BUSINESS

ETHICS
Moral principles of duty and virtue that prescribe
how we should behave;
behave the foundation of our
internal control.

Integrity
Responsibility
Respect
Fairness
Excellence
Objectives of Ethics

 Study of human behaviour and makes evaluative

assessment about that as moral or immoral.

 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.
Ethics will be different
at different levels
 At the basic level, it is about discipline,
i.e.. to maintain punctuality, coming to
work on time, behaving properly with
superiors, colleagues and subordinates
and not wasting time during working
hours.

 At the top level, it is about commitment

and Protecting the interests of the
organization.
Factors Influencing Ethics

Individual Organizational Environmental

o Values oTop Level Mgmt. oCompetition

o Work Philosophy
oEconomic
Background
oThe Firm’s Reward Conditions
o Family Status System
oSocial/Cultural
o Personality oJob Dimensions Institutions
 Sources of Ethics

1. Genetic Inheritance : the qualities of goodness is a product of

genetic traits strengthened over time by the evolutionary
process.
2. Religion : religious morality is clearly a primary focus in
shaping our societal ethics.
3. Cultural Experience : individual values are shaped in large
measure by the norms of the society.
4. The legal system : laws represent a rough approximation of
society’s ethical standards.
5. Codes of Conduct : three primary categories of codes, a)
company codes, b) company operating policies, c) codes of
ethics.
Code of Ethics – American Marketing
Association
• Responsibilities of Marketer :
a) not to do harm knowingly,
b) to adhere all applicable laws and regulations,
c) the accurate representation of their education,
training and experience,

• 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,
c) establishing equitable fee schedules including the
payment or receipt of usual, customary and/or legal
compensation for marketing exchange.
Code of Ethics – American Marketing
Association

 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,
 There is a
big Righ
ts
difference
between
what you
have a right
•It’s not about what we say, or intend, nor
is it simply a written code or a framed
credo.
 FAIRNESS
• Process
• Impartiality
• Equity

CARING
• The heart of ethics
• It is scarcely possible to be
truly ethical and yet
unconcerned with the
welfare of others

CITIZENSHIP
• Duties that prescribe how
we ought to behave as part
of a community.
Foundations of Ethical
Behavior

 Treat others as you would be treated :-

 Respect

 Honesty

 Trust
 Taught in All Cultures

Judaism: What you hate, do not do to anyone.

Islam: No one of you is a believer until he loves for his brother
what he loves for himself.
Hinduism: Do nothing to thy neighbor which thou wouldst not
have him do to thee.
Sikhism: Treat others as you would be treated yourself.
Buddhism: Hurt not others with that which pains thyself.
Confucius: What you do not want done to yourself, do not do to
others.
Aristotle: We should behave to our friends as we wish our
friends to behave to us.
Plato: May I do to others as I would that they should do unto
me.
TREAT PEOPLE THE WAY
YOU WANT THEM TO TREAT YOU
Ethical Issues Relating to
Business
 Honesty—communication and behavior consistent
with facts
 Disclosure of information
 Promises/commitments
 Laws and professional standards
 Representation of others like shareholders
 Unfair competition
 Refrain from bribes and excessive gifts
 Comply with “anti-trust” laws
 Just compensation
 Respect intellectual property
 Treat employees fairly
 Respecting rights of others
 Treat others with fairness and respect regardless of age,
religion, ethnic group, sex, economic status, etc., especially
children, women, and subordinates
 Respect others and future generations by treating the
environment well
Values are important beliefs
and desires that shape
attitudes and motivate
actions.

2000 Josephson Institute, Ethics in the Workplace

Values
 Values are general terms referring to those things which
people regard as good, bad, right, wrong, desirable, justifiable
etc.

 Business is driven by values.

