different categories..
• Functional areas of business
continuation

 In the current business environment, the issues like fairness, justice and
honesty are the main issues that are posing complex dilemma to the
businesses.
 Any wrong or biased decision can have a profound impact on the goodwill of
the company as well as its market position..
 If they choose to use legality and profitability as their measurement in
determining what is right from wrong then business ethics will surely become
irrelevant..
BUSINESS FUNCTION ETHICS

 MARKETING FUNCTION
- The function of this business unit is to provide understanding about the four
basic aspects of a business- Product, Price, Place and Promotion.
- It provides interface to the management related not only to the customers
but the other related parties like media, investors, distribution system,
supply chain partners, legal framework, as well as others.
Continuation…

 Marketing can be defined as “practices that emphasize transparent,

trustworthy, and responsible personal and organizational marketing
policies and actions that exhibit integrity as well as fairness to
consumers and other stakeholders”
ACCOUNTING ETHICS

 Accounting ethics articles help in understanding the importance of business

code of ethics, besides the profit/loss, balance sheets and financial
statements.
 Enhancing the financial figures and statements which is manipulated for the
purpose of achieving something which is unethical.
FUNDAMENTAL ISSUES

 The most fundamental or essential ethical issues that businesses must face
are integrity and trust.
 When customers perceive that a company is exhibiting an unwavering
commitment to ethical business practices, a high level of trust can develop
between the business and the people it seeks to serve.
Diversity Issues

 An ethical response to diversity begins with recruiting a diverse workforce,

enforces equal opportunity in all training programs and is fulfilled when every
employee is able to enjoy a respectful workplace environment that values
their contributions. Maximizing the value of each employee’s contribution is a
key element in your business's success.
Decision-Making Issues

 Ethical decision-making processes should centre on protecting employee and

customer rights, making sure all business operations are fair and just,
protecting the common good and making sure individual values and beliefs of
workers are protected.
Compliance and Governance Issues

 Businesses are expected to fully comply with environmental laws, federal and
state safety regulations, fiscal and monetary reporting statutes and all
applicable civil rights laws. Commonly it states that, no one may ask any
employee to break the law, or go against company values, policies and
procedures.
Social Networking Ethics :

 Comments regarding employers or coworkers posted on social networking

websites are costing employees jobs across the country. (eg facebook)
Continuation…

 The ethical and legal challenges surrounding the use of social media and its
consequences in the workplace affects the business industry as a whole
because employers across the nation are setting policies regarding employee
use of these websites while working and even what these workers can say
when off the clock.
 The line between an employer's right to monitor employees and an
employee's right to privacy can easily blur in this climate it has to be clearly
derived.
Harassment in the Workplace :

 Maintaining professional workplace relationships between employees is a

continuing challenge for employers regardless of the industry.
 This challenge can become more difficult when the image companies choose
to project has a significant sexual charge.
 There's never an excuse or a justifiable reason for harassment of any kind in
any workplace, though a willingness to use sexually charged imagery in
advertising may indicate a working climate where harmful behaviours can
occur with costly lawsuits resulting from permissive climates
ADVANTAGES OF BUSINESS ETHICS

 Business ethics offer companies a competitive advantage..

 Good will of the firm hikes depending on its responds towards it ethical issues
 Productivity through rigid, firm and sincere workers as well as other business
chain members.
 Through increasing morale and trust business can increase their market share,
Advantages cont…

 Publicity due to well and ethical performance of the company. ‘Words of

mouth’ is the fastest and best source to gain market. Thus a good
performance will helps in publicity through words of mouth of general public.
 Acceptance of product.
For example : most of consumers prefer classmates notebook of ITC just
because it is eco-friendly and also it contributes a part of its profit for social
welfare.
DISADVANTAGES OF BUSINESS ETHICS

 Business ethics reduce a company's freedom to maximize its profit..

 Diversity in achievements.
For example. A company may diverse from its achievements and turn
towards any other directions.
 Extra expenditure in some cases.
For example, in some cases company may incur extra cost for solving
certain ethical issues like accident compensation, solution for pollutions etc.
CONCLUSION

 Now that we understand the idea of business ethics, it is important to

practice good ethical behaviour. Leading by example; teaching by example;
being a role model; these are all things that will come if you practice ethical
behaviour and chose to make the right decisions.
 One of the most formidable challenges is avoiding immoral management, and
transitioning from an amoral to a moral management mode of leadership,
behavior, decision making, policies and practices. Moral management requires
ethical leadership. It entails more than just "not doing wrong."
Conclusion cont…

 Moral management requires that managers search out those vulnerable

situations in which amorality may reign if careful, thoughtful reflection is not
given by management. Moral management requires that managers
understand, and be sensitive to, all the stakeholders of the organization and
their stakes.
 If the moral management model is to be achieved, managers need to
integrate ethical wisdom with their managerial wisdom and to take steps to
create and sustain an ethical climate in their organizations. If this is done,
the desirable goals of moral management are achievable.