Business Ethics Module 1
-
Upload
sreejith-c-s-sree -
Category
Documents
-
view
213 -
download
0
Transcript of Business Ethics Module 1
7/29/2019 Business Ethics Module 1
http://slidepdf.com/reader/full/business-ethics-module-1 1/20
BUSINESS ETHICS AND CORPORATE GOVERNANCE OBJECTIVE OF THE CHAPTER
The aim objective of this chapter is to give a basic understanding of ethics and its
application in the relevant fields of business study human behavior. It is to establish
& prioritize moral standards & the values of any business and understand by any
entity the scope, concept and importance of Ethics, its gradual development andthe relevance in business scenario. It also aims to encourage independent critical
thought and develop an individual system of ethics within an individual and the
organization at large. A business established with a foundation of strong ethics and
values is more promising, successful and enduring than that of rapid growth at a
cost of many compromises. Presenting moral behavior i.e. making
recommendations abt how to & how not to behave, making judgment on human
behavior based on the standards set of expressing an opinion abt human conduct in
general.
1.1AN OVERVIEW OF BUSINESS ETHICS
Customers want products and services for which they are ready to pay the price.
Businesses create these products and services and in return multiply their
returns, objective is profit. But in this process of requirements and fulfilling or
meeting out the customer requirements and the expectations, companies often
tend to ignore their basic principles of ethics during selling their products
because then their objective of profit takes the helm. There should be their profit
motive but ethically, i.e., at the same time the origin of business which was done
on certain parameters and ethics should not be ignored or over-ruled. There is
old French saying that has much relevance in today's corporate world. It runsthus saying, "He who knows deepest into the past looks farthest into the future."
Hence, it is important to look deep into the past in the hope of perceiving the
needs of the future. Business ethics reflects the philosophy of business. The
basic aim of business is to create profit at all costs. Wealth creation invariably
begins with a passion and the vision of its owners who lay the basic foundation
of the business. They build an idea to create a product or service that is market
oriented or relevant and monetarily profitable. The bottom-line of any business is
how much revenue generation it is making and what kind of brand image or the
goodwill of the company is getting created amongst the customers. Business
success is measured quantitatively in terms of profit and loss. Profit being the
mantra in business, all strategies, actions and decisions are directed towards it,
sometimes regardless of what is ethically correct. It is assumed that profitable
business cannot be done without a certain degree of unscrupulousness. An
action might be morally correct but if it is the best move for business, then it is
justified. Invariably, adjusting the numbers to record better profits becomes a
matter of routine with a common dictum that business ethics is an oxymoron
leading to the rules of business, values take a back seat. In this entire process of
7/29/2019 Business Ethics Module 1
http://slidepdf.com/reader/full/business-ethics-module-1 2/20
sweeping business ethics under the carpet and maximizing profits, it is
overlooked that who we are and what actually influences the work that we do.
Business ethics overlaps with the philosophy of business. One of the aims of
business is to determine the fundamental purpose of the incorporation of a
company.
On one hand if it is to make profits, it should also consider sincere means to
maximize profits arid believe that there are no shortcuts to success. Corporate
social responsibilities an umbrella term under which the ethical rights and duties
existing between companies and society is debated. Issues regarding the moral
rights and duties between a company and its shareholders, fiduciary
responsibility, stakeholder concept vs. shareholder concept are argued. Ethical
issues concerning relations between different companies: e.g. hostile takeovers,
industrial espionage, Leadership issues, corporate governance; Corporate Social
Entrepreneurship, Political contributions made by corporations towards thebetterment of the society, Law reform, such as the ethical debate over
introducing a crime of corporate manslaughter and to continue the misuse of
corporate ethics & policies as marketing instruments are all considered,
understood, argued and implemented towards practicing ethics. Leadership is a
management process, a command of guidance of encouraging & helping others
to work enthusiastically towards the set objectives. For Aim Premix, chairman of
Wipro, integrity is paramount both in personal as well as business life. He
narrates that the only advice that his father gave him was to conduct him with
values and that he believes it has helped him all through his life. He has always
leaded a simple life, and considered integrity the fundamental value. He ran a
factory on captive power generation for 18 months just because he did not want
to bribe the concerned people to get an electricity connection. That sums up his
philosophy. This standard of Premji sets a benchmark for his employees in Wipro
to emulate. Integrity being the guiding principle for Premji has resulted in the
formulation of the 'Integrity Manual' in his company that guides through the
tough choices confronted within the daily execution of the employees roles and
to help create confidence in the minds of the customers , investors, suppliers
and the society at large with respect to Wipro's dependability and sincerity. This
is how the ethical choices of a business leader permeate into the company's
organizational behavior and functioning. As is shown by the performance of
companies like Wipro and Infosys a leader's personal ethics are not a deterrentto generating revenue for the company will later. It can be a foundation for
higher standards of functioning, accountability and transparency that motivates
the employees, influences the way they behave in the workplace, earns their
loyalty and eventually helps an organization endure. No doubt the organization
faces lots of turbulences in the process of inception, continuation of its proving
of existence and constant attacks and challenges but it is not to be forgotten
7/29/2019 Business Ethics Module 1
http://slidepdf.com/reader/full/business-ethics-module-1 3/20
that it was but expected and had to be thought before the implementation of the
idea incarnated. An individual plunges into business when he thinks he is better
than somebody, can do a particular thing better, face competition more
effectively, has an enhanced vision to accomplish and dares to confront the
storms, takes the risks and gets into entrepreneurship. Ethics is seen to be at its
peak at the inception but gradually sinks when profits takeover the prime seat inbusiness or start losing hopes when sees that ethical ways are longer and
difficult comparing the easier routes of accomplishing quicker benefits growth
and meeting the reason for business establishment. So can we really meet the
above and grow, getting retained in business by following ethics throughout?
