LECTURE # 3

DATED:21ST FEB,2023

SUBJECT:
BUSINESS ETHICS
LEARNING AIM

 LA:A
 Learning aim A: Understand how ethical
behaviour is applied in a business context.

 A3 The application of ethical values to

business practice
Business Ethics
Ethical Practices in Business
Organizations
 What Are Ethical Business Practices?
 Ethics are the principles that regulate our
behavior and ensure we do the right thing.
Therefore, ethical business practices are a
set of principles that govern your business.

 They concern your employees, customers,

and stakeholders as well as society as a
whole.
Ethical Practices in Business
Organizations
 It’s important to note that some unethical
business practices are legal. In terms of laws,
there is nothing to stop you from adopting
these practices.
 However, there are many reasons why you
should want to behave ethically.
Why Are Ethical Business Practices Important?

 Why Are Ethical Business Practices Important?

 There are many benefits of ethical business practices
for your company. In fact, many ethical actions can
have big payoffs over the long term.
 For one thing, employees at ethical companies
tend to be more motivated. This leads to higher
productivity and lower turnover.
 In addition, customers are more willing to
purchase from ethical companies, which results in
loyalty, higher sales, and greater profits. Similarly,
your company will be attractive to investors.
Ethical Business Practices

 Top Ethical Business Practices:

 To become an ethical company, it’s necessary
to follow a few key ethical business practices.

 These will be applicable to your situation no

matter what ethical issues you may face.
Ethical Business Practices

 1. Define Your Values:

 A code of ethics is critical for everyone at your company, but
it’s most important for those in a leadership position.
Leaders should refer to your values when making important
decisions, such as implementing a new strategy or dealing
with employees. Your values are critical for everything from
hiring and firing to figuring out how to improve operations.

 To communicate your values with a wider audience, include a

mission statement on your website. This is important for
making sure your values are easy to remember and apply. Plus,
it helps you tailor your values to employees, rather than to
regulators.
Ethical Business Practices
 2. Decide On Appropriate Disciplinary Action:
 There will be times when employees fail to adhere
to your ethical standards. It’s crucial to be
consistent with disciplinary action and ensure the
punishment does fit the crime.
 Create a set of policies from the start and enforce
the rules. This will demonstrate that you stand by
your values and have no tolerance for unethical
behavior.
 It will also show employees what to expect if they
are considering acting inappropriately.
Ethical Business Practices
 3. Hold Your Leaders to High Standards:
 Leaders have great influence over their
subordinates. By holding your leaders to a
high standard, you show your employees
what you expect from everyone and inspire
each individual to act with integrity.
 This will also help you to develop future
leaders in your current employees.
Ethical Business Practices
 4. Incentivize Ethical Behavior:
 To increase ethical behavior, you need to use rewards as well
as punishment. A reward can be as simple as praise in the
face of good behavior — particularly when it would be easy
for an employee to act unethically.
 Another option is to use a reward program, such as employee
of the month. Most programs rely on pro-self bonuses, but you
may see even better results if you use prosocial bonuses.
 For instance, you could encourage winners to use their bonuses
to treat the rest of their team or you could donate the bonus to
a charity of their choice. The benefit of this strategy is that it
promotes good behavior in the short term and leads to a lasting
sense of having done something important.
Ethical Business Practices
 Non-financial incentives are also effective —
often far more than business owners
believe they will be.
 Just reminding employees of how actions can
impact other people can incentivize them to
make the ethically-right decision.
 Alternatively, you can emphasize how
behaving ethically will ultimately improve the
employees’ own lives.
Ethical Business Practices
 5. Keep Ethics Top of Mind:
 Everyone from leaders to entry-level employees will
behave more ethically if you frequently remind them
of your company values. They’ll be less likely to justify
an action that (deep down) they know is ethically wrong.
 There are many ways to create constant reminders of
values. One thing to do is to include an honor code at the
beginning of forms. Too often, companies need to check
a box and sign after they’ve already completed a form.
By this point, it’s too late to change anything if the
person has already provided dishonest information.
Ethical Business Practices
 6. Become Active in Your Community:
 Just because you’re a for-profit company doesn’t mean
everything you do needs to be about making money.
Volunteering in your community can be a humbling
experience and it can serve as a reminder to everyone at
your company that other activities are perhaps more
important than what your business is doing.
 7. Hire a Diverse Range of Employees:
 Hiring employees from a diverse range of backgrounds
brings a wider variety of perspectives. Not only will you
receive fresh ideas for solving problems, you may even avoid
introducing unforeseen problems into your products and
services.
Ethical Business Practices