 Managerial values are e.g. importance of good in organizations

(like productivity, profit maximisation, employee welfare,
industry leadership, organisational stability, organisational
efficiency, organisational growth, social welfare etc.), groups
within organisations ( like employees, customers, co-workers,
superiors, subordinates, stock-holders etc.) and the personal
goals of individuals.
 Core Values
 Honesty Being straightforward, sincere, truthful, free of
fraud, deception or misrepresentation

 Respect To give particular attention to, show consideration

for, or hold in high or special regard
 Responsibility Moral Leaders take responsibility for their
own actions/failures . Involves a commitment to give a
quality performance and not making promises that cannot
be kept, such as committing to unrealistic delivery dates.
Also calls for acknowledgment of implicit commitments,
such as the protection of confidences

 Fairness Involves a elimination (or at least a minimization)

of one's own feelings, prejudices and desires, so as to
achieve a proper balance of conflicting interests.
 Relevance of Values in
1. Knowledge of business ethics will help managers in resolving ethical
Managers
issues/dilemmas as they arise.

2. Knowledge of values will help managers in setting highly responsible

tone for the organization - in individual judgments and decisions
whether ethical or not.

3. It helps manager to realize their social responsibility. Many

organizations find it wise to go beyond their primary mission and
take into the needs of the community. Business ethics make
managers more accountable for social responsibility.

4. Knowledge and awareness of the concept and practices of business

ethics is equally helpful to practicing managers in managerial
conduct and decision-making.
Types of Values
VALUES
TERMINAL INSTRUMENTAL

refers to desirable refers to preferable

end-states of modes of behavior, or
existence, the goals means of achieving
the terminal values.
that a person would
like to achieve
during his/her
lifetime.
Importance of Values
1. Values lay the foundation for the
understanding of attitudes and motivation
because they influence our perceptions.
2. Individuals enter organizations with notions of
what is right and wrong with which they
interpret behaviors or outcomes
3. Values generally influence attitudes and
behavior. Does your values match with your
Job/Organization? How you will react?
 Professional Values
Serving with
Continual
Working competence
improvement of
within excellence
quality of service,
the laws efficiency
Respecting all
of India objectivity
stakeholders
impartiality

Ensuring
Ensuring Upholding
proper,
the means are transparency in
effective
as functioning while
use of
important as the respecting
company money
ends confidentiality
 Ethical Values

Conserving, Resolving
public trust in official duties vs
the integrity, private interest
objectivity and conflicts
impartiality in favour of the
of government public interest

Taking
Acting at all times all decisions
in such a way as to in the
uphold the public interest
public trust
 People Values

Exercising Demonstrating Leading by

authority respect, fairness participation,
and responsibility courtesy in all openness and
with dealings with citizens communication,
respect for and fellow with respect for
human dignity public servants diversity

Treating Fundamental in
people with Basing appointment recruitment
fairness and decisions on merit evaluation
civility at promotion
all times
 Drivers of Values & Ethics
Performance
RESULTS

Leadership Achieving High

Levels of
Values and
People Ethics
Performance
Drivers Organizational Culture

Preventing and
Risk Assessment,Controls Managing
Values and
Standards Ethics Problems
 The Three Pillars of High
Performance
Achieving high levels of positive values and ethics
performance for an organization involves three
foundation pillars:
Leadership
Organizational Culture
People Management

Achieving high levels of ethics and values performance

can lead to higher levels of public trust and confidence.
 Shared Values

Integrity
Fairness
Doing the right thing when
(Safety & Trust)
no one is looking

Individual & Collective Respect and Appreciation

for the individual
Accountability
One’s expertise
To ourselves & our profession
One’s opinion
To each other
A person’s uniqueness
To management
Reciprocal generosity
To the Laboratory
-We encourage responsible &
informed risk taking (judgment)
Why Ethical Behavior Adds
Value
 Better information
 Trust from investors
 Better allocation of resources
 Customers will be more loyal

 Fair competition
 Lowers cost of business in economy
 Leads to better decision-making (do what’s
best for firm, not one individual)
 Improves competitive nature of a country’s
economy
Why Ethical Behavior Adds
Value
 Just compensation
 Attracts and retains better employees

 Rights of others
 Draws upon talents of wider set of individuals
 Develops long-term respect from the community
 Maintains the environment for long-term value to
all

 It’s the right thing to do!