This is a challenging question which plays the foundation of the business further.
1.2 MEANING OF BUSINESS ETHICS
The term business ethics is quite ambiguous. It has various meanings with variedimplications based on its use. Business ethics appeals to people who have a strong
sense of role morality. It can be both a normative and a descriptive discipline. As a
corporate practice and a career specialization, the field is primarily normative. In
academia descriptive approaches are also taken. These_ are the business principles
and values that a company follows to do business. In future these ethical
requirements become legal requirements of business in terms of policies, safety
measures, quality products, conditions of work, needs of employee requirements
etc. Gradually companies, sometimes to save cost may opt for certain
compromises.—Even for the companies there is a dilemma that if they follow ethics
to that hardcore standards, can they really make profits? This leads to minor
acceptations in the beginning in terms of bribery, selling under quality products,etc. Historically, interest in business ethics accelerated dramatically during the
1980s and 1990s, both within major corporations and within academia. For
example, today most major corporate websites lay emphasis on commitment to
promoting non-economic social values under a variety of headings (e.g. ethics
codes, social responsibility charters etc.). When managers reporting to NASA were
thoughtful whether to ask for a postponement before what turned out to be a fateful
launch of the space shuttle Challenger, the Chair of the meeting literally said, "Take
off your engineering hat and put on your management hat." The hats symbolize the
various roles people take on in different situations. Therefore, if the main aim of the
game in business were just maximizing profit, this approach would allow abusinessman to act as if business were-a moral game where success is measured in
financial terms alone. Ethics thus refers to the moral principles, a sense of right &
wrong or the goodness & badness of the action, their motives & the consequences
further. What is ethics then?
. Ethical issues in business include the rights and duties between a company and its
employees, suppliers, customers and share holders. Many philosophers consider
7/29/2019 Business Ethics Module 1
http://slidepdf.com/reader/full/business-ethics-module-1 4/20
ethics to be the "Science of Conduct" and many of them explain that ethics lays the
fundamental ground rules by which we live our lives. Some of them also consider
emerging ethical beliefs to be the state-of-the-art legal matters, i.e... What becomes
an ethical guideline today is often translated to a law, regulation or a rule tomorrow.
Thus applied ethics is a field of ethics that deals with ethical questions in many
fields such as medical, technical, legal and business ethics. Ethics in business issupplying the application of everyday moral of ethical means in business.
Organizations today are finding themselves under public attack and criticism and
they responded by developing the notion of social responsibility. They thus start the
social responsibility program and spend a good deal of money in advertising their
programs and how they promote the social cause. The fundamental purpose of a
company is both profit and social responsibility and adhering to both with due
consideration on ethical values and norms brings not only success but also stability
and dependability in the long run. The different sources of ethical values are
through; Genetic inheritance, code of conduct, culture, religion, legal system,
philosophical system etc. Religion here refers to a specific & institutionalized set of beliefs & practices which are generally agreed upon by a group of persons or
sections of the society.
Religion is the oldest source of inspiration for ethics. Across the globe, we find
various religions with different doctrines with a strong conviction that ethics is
indispensible and reveals what is right and wrong in all the facets of life. All the
religions stress on the need for an ordinary social system and responsibility towards
general welfare. Why business ethics? Business ethics refers to the application of
ethics in business. It is in other words an elaborative study of the good and the evil,
right & the wrong, just and unjust actions of the business. We also find transactional
ethics here which means the asymmetrical or irregular and uneven relations of
unequal claims & conflicting interests which do not exhaust the arsenal of possible
action patterns. As an individual decides principles for his life that he will not cheat
anyone, not tell lie under any circumstance, be sincere at all difficulties and
challenges etc. in the same way company sets certain standards and values or
formulates the moral philosophy of the business to conduct it in a better way. There
are many instances wherein companies did not follow business ethics and they had
to shut down, compromise profits and company image, shattered goodwill, undergo
losses etc in the long run consequently. Hence it is very critical that certain basic
structures on ethics are set and followed emphasizing the study, implementation
and regular practice of ethics in business. Business ethics came into limelight asorganizations started realizing that they need to manage a more positive image of
their company to the public. The philosophy of any business is reflected by the
business ethics followed or implemented by the organization which examines and
resolves the ethical and moral principles and problems that arise in business
environment. Environment refers to all external forces which have a bearing on the
functioning of business. Environment includes factors such as socio-economic,
7/29/2019 Business Ethics Module 1
http://slidepdf.com/reader/full/business-ethics-module-1 5/20
technological, suppliers, competitors and the government. It applies to all aspects
of business conduct and is relevant to the conduct of individuals and the entire
organization. Problems such as corporate responsibility, corporate governance,
share holder relation, bribery and discrimination are examined in Business ethics. It
concentrates on moral standards as they apply particularly to business policies,
institutions and behavior. Discussion on ethics in business is necessary because,firms and corporations operate in the social and natural environment is duty bound
to be accountable to its surviving environment and business can go thus unethical.
There are plenty of evidences on unethical corporate practices. Irrespective of the
demands and pressures upon it, business, by virtue of its existence is bound to be
ethical, for at least two reasons: one, because whatever the business does affects
its stakeholders and two, because every juncture of action has curve of ethical as
well as unethical paths. The existence of business is justified by ethical alternatives.
The demise of small scale, high trust and face-to-face enterprises and emergence of
huge multinational corporate structures are capable of drastically affecting
everyday lives of the masses and compliments the ethical and unethical decisions
of business.
Culture at the same time means the mode of life of a particular group of people with
due reference to the way they lead their lives in the society, their dress code,
beliefs, rules and regulations, rituals, behavior and ethical practices. Therefore
cultures of different nations are different with its own predefined ethical practices.