 8. Monitor Your Suppliers:

 It’s important to hold suppliers and other
professionals you outsource to the same
standards as your own employees.
 Choose suppliers whose values align with
your own. It may we worthwhile to go so far
as to vet them to ensure they are behaving
ethically
Ethical Business Practices Examples

 Ethical Business Practices Examples:

 To see ethical business practices in action, let’s examine some
top companies in their respective fields.

 Levi Strauss
 Levi Strauss is committed to assuring social responsibility
through its various programs. It has the Levi Strauss Foundation,
which carries out charitable work in under-served areas where
the company operates and its Red Tab Foundation provides
employees and retirees with a financial safety net. In 2016, the
company also released Levi Strauss & Co. Collaboratory — a
program that brought fashion entrepreneurs together to tackle
a different problem in the industry each year.
Ethical Business Practices Examples

 Best Buy
 It’s difficult for a company that sells consumer
goods to make a positive impact on the
environment, but Best Buy has been successful.
Barron’s awarded Best Buy with first place in
the 100 Most Sustainable U.S. Companies in 2019.
 Best Buy has achieved sustainability through its
Geek Squad, which collects electronics and
appliances that consumers no longer want or
need.
What Do Unethical Business Practices
Mean
 What Do Unethical Business Practices Mean:
 Unethical behavior includes all the actions
unacceptable in day-to-day business operations. These
actions don’t conform to the established standards of the
ideal corporate world.
 Unethical business practices lead to the mistreatment of
people and animals. They can cause grave harm and even
death due to negligence, directly or indirectly.
Sometimes, the cause might be an individual act, and at
other times, the entire company culture is responsible.
 Actions harming the environment are also considered
unethical.
Unethical Practices In Businesses

 Common Unethical Practices In Businesses:

 Here are the most common unethical practices in businesses.
 1. Misleading Consumers With False Claims:
 False advertising is the most prevalent unethical practice.
Businesses use many tricks to improve sales, from
inconsistent comparison to price-based deception. They
pay influencers for endorsements and fake reviews.
 Many companies inflate the claims while marketing,
exaggerate the desirable features, and hide the side effects.
Furthermore, some even portray harmful products as
healthy to make them more saleable. They trick consumers
by making statements without accurate scientific evidence.
Unethical Practices In Businesses
 2. Bending Terms In User Agreements:
 Most users don’t go through the pages-long fine prints in the
agreements. Thus, businesses slip into undesirable and
complex conditions, which they can tap later to their
advantage. Such acts lead to mass mistrust when they come to
the surface.
 They outline vague and dubious agreements to exploit users.
Many businesses practice such questionable ethics with their
investors too.
 They find gaps and swindle investors and their customers while
being in the legal grey area. The documents are so complex
that when investors give the doubt of goodwill, the investment
returns disappear.
Unethical Practices In Businesses
 3. Creating Unfair Competition:
 Businesses also, occasionally, get into creating unfair
advantages over their competitors. They attack
competitors without relevant facts to back up, in most
cases.
 Spreading lies on social media, defaming for all the wrong
reasons, and infringement of trademarks fall under these
practices. They try to create a false impression of their
competitors in the mind of the consumers.
 Now, it’s not wrong to use competitors’ names in
promoting themselves. It’s also not right to make unjust
claims about them and their practices.
Unethical Practices In Businesses

