Business ethics is a form of applied ethics that examines ethical principles and moral 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 business organizations as a
whole.
Applied ethics is a field of ethics that deals with ethical questions in many fields such as
medical, technical, legal and business ethics.

In the increasingly conscience-focused marketplaces of the 21st century, the demand for
more ethical business processes and actions (known as ethicism) is increasing.[1]
Simultaneously, pressure is applied on industry to improve business ethics through new
public initiatives and laws (e.g. higher UK road tax for higher-emission vehicles).[2]
Businesses can often attain short-term gains by acting in an unethical fashion; however,
such behaviours tend to undermine the economy over time.

Business ethics 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. The range and quantity of business ethical issues
reflects the degree to which business is perceived to be at odds with non-economic social
values.

Historically, interest in business ethics accelerated dramatically during the 1980s and
1990s, both within major corporations and within academia. For example, today most
majorcorporate websites lay emphasis on commitment to promoting non-economic social
valuesunder a variety of headings (e.g. ethics codes, social responsibility charters). In
some cases,corporations have redefined their core values in the light of business ethical
considerations(e.g. BP's "beyond petroleum" environmental tilt).

♦ Ethics is a Greek word, it means Character or manners.

♦ Ethics is subjective while morality is objective.
♦ Ethics is about sense of belongingness to society of business or organization

Definition of Business Ethics

Business Ethics is a specialized study of moral right and wrong. It concentrates on moral
standards as they apply particularly to business policies, institutions, and behavior.

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

In the field of Business ethics, there is variety of theories, approaches and philosophies,
each professing to offer fundamental insights into what constitutes business ethics

Ethics is the activity of examining the moral standards of a society, and asking how these
standards apply to our lives and whether these standards are reasonable or unreasonable,
that is, whether they are supported by good reasons or poor ones
Ethical Issues Relate to all Functional Areas
• Accounting
• Finance
• Management
• Marketing

Why ethics is important in business?

 To gain the goodwill of the community

 To increase the lifetime of an organization

 Produce safe and effective products

 Provide excellent service &Maintain customers.

 Develop and maintain strong employee relations

-Suffer less turnover
- Enjoy better employee morale

 Suppliers and other business partners prefer companies that operate in a fair and
ethical manner.

Why Business Ethics Important

 Business Ethics is important to any organization despite the fact that the
chief aim of any organization is to maximize shareholder’s wealth.

 Good ethics should be seen as a driver of profitability rather than a burden

on business.

 Investors are reassured about the company's approach to risk management

 An ethical framework is part of good corporate governance and suggests a
well run business.

 Employees will be motivated in the knowledge that they operate in an

environment of good ethical corporate behavior.

 To gain a long-term relationship with customers and achieve customer

return for the business, the business needs to be based on ethics.
The main rules of ethics

1.The golden rule: “Treat others as you want to be treated”

2.The common principles and religion.

3.The common good: “the greatest possible good for the greatest possible number of
individuals”.

4.Universalization: “What may happen if all people do that action?”

5.Declaration: “Can you declare this action?”

Objectives of Ethics 16604433-Business-Ethics

 Study of human behaviour and makes evaluative assessment about that as moral
or immoral (A diagnostic goal).

 Establishes moral standards and norms of behaviour.

 Makes judgment upon human behavior based on these standards and norms.

 Prescribes moral behaviour and makes recommendations about how to or how not
to behave.

 Expresses an opinion or attitude about human contact in general.

Nature of Ethics

 Concepts of ethics deals with human beings only. Human beings can distinguish
right or wrong, good or evil.
 The Study of ethics is a set of systematic knowledge about moral behaviour and
conduct. Study of ethics is a science – a social science.
 Science of ethics (Normative Science) : it judges the value of the facts in terms of
ideal situation.
 Deals with human conduct which is voluntary, not forced or coerced by persons
or circumstances.

Code of Ethics in Business

 Responsibilities of Business :
a) not to do harm knowingly,
b) to adhere all applicable laws and regulations,
c) the accurate representation of their education, training and experience,
d) active support, practice and promotion of this code of ethics.

 Honesty and Fairness :

a) being honest in serving consumers, clients, employees, suppliers, distributors and the
public.
b) no knowingly participating in conflict of interest without prior notice to all parties
involved.