The basic values of a society constitute nothing but the core of its culture. Man as a
social animal cannot live alone and hence his conduct has a direct or indirect
reference to the culture he belongs to. These moral standards and values have a
tremendous impact and profoundly affect the person in building his own ethical
value structure.
But it is also to be remembered that the moral conduct of a person is not confined
only to his family culture. It transcends and goes beyond family culture and spills
over to the society or the race which he belongs to. In spite of ethics being culture
specific there are certain principles which run like a common thread among all
cultures, all religions and among all the ages in history. These are nothing but the
principles of honesty, respect for life and freedom, fairness, loyalty, human dignity,
integrity etc. These principles are unchangeable, immortal and remain always valid,
transcending time, space and distance. Corporate culture is a shared value that
defines for its members as to what the organization stands for, its functioning, itspriorities and the importance of its existence. Thus it has a strong impact on
business ethics
Business ethics can be defined as the critical and structured examination of how
people and institutions should behave in the world of commerce, addressing the
moral features of a commercial activity. In particular, it involves examining
appropriate constraints on the pursuit of self interest or profits when the actions of
7/29/2019 Business Ethics Module 1
http://slidepdf.com/reader/full/business-ethics-module-1 6/20
the individuals or firms affect others. It is a movement which refers to the
development of structures and principles internal to the company resulting in
helping the company and the employees. Some companies have always been
ethical and have structured themselves and their culture to reinforce ethical
behavior. A running business requires adequate consideration to a number of issues
outside the traditional scope of making money, of which ethics is most certainly animportant one. As business grows and becomes more significant, we concentrate
and focus on creating jobs and wealth. But it is equally important to understand the
business ethics which can build the reputation or affect it negatively if not
considered. The relationship between ethics and business can be viewed in two
angles: One is that, ethics conflicts with profits and second being that businesses
always choose profits over ethics. Business has the highest level of humanity and
social good. One of the important questions here is what are the ethical values that
a business leader needs to have?
Who decides what the right ethical conduct for business is? It’s no longer enough for
companies to produce healthy profits. They must also prepare the next generationof business executives to respond to ethical, social and environmental
considerations of today’s corporate world.
A few guidelines to manage ethics at workplace are:
1. Managing ethics is a gradual process: Ethics is a matter of values and associated
behaviors distinguished through the process of constant reflection. Ethics programs
may seem more process-oriented and prefer processes focused on deliverables with
measurements. However, experienced managers realize that the deliverables of
standard management practices (planning, organizing, motivating, controlling) are
only tangible representations of the very process-oriented practices. Practicecultural relativism which is a concept of relating any given decision about right or
wrong, true or false to the culture prevailing in a particular place. In short, it means
'Be a Roman in Rome'. Of course the process of strategic planning is more
important than the plan produced by the process. The same is true for ethics
management which produces deliverables like codes, policies and procedures,
budget items, meeting minutes, authorization forms, newsletters etc. and ethics
management program is the process of reflection and dialogue that produces these
deliverables.
2. Ethics program aims at accomplishing preferred behaviors at workplace: The best
of ethical values and intentions are relatively meaningless unless they generate
acceptable ethical behaviors in the workplace that can translate these values to
appropriate behaviors. Thus certain standardization is created and implemented
into the system from seniors to juniors.
3. Ethical dilemmas can be handled by avoiding their occurrence: Precaution is
always better than cure. The development of ethical practices such as developing
7/29/2019 Business Ethics Module 1
http://slidepdf.com/reader/full/business-ethics-module-1 7/20
code of conduct and ethics sensitizes the employees to ethical considerations and
minimizes the chances of unethical behavior occurring in the first place.
4. Make ethics decisions in groups and then publicize the decision: It produces
better quality decisions by including diverse interests and perspectives and
increases the credibility of decision process and outcomes by reducing suspicion of unfair bias.
5. Integrate ethics management with other management practices: While
developing strategic planning, the value statement towards ethical values needs to
be more prominent in workplace as they reflect organizational objectives, goals and
the company culture. Corporate culture is a set of shared values that defines for its
members about what the organization stands for and how it functions along with
what it considers to be the most important. Integrate ethical requirements with
other management practices to create a sound corporate environment and system.
6. Cross-functional teams to develop and implement ethics management program:It is always advised to include employees in developing and operating the values of
ethical program that is to be initiated in the organization which makes them feel a
sense of participation and ownership in the program.
7. Value forgiveness: It rather sounds a little religious and preachy to hear, but it's
also one of the prime components of any management practice. An ethics
management program may increase the number of ethical issues to be dealt with
because people are more sensitive to their occurrence. At the same time, there may
be more occasions to address people's unethical behavior. It is always to be
remembered that a shaking hand and a patting attitude is always better than a
pointing finger. The most important ingredient for remaining ethical is trying to beethical. Therefore, help people recognize and address their mistakes and then
support them to continue to try operate ethically.
8. Try to operate ethically and making a few mistakes is better than not trying at all:
Some organizations have become widely known, as thus operate in a highly ethical
manner, e.g., The Tata’s, Johnson and Johnson, Hewlett Packard, etc. Unfortunately,
it seems that when an organization achieves this strong public image, it's placed on
a pedestal by some business ethics writers. All organizations are comprised of
people and people are not perfect. However, when a mistake is made by any of
these organizations, the organization has a long way to fall. In our increasingly
critical society, these organizations are accused of being hypocritical and they aresoon pilloried by social critics. Consequently, some leaders may fear sticking their
necks out publicly to announce an ethics management program. This is extremely
unfortunate. It's the trying that counts and brings peace of mind and not achieving
a heroic status in society. We can always initiate a process or a route which can
become a basis for somebody else to improvise with better ideas, concepts, means
and perceptions.
