Ethical Issues in

Business

Chapter 03

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Lesson’s Objectives
Define Ethical Issues
Classification of ethical issues
Identify the ethical issues with examples

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Three “C’s” of Business Ethics
The need for compliance of rules, including :
◦ Laws,
◦ Principles of morality, the customs of community,
and
◦ Policy of the company and fairness.

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Three “C’s” of Business Ethics
The contribution business can make to
society through:
◦ The core values,
◦ Quality of one’s products and services
◦ By providing jobs to employees
◦ Usefulness of activities to surrounding
community, and QWL (Quality of Work Life)
influenced by ethical and moral values.

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 Three “C’s” of Business Ethics
The consequences of business activity:
Towards environment inside the plant and outside the
organizational community, e.g., Bhopal Gas Leading
Tragedy.
Social responsibility towards shareholders, bankers,
suppliers, customers and employees of organization.
Good public image. Sound business practices so that
public image is not tarnished.

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Influences on Ethical Behavior
 Personal values
 Attitude/Behaviors of supervisor
 Attitudes/Behaviors of senior management
 Internal drive to succeed
 Performance pressures
 No threat of punishment
 Friends/Coworkers

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Ethical Issue
•A problems, situations, or opportunities
requiring an individual to choose among
actions that may be evaluated as right or
wrong, ethical or unethical
Ethical issues arise because of:
Conflict among personal/organizational
values
◦ Conflicts with societal values

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Is it Ethical Issue?
Is it ethical to reduce costs by exploiting low
quality resources
Is it ethical to sell products that are legal, but
known to harm those who use them
Is it ethical to manufacture products that are
used to kill?
Those are ‘big questions’ that elicit strong views,
but there are many smaller, tactical issues at an
individual level

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Then…..
 Ethical behavior goes beyond the legal
requirement placed on a business, as it concerns
discretionary decisions and behavior;
 In other words, what a business chooses to do,
rather than what it is forced to do.
 Business ethics are relevant both to the conduct
of an individual within an organization and to the
conduct of the organization as a whole.

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Theory & Practice
 In theory, business ethics are shared
set of attitudes, morals and rules of
behavior that underpin the decision
making process
 However, in practice not everybody
agrees on what is ethical and what is
not.

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Classification of Ethical Issues
I. Conflicts of interest
II. Honesty & fairness
III. Communications issues
IV. Organizational relations

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I. Conflict of Interest
 A conflict of interest (COI) occurs when an
individual or organization is involved in multiple
interests, one of which could possibly corrupt the
motivation for an act in another.
 A conflict of interest is a set of circumstances
that creates a risk that professional judgment or
actions regarding a primary interest will be
unduly influenced by a secondary interest.

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• Exists when
Conflict of Interest
an individual must choose whether

to advance his or her own personal interests,

those of the organization, or some other group

• Must be able to separate personal interests

from business dealings

• Bribery is a significant concern 13

Conflict of Interest
 Grease Payments – Money given for the purpose of
getting minor officials to do what they are supposed
to be doing. (Money given to minor officials – clerks,
to expediting a project)
 Bribes – Relatively large amounts of money given far
the purpose of influencing officials to make decisions
or take actions that they otherwise might not take.
(to high – ranking officials to get these persons to
purchase goods

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II. Honesty and Fairness
Honesty relates to truthfulness, integrity &
trustworthiness with business activities
Fairness relates to being just, equitable & impartial
with organizational activities
Business should not be played as a “ game” and
managers tend to Breaking or bending laws means
violates trust
And finally Lack of rules & poor enforcement of firm
may leads to unethical behavior
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III. Communications
 Issues involved relate to advertising, product
safety, pollution, & employee work conditions.
 Lying is a major ethical issue with internal &
external communications
 False advertising relates to:
 Exaggerated/inflated claims
 Concealed / hidden facts & ambiguous statements
 Lying

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IV. Organizational Relationships
Organizational behavior related to behavior of
organizational members toward customers,
suppliers, subordinates, superiors, peers & others

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Ethical Issues Related to Ownership
Owners have an obligation to society as well as
their employees & customers
Minimize pollution
Compensate working fairly
Produce safe products
Must be sensitive to legal & ethical risks of
their industry & region

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Employees & Management Concerns
Employee theft, sabotage & competitive
intelligence, child labor,
Rights in hiring, promotion, and firing
Fear of layoffs, Upward mobility
Salary plateau/level, motivations
Discrimination, security of job
Privacy & data access, outsourcing
Health & safety, welfare facility
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Consumer & Marketing Issues
Better quality of goods, truth
Reasonable price not discriminatory pricing
How to use positioning, promotion tool
How shows differentiations
Maximize positive publicity & avoid
negative
Bidding, Pricing, Competition

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Shareholders
Ensure capital appreciation
Ensure steady & regular dividends
Disclosure all relevant information
Protect minority shareholders interest
Protect interest in times of mergers,
amalgamations and takeovers.

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 Government

Comply with rules and regulations

Honesty in paying taxes

Competitor
Honesty in attracting customer
Practice win-win approach
Beating with value not cheating

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 Distributors

Comply with rules and regulations

Honesty in paying taxes

Supplier
Comply with agreements
Use bargaining power
Consider as a supplier to supplier

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 Identify an Ethical Issue

An activity approved by most members of the

organization & customary in the industry is probably
ethical
If the issue withstands open discussion between
groups within & outside the organization is probably
ethical
Covert discussion, destroyed or disguised documents
indicate potential problems.

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