DR. D.Y.

PATILUNIVERSITY DEPARTMENT OF BUSINESS MANAGEMNT

Subject

Business Ethics

Submitted to
Leena Madam

Submitted by:
Sweta S. Dalvi
MBA BIOTECH Roll no- 01004

Business ethics
While most people have taken the time to define their personal morals, the concept of business ethics has only recently begun to come under intense scrutiny. After Enron was at the center of a scandal involving its irregular accounting practices in 2001, it seemed like a high profile business executive was in the news almost every day being accused of greed, deceit, and corruption. In response to public outrage, the business community at large began to focus more on encouraging ethical behavior. Now, it is common for both large and small businesses to have a formalized listing of ethical guidelines for employees to follow. Naturally, any successful corporation must remain focused on earning a profit. With no profit, the company loses value and the employees eventually lose their jobs. However, business ethics do not allow a company to do whatever is necessary to make money. Corporate social responsibility dictates that businesses must provide safe working conditions and use manufacturing practices that do not unnecessarily harm the environment. Business ethics also require that companies provide accurate financial data to stockholders and avoid advertising their products and services to consumers under false pretenses. The study of business ethics is sometimes referred to as applied ethics because it attempts to translate utilitarianism, social contract theory, deontology, and other theoretical principles into acceptable rules for conduct in various real world situations. At the college level, many schools now have programs to encourage students to develop an awareness of business ethics. These classes typically use case studies as the basis for discussions on what constitutes ethical behavior. Lower level classes are sometimes required for an undergraduate business degree, while students working towards an MBA may be able to specialize in leadership and business ethics. While many people do feel classes discussing ethics are beneficial, others say its hard to predict how students will behave once they are out of school and into the working world. To some extent, the government can regulate ethical behavior by passing laws that require businesses to take certain actions. In many ways, however, professional organizations may be the best equipped to impart a sense of business ethics onto a particular industry. Organizations such as the Public Relations Society of America, the National Independent Automobile Dealers Association, the Chartered Property Casualty Underwriters Society, and the National Association of Realtors have codes of ethical behavior that members are required to follow and provide regular training events that help encourage open discussions of business ethics. Corporate governance is a broad term that has to do with the manner in which the rights and responsibilities are shared among owners, managers and shareholders of a given company. In essence, the exact structure of the corporate governance will determine what rights, responsibilities, and privileges are extended to each of the corporate participants, and to what degree each participant may enjoy those rights. Generally, the foundation for any system of corporate governance will be determined by several factors, all of which help to form the final form of governing the company.

Corporate governance
Within any corporation, the structure of corporate governance begins with laws that impact the operation of any company within the area of jurisdiction. Companies cannot legally operate without a corporate structure that meets the minimum requirements set by the appropriate government jurisdiction. All founding documents of the company must comply with these laws in order to be granted the privilege of incorporation. In many jurisdictions, these documents are required by law to contain at least the seeds of how the company will be structured to allow the creation of a balance of power within the corporation. Much of the basis for corporate governance is found in the documents that must be prepared and approved before incorporation can take place. These documents help to form the basis for the final expression of the balance of power between shareholders, stakeholders, management, and the board of directors. The bylaws, articles of incorporation, and the company charter will all include details that determine who has what authority in the decision making process of the company. Along with the laws of the land and the founding documents, corporate governance is further refined by the drafting of formal policies that not only recognize the assignment of powers in accordance to the bylaws and corporate charter, but also help to further define how those powers may be employed. This helps to allow the company some degree of flexibility in maintaining a balance of power as the company grows, without undermining the rights and privileges inherent in each type of corporate participation

Business ethics and corporate governance

Business ethics and corporate governance are two significant factors that impact a company and how it operates. Business ethics represent the values, principles or characteristics a company follows when conducting business in the economy. Corporate governance is the internal framework a company designs and implements to govern and protect those invested into the company. The relationship between business ethics and corporate governance comes from an organizations owner or executive managers, who create the governance and decide which ethical principles employees will follow. Business ethics typically follow a normative theory. This theory states that individuals and firms will follow ethical principles that are commonly found in society, hence the term normative, or standard, ethics. Three normative ethic theories include stockholder,stakeholder and social contract theories. The stockholder ethical theory states that a company should create a relationship between business ethics and corporate governance that focuses on stockholders. Managers will employ strategies and activities that advance or increase the investments of share holders. Under the stakeholder theory of ethics, business ethics and corporate governance focuses on anyone who has a stake in the business. Although wide ranging, this connection between business ethics and corporate governance is often stronger, as recent changes to corporate governance include now any individual who is affected by the company. This connection ensures that everyone receives equal or fair treatment when dealing with the business. For example, customers who purchase a faulty product may receive a replacement at no charge and a few extra benefits. This promotes business ethics throughout the organization. A third and final ethical theory is the social contract theory. This theory focuses on companies that improve the overall welfare of society. Shareholders may be less willing to

invest money into a company that follows this ethical theory, as shareholders may lose money to causes or other benefits that are outside of the companys normal operating context. To make investors fully aware of the companys social contract theory of ethics, business owners, executives and board members will often include this information in the corporate governance. Another relationship between business ethics and corporate governance is a companys mission statement. The mission statement clearly outlines a companys planned standard ofexcellence for operating in the business environment. This mission statement can focus more on a social aspect of the operations rather than a profit motive to repay shareholders. In these types of companies, shareholders will invest in the company because they believe in the company and desire to see the company succeed in its social mission.