7/29/2019 Business Ethics Module 1
http://slidepdf.com/reader/full/business-ethics-module-1 8/20
1.3 HISTORY AND DEVELOPMENT OF BUSINESS ETHICS
The history of business ethics is probably as old as business itself. Even inprehistoric societies there were most likely rules governing acceptable trade
practices which dealt considerably with issues concerning commerce, tariffs and
pricing.
The evolution of business ethics and awareness can be attributed to a number of
factors like increased globalization and decentralization of business, an expanded
corporate business to ethics and the influence of various stakeholders focusing
attention on both ethical successes and challenges. With the globalization of
economy and media and the growth of internet, companies are being held
accountable for their ethical conduct. A range of new economic issues such as the
shifting of production to developing economies, what constitutes a living wage and
how companies respond to cultural differences is being cast in ethical frames since
times.
By the 4th century B. C., ethical issues related to business and trade can be traced
receiving academic treatment in the philosophies of Plato and Aristotle. The history
of business ethics also has its formative years in the reformation. Reformation
figures like Martin Luther and John Calvin, in the 15th and 16th centuries A. D.,
applied religious and moral considerations to trade and economics leading to the
development of the Protestant work ethic. But in the following two centuries,
Enlightenment thinkers such as John Locke and Adam Smith began to separate
religious doctrine from moral and ethical considerations of commerce and business.
Locke introduced the concept of property as a natural right, and Smith developed
the foundation for modern economic theory by championing the moral values of
self-interest in guiding and promoting the progress of markets. In the 19th century,
theories like Smith's came under attack from Karl Marx and his followers, who saw
the maximization of profit dictated by self-interest as necessarily exploitative of
labor. We have seen in the past that great teachers have searched for their
disciples and instances where the student has covered a long distance in finding out
their teachers.
There are various examples like Swami Ramakrishna Paramhamsa who has seen
Mother Kali incarnating and he himself traveled around to discover his student
Swami Vivekananda, Swami Guru Ramdas who searched for his student Shiva
Maharaja, Chanukah, who went in search of and found his shishya Chandragupta
Maurya, Shri Gokhale who found Mahatma Gandhi and so on there are various
examples which exhibit how in the past religious, moral, political, social and
business concerns were met with the help of ethics identification, exploration and
7/29/2019 Business Ethics Module 1
http://slidepdf.com/reader/full/business-ethics-module-1 9/20
ways of implementation so as to establish peace, justice, customs, behaviors,
conduct, habits and rules for the smooth administration processes. Likewise we also
have many examples wherein the student has explored his Guru and covered the
journey of their lives. When Swami Ramanandji did not accept Ramdas as his
student, since he was an untouchable, one early morning in the dawn when the
Guru was on his way to take bath in the river, Ramdas slept on the steps. The Gurudid not notice and stamped him and said Ram-Ram. Though the Guru did not accept
Ramdas as his disciple, the student took his uttered words as Gurumantra and
continued believing him as his Guru. We know the story of Sri Hanuman who waited
for his Guru Sri Ram and later was prominently known for his Guru-bhakti, both for
and because of his Guru. Ekalavya is a classic example in this stream, which was
not accepted by his Guru Shri Dronacharya as his disciple for which he made an idol
of his Guru and practiced archery.
Not only this, ethics meets its reality when he was asked for his thumb as
Gurudakshina and he did not hesitate or rethink to give it though he knew that his
dream, passion, talent and practice would come to an end after it. Thus ethicscannot be pointed and said that this is right and this is wrong. That which helps in
the multiplication of profit, social gains, benefits to individuals and society at large
without following or indulging into any illegal, prohibited, banned or illegitimate or
dishonest means can be stated as ethical or unethical the otherwise.
To this day, many of the issues and concerns raised by the religious, philosophical,
and economic traditions have continued in various forms in discussions of ethics
and morality in business practices. But business ethics as a separate, formal
academic discipline is a fairly recent development. In the midst of the changes in
social attitudes that emerged in the 1960s, questions about the social and moral
responsibilities of businesses and corporations began to emerge in academic and
professional circles. Sociologist Raymond Baumhart was among the first
academicians to explicitly teach and study the ethics of business and commerce
and by 1974 there was enough of a developing discipline in the field to give rise to a
landmark conference at the University of Kansas. Since then, courses and organized
studies in the field have emerged in universities throughout the world, even
spawning sub-disciplines such as marketing, accounting, and financial ethics.
Business ethics has only existed as an academic field since the 1970's.
During the 1960's corporations found themselves increasingly under attack over
unethical conduct. As a response to this, corporations in the developed socialresponsibility programs involved charitable donations and funding local community
projects. This practice was unorganized and it differed from industry to industry and
from company to company.
Business schools in large universities began to incorporate social responsibility
courses into their syllabi around this time. But it was mostly focused on the law and
management strategy Social responsibility has been descried as being a pyramid
7/29/2019 Business Ethics Module 1
http://slidepdf.com/reader/full/business-ethics-module-1 10/20
with four types of responsibility involved into called as — Economic, legal, ethical
and philanthropic. Ethical issues were dealt with in social issues and were not
considered in their own right until the 1970's when philosophers began to write on
the subject of business ethics.
Previous to this development, only the management professionals, theologians and Journalists had been highlighting problems of this nature on a regular basis. When
philosophers became involved they brought ethical theory to bear on the relevant
ethical issues and business ethics became a more institutionalized, organized and
integral part of education in business. This aspect of business ethics differentiated it
from social issue courses in three ways, like;
• Business ethics provided an ethical framework for evaluating business and the
corporate world.
• It allowed critical analysis of business and development of new and different
methods.
• Business ethics focused on personal and social responsibility together and gave it
a theoretical foundation.