 Can Ethical Values be
Taught?
Level 1: The Foundation

Personal Ethical Understanding

ht/wrong, Fairness, Honesty, Personal Integrity, Respect for Oth
 Personal Ethical
Understanding

 Concepts of right and wrong, fair play, respect for

rights of others, honesty, personal integrity

 Best learned in the home at an early age—and

follow-up is needed throughout life

 Institutions (churches, schools, etc.) can help

 Level 2: Application to
Business

Application of Ethics to Business Situations

Fraudulent Practices, Misleading Advertising, Unfairness

Personal Ethical Understanding

ht/wrong, Fairness, Honesty, Personal Integrity, Respect for Oth
Application of Ethics to
Business Situations
 Fraudulent practices, misleading
advertising, unfairness
 Can be taught in management
education and organizations—provided
students have a personal
understanding of ethics
 Can be reinforced by policies, codes of
ethics, training
Application of Ethics to
Business Situations

“Companies also have to further

strengthen ethics management and
social responsibility activities to
improve their public image’’
 Level 3: Ethical Courage

Ethical Courage
Willingness to Pay the Price for Ethics

Application of Ethics to Business Situations

Fraudulent Practices, Misleading Advertising, Unfairness

Personal Ethical Understanding

ht/wrong, Fairness, Honesty, Personal Integrity, Respect for Oth
Ethical Courage

 It is not sufficient to simply understand

ethical principles

 One must have the courage to pay a

price for being ethical

 Examples can be helpful—case studies

showing people willing to stand up for
ethical principles
 Level 4: Ethical
Leadership

Ethical Leadership
Helping Others to be Ethical

Ethical Courage
Willingness to Pay the Price for Ethics

Application of Ethics to Business Situations

Fraudulent Practices, Misleading Advertising, Unfairness

Personal Ethical Understanding

ht/wrong, Fairness, Honesty, Personal Integrity, Respect for Oth
Ethical Leadership

 The ability and willingness to

encourage others to behave ethically

 Includes
 Developing an organizational climate that
fosters ethical behavior
 Structuring policies that encourages ethics
 Behaving ethically while facing the
pressures of leadership
The Importance of Ethical
Leadership

Honest Employees Dishonest Employees

Will be Honest Always Swing GroupPolicies Won’t Help Much
Could Go Either Way

Ethical Leadership will significantly impact an

organization since the vast majority, in this view, can
be influenced to behave ethically.
 Importance of Ethical
Leadership

Honest Employees Dishonest Employees

Will be Honest Always Policies Won’t Help Much
Swing Group
Could Go Either Way

Strong Ethical Leadership—induces the

group to behave as if they were the honest
employees.
 Importance of Ethical
Leadership

Honest Employees Dishonest Employees

Will be Honest Always Swing Group
Policies Won’t Help Much
Could Go Either Way

Weak Ethical Leadership—permits group to behave

as if they were the dishonest employees.
 The work ethos is the prevalent
outlook towards work or the value
system with regard to the working
environment and community’s value
system, whether it is of an individual
or a work group.
NEED AND IMPORTANCE OF BUSINESS
ETHICS
I. Protection of Consumer rights:
Consumer is the centre of all business activities. In fact, business is essentially meant for satisfaction of consumer
wants. Unfortunately, consumers are the most neglected and
exploited group. The application of business ethics will help to confer and implement
consumer rights. Business ethics can be used to check malpractices like adulteration, unfair
trade practices and to make the working of business consumer oriented.
II. Social Responsibility:
Business ethics is a means of making business socially responsible for its actions.
Exploitation of consumers, employees, discriminate use of natural resources, etc; is quite
common in all types of business. Compliance to ethical standards will ensure (a) protection of
consumer rights, (b) public accountability, (c) protection of worker’s interests, and (d) proper
utilization of natural resources.
III. Concept of Socialism:
The concept of socialism in business states that gains of a business must be shared
by all and just by the owner of business. Profit is a sing of business skill and talent. Profit is
also a result of group efforts. Employees, shareholders, consumers, Suppliers and others
contribute to the success of the business. Therefore, success should be shared by all concerned.
Contd……
IV..Consumer Movement:
The growth in consumer movement is also another important factor
that has necessitated the need for business ethics. The spread of
education and awareness among consumers about their rights has
made the business community to conduct business on ethical
principles.

