An assignment on Business Ethics

Name Roll no Semester Batch Subject Year : : : : : : Parmar Mehul .D. 19(SFI) 2nd 2010-2012 MBA PROGRAMME Ethics and Values in Management 2010-2011

Guided By

DR.A. Kumar

Submitted To :

Department of Business Administration, Faculty of Management, Bhavnagar University, Bhavnagar

Signature: Date: Place:

MEANING AND NATURE OF BUSINESS ETHICS

First of all let us understand the meaning of Ethics UN Ethics is two things First, ethics refers to well-based standards of right and wrong that prescribe what humans ought to do, usually in terms of rights, obligations, benefits to society, fairness, or specific virtues. Ethics, for example, refers to those standards that impose the reasonable obligations to refrain from rape, stealing, murder, assault, slander, and fraud. Ethical standards also include those that enjoin virtues of honesty, compassion, and loyalty. And, ethical standards include standards relating to rights, such as the right to life, the right to freedom from injury, and the right to privacy. Such standards are adequate standards of ethics because they are supported by consistent and well- founded reasons. Secondly, ethics refers to the study and development of ones ethical standards. As mentioned above, feelings, laws, and social norms can deviate from what is ethical. So it is necessary to constantly examine ones standards to ensure that they are reasonable and wellfounded. Ethics also means, then, the continuous effort of studying our own moral beliefs and our moral conduct, and striving to ensure that we, and the institutions we help to shape, live up to standards that are reasonable and solidly-based.

Definition of Ethics Ethics is a set of moral principles or values which is concerned with the righteousness or wrongness of human behaviour and which guides your conduct in relation to others (for individuals and organizations).

Business Ethics

Business Ethics is a specialized study of moral right and wrong. It concentrates on moral standards as they apply particularly to business policies, institutions, and behaviour. Ethical Issues Relate to all Functional Areas Accounting Finance Management Marketing Why do we need to Study Business Ethics .Now that we have understood the meaning of the terms Ethics and Business Ethics, its time we should understand the importance of this concept.

Importance of Business Ethics

1. Ethical motivation:

It protects or improves reputation of the organization by creating an efficient and productive work environment. At a time of mass corporate downsizing, one of the most effective ways to appeal to the fragile loyalty of insecure employees is to promote an ethical culture, which gives employees a greater sense of control and appreciation.
2. Balance the needs and wishes of stakeholders:

There is pressure on business to recognize its responsibilities to society. Business ethics requires businesses to think about the impact of its decisions on people or stakeholders who are directly or indirectly affected by those decisions. Companies build their image by acting in accordance with their values, whatever they might be. Creating a positive public image comes from demonstrating appropriate values. Publicizing and following a companys values allows stakeholders to understand what the company stands for, that it takes its conduct as an organization seriously.

3. Global challenges:

Business must become aware of the ethical diversity of this world because of increasing globalization of the economy. It must learn the values of other cultures, how to apply them to its decisions, and how to combine them with its own values. In a world where transnational corporations and their affiliates account for two- thirds of the worlds trade in goods, and employ 73 million people, corporations cannot afford to ignore the reality of multicultural ethics.
4. Ethical pay-off:

They serve to protect the organization from significant risks, and to some degree help grow the business. Risks such as breaches of law, regulations or company standards, and damage to reputation were perceived to be significantly reduced.
5. Employee Retention:

One of the major costs in business is inappropriate turnover. The loss of valuable experience and development of new personnel is a cost companies can control. Seldom is playing the primary factor in losing an employee. What would a company give to retain valuable employees? With a successful program, the employees work with managers and supervisors in making decisions based on the companys values. A successful Business Ethics decision. 6. Prevention and Reduction of Criminal Penalties: The United States Sentencing Commission Guidelines state that to receive a 40% reduction in federal penalties, a company must have an effective program to detect and prevent violations of the law. Executives cannot always be aware of everything done in a companys name. Jeffrey Kaplan in his article The Sentencing Guidelines: The First Ten Years points out that recent cases also show that prosecutors are electing not to pursue some actions because the companies in question have sound programs in place. This is a tremendous asset to companies under regulatory scrutiny. program establishes a culture that rewards making the right

7.

Preventing civil lawsuits: Many times employees that experience issues in the workplace first try to resolve these

issues internally. If their complaints are ignored, employees feel compelled to go to an

outside advocate. That could be a private attorney, government regulator or news agency. Giving employees an internal outlet can solve problems without the event becoming public knowledge or an issue for the courts. Having the values permeate the company culture enhances the staffs trust in senior management. Why? Because with an effective program, the staff recognizes that management also operates within these appropriate values.
8.