In this way we find business ethics had a broader remit than the social issues and
was a good deal which was more systematic and constructive. Business ethics also
recognized that the world of business raised new and unprecedented moral
problems and covered by personal systems of morality. Common sense morality is
sufficient to govern judgments about stealing from your employer, cheating
customers and tax frauds. It could not provide all the necessary required tools forevaluating moral justification of affirmative action, the right to strike and whistle-
blowing. Business ethics being part of the larger social ethics, always has been
affected by the ethics of time.
The followers of Epicures, a Greek follower who taught and gave the doctrine that
pleasure was the chief God meant Epicure or Epicureanism. At different periods,
people, especially the elites of the world, were blind to ethics and morality and
obviously unethical to the succeeding ages. History of business, thus, is tainted by
and through the history of slavery and colonialism and later by the history of cold
war. The need for business ethics in the current times had begun gaining more
attention since 1970s. Historically, firms started highlighting their ethical stature
since the late 1980s and early 1990s, as the world witnessed serious economic and
natural disasters due to unethical business practices.
The Bhopal disaster, and the fall of Enron are instances of the major disasters
triggered by bad corporate ethics. It should be noted that the idea of business
ethics caught the attention of academics, media and business firms by the end of
7/29/2019 Business Ethics Module 1
http://slidepdf.com/reader/full/business-ethics-module-1 11/20
the overt Cold War. Of the many, the first definition of social business ethics in India
dates back to around 1000 to 1600 BC. In the Bhagavada Gita, Shri Krishna laid
down the rights and obligations of each one of us. Shri Krishna said that a manager
must look upon the task that he has been set for that he sets himself, not interms of
personal gains or profit but purely interms of its fulfillment and the satisfaction that
he gets out of that. To elaborate the same, it can be a better instance to relate theinstance provided by Mr.Prakash Tandon, when he was the director of Hindustan
Lever in 1956 and it became a public company with its first board meeting with a
every scholarly chairman, Lord Heyworth, whose name had been associated with
Unilever for 30years.
At the board meeting, Lord Heyworth said that there was one little thing that he
would like to discuss. Did the directors of Hindustan Lever buy and sell Hindustan
Lever shares or not. Did they get involved in any personal manner in the company,
or was their involvement only professional? After a brief discussion, the chairman
said if they understood the market well, they could trade in other company’s
shares: but he advised them not to be associated with any personal gain inHindustan Lever beyond their remuneration.
Many years later an American scholar, Elliot Jacques, created a new term for this
kind of professional manager, he allied him 'property-less manager', one who
manages the company but does not own any part of it as his personal property.
Jacques went straight back to Shri Krishna's definition of a true manager, one who
does his job, not for personal gain but for the sheer fulfillment of the task and the
satisfaction, which he derives.
Lord Buddha enunciated the same concept in his words with a beautiful phrase that
a trade is like a honey bee, which sucks honey out of the flower but does not harmthe flower.
Buddha of course did not realize, that the bee actually helps the flower in the
process of fertilization by pollinating it. What Lord Buddha wanted to emphasize
was that no harm must be done in quest of personal gain. Arthashastra from the
Mauryan's lays down the concept of accountability (duty, responsibility) of the
manager to keep complete accounts; it also mentions that he should be subject to
an audit from time to time on clarity and truthfulness of his fair accounts. Akbar
gave us something indispensible for regular ethical functioning; a clear and stable
commercial set-up.
1.4 NATURE OF BUSINESS ETHICS
Business ethics reflects the philosophy of business and the aim is to determine the
fundamental purpose of the incorporation of a company. The moral philosophy, the
business philosophy, employer-employee philosophy and the responsibilities
towards the customers need the optimum priority and attention in business ethics.
It is now considered as an important discipline because of its relevance and the
7/29/2019 Business Ethics Module 1
http://slidepdf.com/reader/full/business-ethics-module-1 12/20
customers high awareness level. Hence the need of reformulate nature of business
ethics or doing business ethically has secured a more important place of
prominence today.
If a company's purpose is to maximize shareholder returns, then sacrificing profits
to other concerns is a violation of its deemed responsibilities. Economist MiltonFriedman writes that corporate executives' responsibility generally will be to make
as much money as possible while conforming to their basic rules of the society.
Similarly business consultant Peter Drucker observed, "There is neither a separate
ethics of business nor is one needed, implying the standards of personal ethics
covers all business situations."
Another view of business is that it must exhibit corporate and social responsibility
and an ethical business must act as a responsible citizen of the communities in
which it operates even at the cost of profits or other goals. Stakeholders have the
right to expect a business to be ethical; if business has no ethical obligations, other
institutions could make the same claim which would be counterproductive to thecorporation. Ethics and Values have their own stand and play a vital role.
Ethics can be denied as a description of norms and behavior that provide a
comparable protection to the coherence of the society whereas Values are global
beliefs that guide actions and judgments across a variety of situations. Values
represent basic convictions of what is right and wrong, good or bad, just or unjust,
fair or unfair etc. Business ethics or corporate ethics is a form of applied ethics or
professional ethics which examines ethical principles and morals or ethical
problems that arise in a business environment. It applies to all aspects of business
conduct and is relevant to the conduct of individuals and the entire organization.
Consequently, business ethics can be strong preventative medicine and there aremany benefits of managing ethics in the workplace. Similarly Money Laundering
which is squandering of money involving transactions of cash outflow, conducted in
a manner as to appear that they were made honestly.
Laundering actually means 'cleaning up'. Money laundering cloaks the illegal
activities and protects the lawbreakers.
Wallace and Peel explain that attention to business ethics is critical during times of
fundamental changes in times much like those faced by businesses like values that
were previously taken for granted might now strongly be questioned.