 Rights and Duties of parties :

a) products and service offered are safe and fit for their intended use,
b) communications about offered product and services are not deceptive,
c) all parties intend to discharge their obligations, financial and otherwise, in good faith,

Characteristics of Business Ethics

 Ethical decisions differ with individual perspective of different persons. Each

person views the ethical question in terms of his or her own frame of reference.
And this frame of reference is the person’s own unique value system.
 Ethical decisions are not limited only to themselves, but affects a wide range of
other situations as well. Similarly, unethical decisions do not end in themselves,
but have widespread ramifications.
 Most ethical decisions involve a tradeoff between cost incurred and benefits
received. Cost and benefits, profits and social responsibilities are different ends
of a single spectrum. All cannot be maximized simultaneously.
 The consequences of most ethical or unethical decisions are not clear. The only
certainty is that somewhere, sometime, somehow, something positive will result
from an ethical decision and something negative from unethical one.
 Every person is individually responsible for the ethical or unethical decision and
action that he or she takes. Taking an ethical decision cannot be an impersonal
activity as it involves the person’s individual unique value system along with his
moral standards.
 Ethical decisions are voluntary human actions. A person cannot escape his
personal liability for his crimes citing force of circumstances or pressure

Benefits of Ethics

 Fostering a more satisfying and productive working environment

 Building and sustaining Organisation reputation
 Maintaining the trust of staff to ensure continued self-regulation
 Providing ethical guidance for employees prior to making difficult
decisions
  Aligning the work efforts of employees with the Organisation’s
broader mission and vision
 Increased employee loyalty, higher commitment and morale as well as
lower staff turnover
 Attraction of ‘high-quality’ staff
 Reputation benefits (customers and suppliers)
 More open and innovative culture
 Decreased cost of borrowing and insurance
 Generation of good-will in the communities in which the business
operates

Influencing factors of Ethics 17191258-Busines-Ethics

Internal environmental factors

• Individual factors
• Organizational factors

External environmental factors

• political economical factors

• social factors

1.Individual factors

Individuals with higher ego strengths will not depend on others for decisions making ,
whereas people with low ego strength will look to others for help in arriving at decisions

Organizational culture –
The culture of an organization includes its values, belief systems, and norms. It is
influenced by the behavior of the mangers or the top management of the organizations

Performance measurement systems

• The top management of sears auto centers developed incentive systems to
improve revenue performance, and set targets for their employees that were
practically unachievable. The employees therefore resorted to unethical actions by
indulging in unnecessary and incomplete repairs of vehicles and overcharging for
services.
• Finally , consumers initiated legal proceedings against the organization

Reward systems
• Reward system in many organizations tend to encourage unethical behavior like
kickbacks. Also, some organizations tend to discourage and penalize
 whistleblowers; such punishment systems tend to further encourage unethical
behavior.
• Reward systems should be integrated with the performance measurements
systems

Position related factors

• These are peer pressure, the expectations of the top management regarding
achievement of objectives, the presence or absence of a code of conduct, superior-
subordinate relationships, extent of resource availability, etc.,
• For example, employees of departments like marketing and purchase tend to face
more ethical dilemmas

Organizational factors
• If a specific ethical behavior is rewarded, employees will tend to continue
behaving in that way. On the other hand, if any employee gets punished for a
specific behavior , he and the others in the organization will not resort to that kind
of behavior

Political and economical factors

• It include factors like government polices, tax structures, and the tariffs and duties
levied on imports.
• Many organizations resort to bribing government officials to get contracts or
licenses for businesses or to get into such transactions to stay in competitions.
• The case of Siemens AG officials routing organizational funds to an Italian
energy company as bribes is an example of unethical behavior.

Social factors
• Giving the right information to customers regarding products and services is one
of the major ethical considerations that organizations must keep in mind.
• Being ethical serves as a competitive advantage for organizations, as it helps them
build up a good reputation and image for themselves.
• Johnson and Johnson- faced a serious crisis, when a few capsules of its popular
medicine, Tylenol were found to be laced with cyanide.

TWO KEY ASPECTS OF ETHICS

♦ The first involves the ability to discern right from wrong, good from evil, and
propriety from impropriety.
♦ The second involves the commitment to do what is right, good and proper.
Ethics entails action; it is not just a topic to mull or debate.”

10 Myths About Business Ethics

1. Business ethics is more a matter of religion than management.

2. Our employees are ethical so we don't need attention to business ethics.
 3. Business ethics is a discipline best led by philosophers, academics and
theologians
4. Business ethics is superfluous -- it only asserts the obvious: "do good!"
5. Business ethics is a matter of the good guys preaching to the bad guys.
6. Business ethics in the new policeperson on the block.
7. Ethics can't be managed.
8. Business ethics and social responsibility are the same thing.
9. Our organization is not in trouble with the law, so we're ethical.
10. Managing ethics in the workplace has little practical relevance.

Some of the Unethical Business practices are :

 Cutting corners on quality

 Covering up incidents
 Abusing or lying
 Lying customers
 Stealing from the company
 Taking credits from co-workers ideas/work
 Taking or giving bribe
 Government corruption
 Financial scandals
 Product safety
 discrimination
 Sexual harassment
 Firing an employee for whistle blowing
 Divulging confidential information

COMMON UNETHICAL ACTS

 Lying to supervisors
 Falsifying records
 Alcohol and drug abuse
 Conflict of interest
 Stealing
 Gift/entertainment receipt in violation of company policy

Global Ethical Issues

• Wages and hours

• Child labor

• Discrimination
• Legal and ethical business practices

• Product safety and quality

• Environment