LESSON 1: ETHICS AND BUSINESS

3. Encourage Healthy Competition − A well

Introduction reasonable atmosphere that offers certain profits to
Business is a part of society. It works together the consumers must be encouraged.
with every human being and act like a distinct entity. It is 4. Accuracy − Correctness in weighing, packaging
complex and dynamic interaction among the people and and quality of providing goods to the consumers has
the institutions. Its activities must be observed and to be followed.
viewed to see their points as a major factor in our 5. Pay Taxes Regularly − Taxes and other duties to
society. the government must be fairly and frequently paid.
6. Get the Accounts Audited − Good business
Ethics is a topic of social science that is connected with records, accounts must be achieved. All official
moral values and social values. persons and authorities should have admission to
these details.
BUSINESS ETHICS – DEFINITION 7. Fair Treatment to Employees − Fair wages or
salaries, facilities and incentives must be delivered
There are numerous meanings of business ethics, but
to the employees.
the ones given by Andrew Crane and Raymond C.
8. Keep the Investors Informed − the shareholders
Baumhart are considered the most appropriate ones.
and investors must know about the financial and
other important choices of the company.
 According to Crane, "Business ethics is the study of 9. Avoid Injustice and Discrimination − Evade all
business situations, activities, and decisions where types of unfairness and prejudice to employees.
issues of right and wrong are addressed." Judgment based on gender, race, religion,
 Baumhart defines, "The ethics of business is the language, nationality, etc. should be avoided.
ethics of responsibility. The business man must 10. No Bribe and Corruption − Do not give
promise that he will not harm knowingly." expensive gifts, commissions and payoffs to
people having influence.
FEATURES OF BUSINESS ETHICS 11. Discourage Secret Agreement − Making secret
There are eight major types of business ethics agreements with other business people to
influence production, distribution, pricing etc. are
1. Code of Conduct − Business ethics is really a form unethical.
of codes of conduct. It lets us know what to do and 12. Service before Profit − Accept the principle of
what not to do. Businesses must follow this code of "service first and profit next."
conduct. 13. Practice Fair Business − Businesses should be
2. Based on Moral and Social Values − Business fair, humane, efficient and dynamic to offer certain
ethics is a topic that is based on moral and social benefits to consumers.
values. It proposals some moral and social 14. Avoid Monopoly − No private monopolies and
principles (rules) for conducting a business. concentration of economic power should be
3. Protection to Social Groups − Business ethics practiced.
defend numerous social groups counting 15. Fulfill Customers’ Expectations − Adjust your
consumers, employees, small businesspersons, business activities as per the demands, needs and
government, shareholders, creditors, etc. expectations of the customers.
4. Offers a Basic Framework − Business ethics is the 16. Respect Consumers Rights − Honor the basic
basic framework for doing business correctly. It rights of the consumers.
constructs the social, cultural, legal, economic, and 17. Accept Social Responsibilities − Honor
other limits in which a business must operate. responsibilities towards the society.
5. Voluntary − Business ethics is intended to be 18. Satisfy Consumers’ Wants − Satisfy the wants of
voluntary. It should be self-practiced and must not the consumers as the main objective of the business
be enforced by law. is to satisfy the consumer’s wants. All business
6. Requires Education & Guidance − Businessmen operations must have this aim.
should get good education and leadership about 19. Service Motive − Service and consumer's
business ethics. Trade Relations and Chambers of satisfaction should get more attention than profit-
Commerce should be active enough in this matter. maximization.
7. Relative Term − Business ethics is a qualified term. 20. Optimum Utilization of Resources − Ensure
It alters from one business to another and from one optimum utilization of resources to remove poverty
country to another. and to increase the standard of living of people.
8. New Concept − Business ethics is a comparatively 21. Intentions of Business − Use permitted legal and
newer concept. Established countries have more sacred means to do business. Avoid Illegal,
experience to business ethics, while poor and unscrupulous and evil means.
developing countries are moderately backward in
applying the principles of business ethics. 10 MYTHS ABOUT BUSINESS ETHICS
Business ethics in the workplace is about prioritizing
PRINCIPLES OF BUSINESS ETHICS moral values for the workplace and ensuring behaviors
The principles of business ethics are connected to social are aligned with those values -- its values management.
groups that include of consumers, employees, investors, Yet, myths abound about business ethics. Some of
and the local community. The important rules or these myths arise from general confusion about the
principles of business ethics are as follows − notion of ethics. Other myths arise from narrow or
1. Avoid Exploitation of Consumers − Do not fraud simplistic views of ethical dilemmas (McNamara, 2008).
and abuse consumer with measures such as
artificial price rise and adulteration. 1. Myth: Business ethics is more a matter of
2. Avoid Profiteering − Dishonest business actions religion than management. Diane Kirrane, in
such as hoarding, black-marketing, selling banned "Managing Values: A Systematic Approach to
or harmful goods to earn exorbitant profits must be Business Ethics,"(Training and Development
avoided. Journal, November 1990), asserts that "altering
 people's values or souls isn't the aim of an gotten more attention recently because of the social
organizational ethics program – managing values responsibility movement that started in the 1960s.