 4. Manipulating Financial Statements:

 Manipulating financial statements to show improved financial
performance is another popular tactic in the business world. It
makes a business seem more profitable while hurting the
investors and end consumers.
 Recording false transactions, overvaluing inventory, and
understating liabilities are many ways businesses manipulate
their financial records.
 By cooking their books and tweaking the reports, they trick
everyone to their advantage. And in most cases, auditors may
not detect the manipulation unless they go deep. Therefore,
companies continue without hassle.
Unethical Practices In Businesses
 5. Bribing To Get A Favorable Deal:
 Bribery and corruption are common in many business dealings.
They offer bribes in different forms like gifts, political support,
and sponsorships. It isn’t limited to only money.
 They do it to get favorable deals, an upper hand over
competitors, or insider information they can use to their
benefit. A bit of pampering speeds up the complicated
administrative procedure and pleases the decision-makers
involved.
 Also, some companies bribe to bypass the rules and
regulations. Due to such practices, the consumers have to
suffer in many cases.
Unethical Practices In Businesses
 6. Using Customer Data Inappropriately:
 All businesses store customer data in one way or the other.
They collect it to understand customers’ preferences,
personalize the experience and have relevant communications.
The data is also used to optimize and maximize the results of
marketing campaigns.
 What many companies don’t disclose is if the data is shared
with third-party services. Even if they mention it in their
agreement, the usage rights are often vague. It leads to data
misuse, which often surfaces when it goes out of hand.
 Such use of information in a way it wasn’t intended falls under
unethical behaviors. It can lead to costly lawsuits and potential
loss of reputation.
Unethical Practices In Businesses
 7. Spamming Email List Subscribers:
 Spamming is probably the most common unethical business
practice over the Internet. Many companies sign up customers
to their email list without taking proper consent. Customers
agree to receive email newsletters unknowingly.
 Many companies also buy email databases and bombard
the recipients with promotional messages. Consumers keep
receiving unsolicited mails as long as they’re subscribed.
 Companies also use AI tools to create fake images, fabricate
phony social media profiles, and mass outreach to potential
customers. Such tactics are unethical and can tarnish the
image of the organizations using them.
Unethical Practices In Businesses
 8. Exploiting Employee Skills:
 Mistreating employees is a familiar scene in many
companies. Sometimes, employees have to work long hours
without getting paid for the overtime. In other situations,
they need to handle multiple tasks outside the scope of their
job.
 Employing low-wage workers and hiring sweatshops for bulk
work are also common. Such exploitation is widespread.
 Big or small, public or private, you’ll find such unethical
behaviors in all organizations. And when such practices are
unearthed, people begin boycotting their products and
services.
Unethical Practices In Businesses
 9. Harassing Staff Sexually:
 Sexual harassment is another common issue found in unethical
companies. It’s not limited by gender. Anyone can be a victim.
 What more? Companies try to dismiss or suppress any reports
of sexual harassment. They want to keep such incidences
hidden from public knowledge. Thus, such disgraceful acts
continue unchecked unless someone speaks out loud.
 It encompasses opposite-sex harassment as well as unwanted
physical contact and advances by the same sex. Implicit or
explicit promises of preferential treatment in return for sexual
favors are also considered acts of harassment.
Unethical Practices In Businesses
 10. Causing Harm To The Environment:
 Businesses causing harm to the environment are probably the
most talked-about unethical business behavior.
 Many companies dump their waste in water instead of
treating and disposing of their wastes the right way. Some
also release chemical pollutants into the air without proper
filtering.
 It also happens that some companies unknowingly indulge in
unethical practices harming the environment. They adhere to
the norms set by the government but try to skip the expenses
associated with a suitable setup.
 Such acts, even if performed unknowingly, lower the repute of
the organization.
Examples Of Unethical Business Practices

 Examples Of Unethical Business Practices:

 1. Huawei
 Huawei has been in the limelight for copying
the design of Apple’s iPhone. From mirroring
its form factor to camera placement style, it
has constantly reproduced iPhone models. It
even designed screws similar to the ones in
iPhone devices.
Examples Of Unethical Business Practices

 4. Toyota
 Toyota ignored passengers’ safety even when the
management knew about the fault in their vehicles.
Instead of solving issues with the faulty brakes and pedals,
they tried covering up their mess by attributing it to
human error.
 5. Coca-Cola
 Coca-Cola has been blamed for its unethical behavior in
multiple areas. These accusations involve concerns about
environmental impacts, poor working conditions, and
severe abuse of human rights. Its products, too, have
remained questionable regarding health concerns.