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ETHICAL ISSUES IN BUSINESS

Modern Business Ethics and Dilemmas

Modern entities are acquiring large significance due to their size and the influenceexerted by them. These business corporations have become a method of property

tenure and means of organizing societys economic life. The growth of business

houses has evolved a corporate system. These corporate systems have gained

prominence and have with it the attributes of power and can deal with itself as a

major social institution. While maing a decision! a manager has many questions

which need to be answered" What is right, for whom the decision will help, for

whom it will harm, what will be the gains and losses and what would be the

optimal decision which would make everybody happy.

The most important people that are connected with the company are the

staeholders. These staeholders include all individuals or groups who can effect

or is affected by the actions! decisions! policies! practices or goals of the

organization.

These staeholders are divided into # categories$

%. Focal Stakeholders &usiness house or the top management

'. !rimary Stakeholders (wners! customers! suppliers and employees.

#. Secondary Stakeholders )ll sets of people other than those in % * '.

+ncludes consumers! government! general public! society! media etc.

)ctions, -emands of the entire all the above staeholders exerts certain ethical

dilemmas on the company which could be divided into two types$

(pen$ Where the problem is open to the public and could be seen. or eg$

theft! bribery! sabotage! espionage etc

/oncealed$ 0idden. /omplex and covered by rules and laws. -ifficult to

locate and becomes a potential danger to the corporate. or eg$ +nside

trading! bad 01M policies! corporate acquisitions and mergers.

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"ight in #heory, do ethics work in business$

2uestions that are generally ased is whether all the theories really wor in real

life3 /an these theories guide ethical decision maing, -o they wor where the

maret is a battle field and where every product is fighting for a place in the

maret3

The surprising thing is that every manager thins that the competition is breaing

the rules of ethics except him and he has to tae protective measures.

The question generally ased is that when the maret is full of unethical companies

following unethical routes how could a competing company remain ethical3 The

managers feel that the company would be put to disadvantage! if they follow

ethical means. The stoc marets and even the local auto repair shop is full of

examples of the unethical practices followed by them.

0owever it has been proven time and again that if every organization commits

itself to the path of honesty and culture! it can certainly overcome all the

difficulties of enforcing ethical values and principles.

%s Business Bluffing Ethical$

Without truth as a guiding principle! any discussions become valueless. More often

than not we lie! tell half truths or eep quite to some questions. We regularly

distort! alter! and manipulate the true information in order to tailor it to the

discussions. What words we say and how we say conveys a lot of meaning to the

listeners. Truth is not always a wise policy. We need to eep certain things away

from public eyes to avert greater disaster.

What is &egal is Ethical$

) decision that a manager maes has broadly three components$

#he company re'uirementslie physical targets! financial requirements!

profits etc.

#he moral standardsof the company based on the social structure of the

society! corporate social responsibilities and ethos of the company.

&egal re'uirementsof the company and particular situation.

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(f these the most important is the 4egal route. The legal route is essentially a

compliance based approach where the decisions follow existing laws. Moreover

the legal compliance route goes against the philosophy of empowerment.

5mpowerment gives the managers resources! discretion and the authority and then

a trust to mae good and ethical decisions in the interest of the company.

(ompliance to legal re'uirements simply kills the initiative and to follow on the

dotted line of the law.

&aw should be taken only as a guideline so that the decision maker is well within

the laid down laws)The law gives only a level of acceptable behavior whereas it

does not inspire human excellence that is required in business. ) manager should

be aware of the rights as well as the power he has in his hands for maing ethical

choices in decision maing.

There are four types of justice based on larger principles of justice$

(ompensatory *ustice$ /ompensating someone for past losses or harm or

injustice.

"etributive +ustice6erving punishment to a guilty who has done harm to a

person. The criterion is that the punishment should be in accordance to the

crime.

Distributive *ustice$ air is equitable distribution of benefits and burden.

6ome should not get undue gain.

!rocedural *ustice$ 7ood rules! fair decisions maing processes! procedures

and agreements among the parties. This is applicable in all cases especially

in contracts.

(orporate Social "esponsibility and Ethics

6ocial responsibility is defined as the intelligent objective concern for the welfare

of the society. 6ocial responsibility should lead to position contribution towards

human betterment.The social responsibility restrains individual or corporate

behavior from destructive activities even if it means losing immediate profits.

There are ' important elements of /orporate 6ocial 1esponsibility 8/619

&usiness should tae account of its responsibilities.

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6ociety to accept responsibility of setting ethical standards in the society

)dam 6mith considered that maing pure profit is a social responsibility of any

business as long as some part of the profits is ploughed bac to the benefit of the

society. &y ding this! the company earns a good 12! which gives the company a

better and lasting brand image and helps in its financial performances.

%s Ma-imi.ing !rofits unethical$

+n the high level of competitive marets and free economy it is seen that the

function of business is economic and not social. The policies of the business

should be guided by economic criteria and actions be dictated by the profit

maximization within the social and legal framewor. /onsidering any other factor

other than profit maximization will be deliberately sacrificing profits. rom the

point of view of society the profit maximization may not be the best outcome from

the business entity.

:rofit is necessary for the survival of the business. The growth of the

business is dependent on the level of the profit earnings of the organizations.

The company has to survive by maing adequate profits for itself and for

growth.

5qually important is the fact the pricing policies of the firm have to be in

line with the competitive advantage of the business entity.

The next principle is the business has to tae into account! is the fairness that

is combining social activities with the established economic activities of the

business.

The final argument is the legitimacy that is the social issues are the concern

of the government.