and conflict among them is ..." 7. Myth: Ethics can't be managed. Directive if you
2. Myth: Our employees are ethical so we don't will, on behavior or employees in the workplace.
need attention to business ethics Most of the Strategic priorities (profit maximization, expanding
ethical dilemmas faced by managers in the market share, cutting costs, etc.) can be very strong
workplace are highly complex. Wallace explains that influences on morality. Laws, regulations and rules
one knows when they have a significant ethical directly influence behaviors to be more ethical,
conflict when there is presence of a) significant usually in a manner that improves the general good
value conflicts among differing interests, b) real and/or minimizes harm to the community. Some are
alternatives that are equality justifiable, and c) still skeptical about business ethics, believing you
significant consequences on "stakeholders" in the can't manage values in an organization. Donaldson
situation. Kirrane mentions that when the topic of and Davis (Management Decision, V28, and N6)
business ethics comes up, people are quick to note that management, after all, is a value system.
speak of the Golden Rule, honesty and courtesy. Skeptics might consider the tremendous influence of
But when presented with complex ethical dilemmas, several "codes of ethics," such as the "10
most people realize there's a wide "gray area" when Commandments" in Christian religions or the U.S.
trying to apply ethical principles. Lack of involvement Constitution. Codes can be very powerful in smaller
of leaders and managers in business ethics "organizations" as well.
literature and discussions has led many to believe 8. Myth: Business ethics and social responsibility
that business ethics is a fad or movement, having are the same thing. The social responsibility
little to do with the day-to-day realities of running an movement is one aspect of the overall discipline of
organization. They believe business ethics is business ethics. Madsen and Shafritz refine the
primarily a complex philosophical debate or a definition of business ethics to be: 1) an application
religion. However, business ethics is a management of ethics to the corporate community, 2) a way to
discipline with a programmatic approach that determine responsibility in business dealings, 3) the
includes several practical tools. Ethics management identification of important business and social
programs have practical applications in other areas issues, and 4) a critique of business. Items 3 and 4
of management areas, as well. are often matters of social responsibility. (There has
3. Myth: Good business means good ethics. The been a great deal of public discussion and writing
reasoning here is that executives and organizations about items 3 and 4. However, there needs to be
that maintain a good corporate image, practice fair more written about items 1 and 2, about how
and equitable dealing with customers and business ethics can be managed.) Writings about
employees, and earn profits by legitimate, legal social responsibility often do not address practical
means. Such organizations, therefore would not matters of managing ethics in the workplace, e.g.,
have to be concerned explicitly with ethics in the developing codes, updating policies and procedures,
workplace. Just do a hard, fair day’s work and that approaches to resolving ethical dilemmas, etc.
has its own moral goodness and rewards. 9. Myth: Our organization is not in trouble with the
4. Myth: Business ethics is superfluous -- it only law, so we're ethical. One can often be unethical,
asserts the obvious: "do good!" Many people yet operate within the limits of the law, e.g., withhold
react that codes of ethics, or lists of ethical values to information from superiors, fudge on budgets,
which the organization aspires, are rather constantly complain about others, etc. However,
superfluous because they represent values to which breaking the law often starts with unethical behavior
everyone should naturally aspire. However, the that has gone unnoticed. The "boil the frog"
value of a code of ethics to an organization is its phenomena is a useful parable here: If you put a
priority and focus regarding certain ethical values in frog in hot water, it immediately jumps out. If you put
that workplace. For example, it’s obvious that all a frog in cool water and slowly heat up the water,
people should be honest. However, if an you can eventually boil the frog. The frog doesn't
organization is struggling around continuing seem to notice the adverse change in its
occasions of deceit in the workplace, a priority on environment.
honesty is very timely -- and honesty should be 10. Myth: Managing ethics in the workplace has little
listed in that organization’s code of ethics. Note that practical relevance. Managing ethics in the
a code of ethics is an organic instrument that workplace involves identifying and prioritizing values
changes with the needs of society and the to guide behaviors in the organization, and
organization. establishing associated policies and procedures to
5. Myth: Business ethics is a matter of the good ensure those behaviors are conducted. One might
guys preaching to the bad guys. Some writers do call this "values management." Values management
seem to claim a moral high ground while lamenting is also highly important in other management
the poor condition of business and its leaders. practices, e.g., ma aging diversity, Total Quality
However, those people well versed in managing Management a d strategic planning
organizations realize that good people can take bad
actions, particularly when stressed or confused.
(Stress or confusion are not excuses for unethical ETHICS DEFINED
actions -- they are reasons.) Managing ethics in the
workplace includes all of us working together to help ETHICS is derived from the Greek word “ethikos”
each other remain ethical and to work through which means “having to do with character. The Latin
confusing and stressful ethical dilemmas. word for ethos is “mos” (or “mores”). That is why we
6. Myth: Business ethics in the new policeperson known Ethics as the Moral Science or Moral Philosophy.
on the block. Many believe business ethics is a It refers to the theory of morality of right
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
Ethics Defined Common Characteristics that Constitutes upholding one’s duty is what is considered ethically
an Ethical Person. correct.