Many of these values are no longer followed. Consequently, there is no clear moral
compass to guide leaders through complex dilemmas about what is right or wrong.
Attention to ethics in the workplace sensitizes leaders and staff to how they should
act. Perhaps most important attention to ethics in the workplace helps ensure that
when leaders and managers are struggling in times of crises and confusion, they
retain a strong moral compass. However, attention to business ethics provides
numerous other benefits also. Business ethics refers to the application of ethics to
7/29/2019 Business Ethics Module 1
http://slidepdf.com/reader/full/business-ethics-module-1 13/20
business. To be considered ethical a business must draw its idea about what is a
desirable behavior from a common or a reliable source. It should anyhow not try
evolving into its own principles to justify its actions.
Also in order to have a long run existence and sustained profitability it is important
for a business to have an ethical foundation and function as responsible corporatecitizen of a country. Business ethics is considered as management discipline,
especially since the origin of social responsibility movement. In 1960's, social
awareness movements raised expectations of businesses to use their massive
financial and social influence to address social problems such as poverty, crime,
environmental protection, equal rights, public health and improving education.
An increasing number of people asserted that because businesses were making
profit from using the country's resources, they owed it to the country by improving
society. Many researchers, business schools and managers have recognized this
broader constituency, and in their planning and operations have replaced the word
"stockholder" with "stakeholder," meaning to include employees, customers,suppliers and the wider community.
Organizations can manage ethics in their work place by establishing an ethics
management program which is made up of values, policies and activities which
impact the propriety of organization behavior. To maintain the ethical culture in
Infosys, employees are encouraged to report cases of fraud, in person or by writing
anonymously through e-mail or to the corporate counsel.
1.5 SCOPE AND IMPORTANCE OF BUSINESS ETHICS
The success of business depends on various factors which are both internal and
external to the organization. Strategies are chalked out or action plan is worked
before executing or implementing any idea or a long run theory. Strategy refers to a
plan of action designed to achieve a particular goal or the relevant alternatives
chosen to make a desired future such as achievement of a goal or solution to a
problem. It is otherwise the art and science of planning of the resources for their
most efficient and effective use.
Conducting business requires adequate consideration to a number of issues outside
the traditional scope of making money. In the process of making profits and
achieving growth, business people and organizations face many challenges related
to environment and conduct of business. So important part of doing businessprimarily understands the business ethics.
If organizations and people fail to understand and consider, it might affect
reputation of the business and can even ruin the business affecting long standing
establishments and success. Ethics being a subjective topic might not have
importance across all areas of business. But ethics has significant role to play in
most of the areas of business be it sales and marketing, product development,
7/29/2019 Business Ethics Module 1
http://slidepdf.com/reader/full/business-ethics-module-1 14/20
customer service and even to some extent finance. So ethics plays an important
role in ensuring business success and ultimately living up to the corporate social
responsibility.
Thus adopting ethics approach to doing business is critical towards ensuring a
strong business model with long term potentials. Business ethics is especiallyimportant in dealing with customers, maintaining integrity with customer and
building client relationships. On the other side of your business, it's also important
to adopt an ethical approach which considers your various responsibilities towards
shareholders, employees and the society at large. Ethics is no doubt an important
business subject for any entrepreneur to study, but it also has a wider application
throughout organizations. So what is ethical to one may not be ethical to others
hence, it's important to establish a collective set of ethics that represent the entire
organization rather than just adopting it individually. This can be done through
training, through having standard business policies and even by careful selection of
human resource.
An ethical image for a company can build goodwill and loyalty among customers
and clients and the importance of business ethics can be highlighted;
• Ethical motivation works on employee motivation which protects and improves
reputation of the organization by creating an efficient and productive work
environment.
• Balancing the needs and wishes of stakeholders is also a critical requirement.
There is pressure on business to recognize its responsibilities to society. Business
ethics requires business to think about the impact of its decisions on people or
stakeholders who are directly or indirectly affected by such decisions. Companiesbuild their image by acting in accordance with their values. Creating a positive
public image comes from demonstrating appropriate values. Publicizing and
following a company's values allows stakeholders to understand what the company
stands for.
• A global challenge not only leads to business growth and expansion but has to
become aware of the ethical diversity of the world because of increasing
globalization of the economy. Business must learn the values of other cultures and
apply them to its decisions, combining with its own values. • Ethical pay-offs help
the organization to reduce risks such as breaches of law, regulations or company
standards, and damage to reputation of the organization in long run.
• Employee Retention is a successful Business Ethics program which establishes a
culture that rewards making the right decision and helps company to retain talent.
One of the major costs in business is employee turnover. The loss of people is loss
of valuable experience and training the new personnel cost the company.
7/29/2019 Business Ethics Module 1
http://slidepdf.com/reader/full/business-ethics-module-1 15/20
• Prevention and Reduction of Criminal Penalties through following a set of ethical
practices can help a company have "an effective program to detect and prevent
violations of law". Exc7itives cannot always be aware of everything done in a
company's name.
• Market Leadership ^xi be seen when a company fully integrates its values into itsculture, gradually quality rises due to the employee's focus on values. Customers
see that the employees care about the customer's concerns. Employees reflect
appropriate values in their attitude and conduct.
• Following ethical practices can help the company to set an example in the society
and the market and also lead to recognize the company as a leader.
1.6 NEED FOR BUSINESS ETHICS
Why to promote business ethics in organizations? Customers are more educatedtoday and their awareness level has comparatively increased. Business
organizations will always set objectives for the business and focus towards profit
maximization and growth. The most important question is how managers make
profit and achieve growth?
They work towards understanding and working towards meeting these objectives.