Market Leadership: When a company fully integrates its values into its culture, quality rises due to the

employees focus on values. Customers see that the employees care about the customers concerns. Employees reflect appropriate values in their attitude and conduct. Roy Koerner in his article Want More Profit? Try Ethical Business Practices points out that businesses demonstrating the highest ethical standards are also the most profitable and successful.
9.

Setting the Example: By setting the example in the community and market, the entire industry has a new

standard that allows the community and the market to recognize the company as a leader. When the word gets out, competitors will have to answer questions about why they were not establishing similar values. So, above points show how business ethics are important for a business.

Myths about Business Ethics

Business ethics in the workplace is about prioritizing moral values for the workplace and ensuring behaviours are aligned with those values its values management. Yet, myths abound about business ethics. Some of these myths arise from general confusion about the notion of ethics. Other myths arise from narrow or simplistic views of ethical dilemmas.

1. Myth: business ethics is more a matter of religion than management. Diane Kirrane, in Managing Values: A Systematic Approach to Business Ethics,(Training and Development Journal, November 1990), asserts that altering peoples values or souls isnt the aim of an organizational ethics program managing values and conflict among them is
2. MYTH: OUR EMPLOYEES ARE ETHICAL SO WE DONT NEED ATTENTION TO BUSINESS ETHICS.

Most of the ethical dilemmas faced by managers in the workplace are highly complex. Wallace explains that one knows when they have a significant ethical conflict when there is presence of a) significant value conflicts among differing interests, b) real alternatives that are equality justifiable, and c) significant consequences on stakeholders in the situation. Kirrane mentions that when the topic of business ethics comes up, people are quick to speak of the Golden Rule, honesty and courtesy. But when presented with complex ethical dilemmas, most people realize theres a wide gray area when trying to apply ethical principles.
3. MYTH: BUSINESS ETHICS IS A DISCIPLINE BEST LED BY PHILOSOPHERS, ACADEMICS AND THEOLOGIANS.

Lack of involvement of leaders and managers in business ethics literature and discussions has led many to believe that business ethics is a fad or movement, having little to do with the day-to-day realities of running an organization. They believe business ethics is primarily a complex philosophical debate or a religion. However, business ethics is a management discipline with a programmatic approach that includes several practical tools. Ethics management programs have practical applications in other areas of management areas, as well. (These applications are listed later on in this document.)

4. MYTH: BUSINESS ETHICS IS SUPERFLUOUS IT ONLY ASSERTS THE OBVIOUS: DO WELL!

Many people react that codes of ethics, or lists of ethical values to which the organization aspires, are rather superfluous because they represent values to which everyone should naturally aspire. However, the value of codes of ethics to an organization is its priority and focus regarding certain ethical values in that workplace. For example, its obvious that all people should be honest. However, if an organization is struggling around continuing occasions of deceit in the workplace, a priority on honesty is very timely and honesty should be listed in that organizations code of ethics. Note that a code of ethics is an organic instrument that changes with the needs of society and the organization. 5. MYTH: BUSINESS ETHICS IS A MATTER OF THE GOOD GUYS PREACHING TO THE BAD GUYS. Some writers do seem to claim a moral high ground while lamenting the poor condition of business and its leaders. However, those people well versed in managing organizations realize that good people can take bad actions, particularly when stressed or confused. (Stress and confusion are not excuses for unethical actions they are reasons.) Managing ethics in the workplace includes all of us working together to help each other remain ethical and to work through confusing and stressful ethical dilemmas.
6. MYTH: BUSINESS ETHICS IN THE NEW POLICEPERSON ON THE BLOCK.

Many believe business ethics is a recent phenomenon because of increased attention to the topic in popular and management literature. However, business ethics was written about even 2,000 years ago at least since Cicero wrote about the topic in his On Duties. Business ethics has gotten more attention recently because of the social responsibility movement that started in the 1960s. 7. MYTH: ETHICS CANT BE MANAGED. Actually, ethics is always managed but, too often, indirectly. For example, the behaviour of the organizations founder or current leader is a strong moral influence, or directive if you will, on behaviour or employees in the workplace. Strategic priorities (profit maximization, expanding market share, cutting costs, etc.) can be very strong influences on morality. Laws, regulations and rules directly influence behaviors to be more ethical, usually in a manner that improves the general good and/or minimizes harm to the community. Some

are still sceptical about business ethics, believing you cant manage values in an organization. Donaldson and Davis (Management Decision, V28, and N6) note that management, after all, is a value system. Sceptics might consider the tremendous influence of several codes of ethics, such as the 10 Commandments in Christian religions or the U.S. Constitution. Codes can be very powerful in smaller organizations as well.
8. MYTH: BUSINESS ETHICS AND SOCIAL RESPONSIBILITY IS THE SAME THING.