Factors Influencing the Business Ethics  Legal Rights. It includes freedom of religion,
Characteristics of an Ethical Organization speech and assembly, protection from improper
Benefits of Business Ethics arrest, searches and seizures, proper access to
counsel, confrontation of witnesses, cross-
VIEWS OF ETHICS examination in criminal prosecutions, right to privacy
in many matters and rights applied without regard to
 Wisdom. The ability to discern right from wrong. Let race, color, creed, gender, or ability.
us take the situation of King Solomon, known in the
Holy Bible as the wisest king of Israel. He decided to CHARACTERISTICS OF ETHICAL ORGANIZATION
ask wisdom like his father King David than any  Ethical Organization are based on the principles of
wealth in order to govern the kingdom with loyalty. fairness.
According to Proverbs 4:6-7, “Do not forsake  All stakeholders are treated equally without any
wisdom, and she will protect you; love her, and she discrimination.
will watch over you. Wisdom is supreme; therefore  Benefit of stakeholder in given precedence over own
get wisdom. Though it cost all you have, get interest.
understanding.”  There is a clear communication in an ethical
 Courage. It is defined as the ability to withstand and organization.
defend one’s decisions. It is to accept things we (I)  What is to be done, how it is to be done is clearly
we cannot change. (“That is why / the reason I stated.
created you.” – Lord)  No bureaucracy.
 Temperance. It is defined as the ability to control  Minimum bureaucracy and high control helps in
oneself and keeping proper decorum even in the implementing business ethics.
hardest situation.  Compliance with applicable laws.
 Justice. It is known as the act of fairness; being
impartial or having no bias. Again let’s take the BENEFITS OF BUSINESS ETHICS
situation of King Solomon in 1 Kings 3:16 -28. King  Goodwill of the People. People like to build long
Solomon wisely judge the problem of the 2 mothers term relationships with organizations that performs
about the child, he used the decision of dividing the their tasks on the principle of ethics. Moreover,
baby into two to identify the real number. By this he strong public image leads to continual loyalty and
known that the second mother is the real mother.” attracts new investors.
Through the wisdom, he became just in deciding for  Prevention from Legal Actions. By implementing
the sake of common interest of the Israelites ethical practices, organizations are automatically
 Conscience. It refers to the practical judgment of prevented from illegal and objectionable activities as
reason upon act as good. business ethics instruct to avoid all that is wrong and
evil. Such organization have no fear of legal action
TYPES OF CONSCIENCE and social boycott.
1. Antecedent Conscience is a judgment before an  Business Ethics have Substantially Improved the
action is done. Society.
2. Consequent Conscience is a judgment after an
 Establishment of Ethical Practices Create Strong
action is done.
Public Image. Organization with strong ethical
3. True Conscience is a conscience which judges
practices will possess a strong image among the
thing truly as they are.
public. This image would lead to strong loyalty.
4. Erroneous Conscience is known as the false
 Ethical Practices Support Employees’ Growth.
conscience.
Ethics in the workplace help employee face reality,
5. Certain Conscience is a subjective certainty of the
both good and bad – in the organization.
legality of particular actions.
6. Doubtful Conscience happens when a person is  Strong Teamwork and High
not certain about a judgment. Productivity. Constant change and dialogue will
7. Scrupulous Conscience is one which sees wrong ensure the employee matches to the value of the
where there is none. organization.
8. Lax Conscience is one where it fails to see wrong  Build Trust with the Key Shareholders.
where there is wrong. Implementation of ethics helps organization to gain
trust of their shareholders.
FACTOR INFLUENCING BUSINESS ETHICS  High Profit. Reputation of the company and its
share prices also increase if the company act upon
 Leadership. Leaders is a person who leads the Corporate Social Responsibility (CSR).
people towards achieving a common goal. Leader
can be good or bad, great or small they arise out of THE CONCEPT OF MORAL RESPONSIBILITY
needs
 Performance and Working Environment. Good 1. Moral Responsibility refers to holding to
performance creates motivation to the subordinates people morally accountable for some past action
to work harder. The working environment must or actions. This simply means assigning to
possesses the energy of being productive in order people blame or praise for particular actions that
for all to flow properly. If the working environment they have performed.
possesses a weak or feeble performance, the 2. Moral Responsibility also means care, welfare,
workers started to be lazy and not concentrated to or treatment of others as derived from the
the work resulting of being not productive. specific social role that one plays in the society.
3. Moral Responsibility likewise refers to one’s
 Deontology. The philosophy that says people
capacity for making moral or rational decisions
should meet their obligations and duties when
of his own.
analyzing an ethical dilemma. This means that a
person will follow his/her obligations because