Business considers why to make profits, and why should do so legally. But why
should they be concerned about ethics, as long as they are making money and
staying out of legal problems making a legal profit for the firm. These dimensions
and arguments are confusing and often mistaken. So it is important to first
understand why should business people be ethical?
To say that one should do something is another way of saying it is ethical. If it is not
ethical, then one should not do it. Perhaps when business people ask why they
should be ethical, they have a different question in mind: what is the motivation for
being good (ethical)? One should be good because "good" is, by definition, that
which one should be. As for motivation, good behavior often brings a reward, but
not every time. Think about it. If it were always in one's interest to be good, there
would be no need for ethics. We could simply act selfishly and forget about
obligation. People invented ethics precisely because it does not always coincide
with self interest. No doubt organizations prove their existence by profit taking, but
it is always not necessary to opt for the unethical way. In the past a number of
factors have brought ethical matters into sharper focus. A few of the following
points put an effort to explain the need and intent of business ethics:
1. Globalization : Global expansion has brought about greater involvement with
different cultures and social-economic systems. With this kind of a development,
the ethical considerations such as the different assumptions about the
7/29/2019 Business Ethics Module 1
http://slidepdf.com/reader/full/business-ethics-module-1 16/20
responsibilities of business, about accepted business practices and about the values
needed to build a cohesive successful organization taking-up the lead and become
more important.
2. Competition. Rising competition brings with it added pressure to corners.
Simultaneously, leaders looking for new ways to differentiate their companies and
moreover to a new level of excellence. Some believe that a proactive ethical stance
can have a positive impact on the bottom-line.
3. Technology. The added capabilities of technology have created a new level of
transparency and immediacy to business communities. Now the conduct of
businesses around the globe is more exposed than it ever was before. The boon of
science and technology is completely exploited by business arena and used as
stepping stones to success.
4. Public perception and the law. This is a perceived decline in social ethics that
yields uncertainty. Managers are no longer comfortable assuming the employees
joining their companies and possess the desired ethical values. Public expectations
have also changed enormously. That which ones deemed unacceptable is now more
readily scrutinized. New laws and stepped up enforcement efforts Rave increased
the risk of personal and organizational liability.
Why Study Ethics? Ethics courses have a number of features that influence
behavior. It provides a language and conceptual framework with which one can talk
and think about ethical issues. They present ethical theories help define what a
valid ethical argument looks like. They give an opportunity to think through,
complex ethical issues that are likely to arise later.
None of this convinces one to be good, but it is useful to those who want to be
good. It may also improve business conduct in general. How many of the recent
business scandals would have occurred if subordinates had possessed the skills,
vocabulary and conceptual equipment to raise an ethical issue with their
coworkers?
Participatory ethics is a privileged part of business ethics. Parties co-operate
voluntarily committing themselves to a self imposed and non-enforceable obligation
producing a distant common good. Similarly recognition ethics is an ethics of self
development guided by the principles of fidelity to one's basic self which clarifies
and supports the Principle of recognition (formal and conscious when one gets
involved in situations of moral asymmetry) and the Principle of beneficence (that no
harm should be done to others or avoided or compensated thereof).
Ethics and management are closely related. Business management is all about
making decisions. Ethics is all about making the right decision. So what is the
difference between the two? Management is concerned with how decisions affect
7/29/2019 Business Ethics Module 1
http://slidepdf.com/reader/full/business-ethics-module-1 17/20
the functioning of a company, while ethics is concerned about how decisions affect
everything else including the existence of a company.
Management operates in the specialized context of the firm, while ethics operates
in the general context of the world. Management is therefore part of ethics. A
business manager cannot make the right decisions without understandingmanagement in particular as well as ethics in general. Business ethics is thus
nothing but management carried out in the real world. Hence a businessman should
study and understand ethics. The need of business ethics can be more
appropriately discussed with, the following relevance's :
• Introducing Socialism in Business which elaborates that the gains of business
must be shared by all and not just by owner of business. Profit is the result of group
efforts and hence all concerned i.e., the workers, shareholders, consumers and all
others who contribute to the success of the business should share the gain and
profits.
• Interest of Industry should be protected by big firms which normally try to
dominate and eradicate small firms. If industry follows code of conduct, small firms
can fight for their existence and stay in the business for longer times contributing
success and economy.
• Buyers Market is taking its importance in many products by converting sellers
market into buyers market. Under such changed business conditions business ethics
needs to stress the importance of consumer satisfaction and service orientation in
place of profit orientation.
• Better Relations with business and society, reconciling conflicting interests of
various sections of society such as workers, shareholders, consumers, distributors,
suppliers, competitors and government can be done by implementing and following
Code of conduct.
• Advantages to Business and Society can be shown by Ethics pointing out what is
good and bad, so also what is right and wrong. It brings to the notice of the
business community the importance of honesty, sincerity, fairness which makes
them alert and socially conscious.
Thus business ethics helps business and society at large ensuring healthy
atmosphere in business which further leads to improvement in social, economic and
cultural values of the society.
1.7 BENEFITS OF BUSINESS ETHICS
Most of the organizations today are taking up challenges related to bringing in
ethical practices and are also looking at the benefits that organizations get by
following business ethics. So these benefits are related to many dimensions like
7/29/2019 Business Ethics Module 1
http://slidepdf.com/reader/full/business-ethics-module-1 18/20
societal, public, employees, stakeholders and organizations. However, the following
list describes various types of benefits from managing ethics in the workplace.
1. Attention to business ethics has substantially improved society : A matter of
decades ago, children in our country worked 16-hour days. Workers' were harassed
and exploited and disabled workers were condemned to poverty and often tostarvation. Big players affected the small players and prices were fixed on ground
rules. Employees were terminated with no valid reason. Then society reacted and
demanded that businesses place high value on fairness and equal rights. Anti-trust
laws were brought in, government agencies were established, Unions were
organized, Laws and regulations were established.