The social responsibility movement is one aspect of the overall discipline of business ethics. Madsen and Shafritz refine the definition of business ethics to be: 1) an application of ethics to the corporate community, 2) a way to determine responsibility in business dealings, 3) the identification of important business and social issues, and 4) a critique of business. Items 3 and 4 are often matters of social responsibility. (There has been a great deal of public discussion and writing about items 3 and 4. However, there needs to be more written about items 1 and 2, about how business ethics can be managed.) Writings about social responsibility often do not address practical matters of managing ethics in the workplace, e.g., developing codes, updating policies and procedures, approaches to resolving ethical dilemmas, etc.
9. MYTH: OUR ORGANIZATION IS NOT IN TROUBLE WITH THE LAW, SO WERE ETHICAL.

One can often be unethical, yet operate within the limits of the law, e.g., withhold information from superiors, fudge on budgets, constantly complain about others, etc. However, breaking the law often starts with unethical behaviour that has gone unnoticed. The boil the frog phenomenon is a useful parable here: If you put a frog in hot water, it immediately jumps out. If you put a frog in cool water and slowly heat up the water, you can eventually boil the frog. The frog doesnt seem to notice the adverse change in its environment.
10. MYTH: MANAGING ETHICS IN THE WORKPLACE HAS LITTLE PRACTICAL RELEVANCE.

Managing ethics in the workplace involves identifying and prioritizing values to guide behaviors in the organization, and establishing associated policies and procedures to ensure those behaviors are conducted. One might call this values management. Values management is also highly important in other management practices, e.g., managing diversity, Total Quality Management and strategic planning.

 Review of Literature on Business Ethics

1. Spirituality and Performance in Organizations: A Literature Review

Fahri Karakas

Open University Business School

Abstract: The purpose of this paper is to review spirituality at work literature and to explore how spirituality improves employees performances and organizational effectiveness. The paper reviews about 140 papers on workplace spirituality to review their findings on how spirituality supports organizational performance. Three different perspectives are introduced on how spirituality benefits employees and supports organizational performance based on the extant literature: a) Spirituality enhances employee well-being and quality of life; b) Spirituality provides employees a sense of purpose and meaning at work; c) Spirituality provides employees a sense of interconnectedness and community. The paper introduces potential benefits and caveats of bringing spirituality into the workplace; providing recommendations and suggestions for practitioners to incorporate spirituality positively in organizations.

2. A literature review on how to create and sustain ethical business culture Alexandre Ardichvili, Ph.D. - James A. Mitchell - Douglas Jondle, Ph.D. Abstract: The purpose of this study was to identify general characteristics attributed to ethical business cultures by executives from a variety of industries. Our research identified five clusters of characteristics:

Mission- and Values-Driven Stakeholder Balance Leadership Effectiveness Process Integrity Long-term Perspective

We propose that these characteristics can be used as a foundation of a comprehensive model that can be engaged to influence operational practices in creating and sustaining an ethical business culture.

3. A literature review on Dimensions of Ethical Business Cultures: Comparing

Data from 13 Countries of Europe, Asia, and the Americas Alexandre Ardichvili, Ph.D. - Douglas Jondle, Ph.D. - Brenda Kowske, Ph.D. Abstract: This paper reports the results of a survey-based study of perceptions of ethical business practices in 13 countries of Europe, Asia, and the Americas. Responses from more than 23,000 managers and employees were analyzed using multivariate analysis of variance and post-hoc comparisons, aimed at identifying homogenous sets of countries. Anglo countries (US, UK, Australia, and Canada) clustered together, and were joined by India in most cases. Japan and Italy formed a homogenous subset significantly different from all other countries. Countries of continental Europe, China, Mexico, and Brazil formed various midrange groupings. The paper discusses some salient differences between groups of countries and presents implications for human resource development (HRD) practice and research.

4. A literature review on Ethical Business Cultures: A Literature Review and Implications for HRD Alexandre Ardichvili, Ph.D. - Douglas Jondle, Ph.D. Abstract: This literature review identifies characteristics of ethical business cultures, describes factors, considered to be important in developing such cultures, describes current practices of developing ethical culture programs, and discusses the role of HRD in developing ethical business cultures. We argue that ethical thinking and behaviour can be learned and internalized as a result of work-based interpretive interactions, and this learning process constitutes an important part of organizational learning. Therefore, to help the organization develop an ethical culture, HRD needs to play a key role in several interrelated activities which include: culture change efforts, focused on the creation of conditions, conducive to ethical behaviors; creation of a dynamic program of ethical training for employees on all levels of the organization; and development of up-to- date codes of ethics.

Bibliography
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2. Human Resource Development Review (Volume 8, Issue 2).

3. Business Ethics (2009 - 85:445-451).

4. www.wikipedia.com

5. scribd.com