2. Ethics programs help maintain a moral course in turbulent times and the times
when change is essential : Every organization passes through tough times and need
for major changes in operations and technology as it is demanded from the
changing business environment. During such times culture of following ethical
practices helps the organizations to hold the momentum and face the challenge.
3. Ethics programs cultivate strong teamwork and productivity : Ethics programs in
the organization helps to bring proper alignment between employee behaviors with
ethical values preferred by leaders of the organization. So there must be proper
exhibition of right behaviors by employees which can match organizational values.
These values in the workplace build openness, integrity and teamwork which results
-in motivation and performance.
4. Ethics programs support employee growth and meaning : Following ethics in the
workplace helps employees face reality, both good and bad in the organization and
within themselves. Employees will express full confidence to handle the tasks andsituation thus taking better decision which helps them to produce better results.
These results in turn help employees to perform better and achieve growth.
5. Ethics programs help ensure that policies are legal : Ethical practices usually
complement legal requirements and these practices are applied in the current
situation and which will impact the future too. So it is better to invest time and
resources to ensure ethical practices now than investing on handling litigation later.
So most of the time ethical principles are often state-of-the-art legal matters.
Attention to ethics ensures highly ethical policies and procedures in the workplace.
6. Ethics programs help avoid crimes and can lower fines : Ethics programs always
help the team to identify ethical issues and violations even before theimplementation so that they can be reported or addressed. In some cases, when an
organization is aware of violation and does not report it to the appropriate
authorities, this can be considered a criminal act. So if organization attempts to
follow the ethical practices, the intensity of fine and penalties will be less.
7. Ethics programs help manage values associated with quality management,
strategic planning and diversity management : Organizations today, will have to
7/29/2019 Business Ethics Module 1
http://slidepdf.com/reader/full/business-ethics-module-1 19/20
face challenges due to dynamism of market ,thus focusing on managing strategic
planning, diversity management and quality management. Ethics programs help to
identify preferred values to achieve better quality and strategic growth. This effort
includes recording the values, developing policies and procedures to align behaviors
with preferred values, and then training all personnel about the policies and
procedures. This overall effort is very useful for several other programs in theworkplace that require behaviors to be aligned with values, including quality
management, strategic planning and diversity management
8. Ethics programs enhances public image of the company : Business organization
will have certain responsibilities towards society and public. Attention to ethics is
also strong public relations but managing ethics should not be done primarily for
reasons of public relations. But the fact that an organization regularly gives
attention to its ethics can portray a strong positive image to the public. People see
those organizations who value people more than profit, as striving to operate with
utmost integrity and honor. 9. Overall benefits of ethics programs : Managing
ethical practices has lot of positive impacts on business and organization. Itstrengthens the team coherence and balances organization's culture, improves trust
and relationships between individuals and groups, supports greater consistency in
standards and qualities of products and cultivates greater sensitivity to follow
organization values. 10. Formal attention to ethics in the workplace is the right
thing to do : As part of organization's practice it is important to follow ethics and it
also emphasizes on legal
. 1.8 ARGUMENTS AND DILEMMAS FOR AND AGAINST BUSINESS ETHICS
There are different arguments in business wherein a category of people believe that
following ethics is safer and rewarding in the long run though it brings with it a lot of problems and challenges, thrills and breakdown time and by for the businessman.
But after all success is assured at a cost of long awaited patience and hard work.
The arguments purport to show that a businessman ought to maximize profit and
nothing else. Money is very important for anything be it continuation or the
existence of the business, hence wealth maximization is a must. At the same time a
situation in which one had more money is necessarily preferable only if other things
are equal, which they often are not. If I am offered a pay-raise naturally am inclined
to accept it, but not if it would entail moving house and saying good-bye to all my
friends, or moving to a location where there are no good schools for my children or
if it would involve working under hazardous conditions, or if it would require of one
telling lies to prospective customers. While the other category of people deny with
the fact and feel that we i have to mould ourselves and be as per the situation and
circumstances and thus being indifferent 7 should achieve the organizational
objectives and achieve profit maximization. Situational changes will decide about
our being or not being or in other words towards the change of 4 business etc,
hence being successful by hook or crook is important.
7/29/2019 Business Ethics Module 1
http://slidepdf.com/reader/full/business-ethics-module-1 20/20
Maxi misers try to sidestep the argument by changing the content of what is being
maximized. Instead of money it is t profits, instead of profits it is long-term profits.
Arguments for : Business organizations today have accepted ethics as a part of their
business conduct. They have realized that business exists and operates within the
society and is a part of the subsystem society, so its functioning should contribute
to the welfare of the society. As a company grows, the public takes more interest init as it has a great impact on the community. There is a greater social responsibility
on the mangers to maintain a proper image of the company in the minds of the
public. The company cannot resort to unethical behavior or disregarding social
welfare.
Ethical practices sometimes reduce the cost of production in the long-run. Ethical
and moral behavior gives a unique edge and advantage in the market place. This
has been well proved by the Tata group of companies that have based their
business activities on ethical principles. There have been different discussions and
contradictions for this view of following and implementing ethics in business or not.
Argument Against : Businesses are economic entities and should concentrate onproducing goods and services efficiently and thus maximizing the profits to the
shareholders.
Some economists like Friedman believed that if business ethics is a part of
corporate culture, the customer would have to bear the cost of the ethical practices
of the organization as some ethical practices increase the price of products. Earlier
people feared that ethical code of conduct would mean a sacrifice of efficiency and
productivity and the competitiveness of the marketplace would fade. It was
believed that business should use their resources and engage in activities designed
to increase profits. But now it is seen that the fears expressed by philosophers and
psychologists have changed gradually.