V. Better Relations With the Society:

Business ethics is needed to develop good relations between business
and society. The relationship of business with society has various
dimensions such as its relations with shareholder, employees,
consumers, distributors, competitors and government. Business ethics
will help to promote and protect the interest to various groups.
CONCEPT OF BUSINESS ETHICS

1. Business Ethics towards Employees:

• Payment of right wages and salaries.
• Provision of proper facilities.
• Proper personnel policies relating to promotion, performance appraisal,
transfers etc;

2. Business Ethics Towards Customers:

• Right pricing.
• Ethical promotion including advertising.
• Provision of proper information about products etc.

3. Business Ethics Towards Competitors:

• Fair competitive practices.
• Restraining from instigating employees, suppliers or dealers or competitors
etc.
Contd…….
4. Business Ethics Towards Government:
• Timely filing returns and other records.
• Payment of proper dues including taxes.
• Supporting Government in social development activities, etc;

5. .Business Ethics Towards Suppliers:

• Proper supply contact.
• Timely payment of dues.

6. Business Ethics Towards Dealers:

• Timely delivery of products.
• Proper dealer’ contact.
Contd…..

7. Business Ethics Towards Shareholders or

Stakeholders:
• Provision of proper information.
• Timely payment of dividend.
• Restraining form insider trading on the stock
markets, etc;

8. Business Ethics Towards Financial Institutions:

• Proper information about firm’s financial position.
• Timely repayment of advances and interest, etc.
Ethics @ Workplace

 Ethics in the workplace in its simplest terms

means doing the right things that guide your
behavior at work.
 On-the-Job Ethical Dilemmas

Telling the truth and

Situation in which
adhering to deeply felt
a business decision
ethical principles in
may be influenced
business decisions.
for personal gain.

Employee’s disclosure Businesspeople expect

of illegal, immoral, or employees to be loyal
unethical practices in and truthful, but ethical
the organization. conflicts may arise.
Golden Rules of Ethics @ Workp

 Avoid Creating Disturbance

 Trust & Respect for Others Work
 Don’t Interfere In Others Work
 Respect the Privacy of your Co-workers
 Avoid Gender Biasness
 No/Least Personal Work During Work Hours
Five P’s of Ethical Decision-making

Purpose
Persistence

Pride
Perspective

Patience
 Five P’s of Ethical Power

PURPOSE:
I see myself as being an ethically sound person.

I let my conscience be my guide.

N o matter what happens, I am always able to

face the mirror, look straight in the eye, and
feel good about myself.
 Five P’s of Ethical Power
PRIDE:
I feel good about myself.

I don’t need the acceptance of other people

to feel important.

A balanced self-esteem keeps my ego

and my desire to be accepted from
influencing my decisions.
 Five P’s of Ethical Power

PATIENCE:
believe that things will eventually work out well.

don’t need everything to happen right now.

am at peace with what comes my way!

 Five P’s of Ethical Power

PERSISTENCE:
I stick to my purpose, especially when it
seems inconvenient to do so.

My behaviour is consistent with my intentions.

As Winston Churchill said,

“Never! Never! Never! Never! Give up!”
 Five P’s of Ethical Power

PERSPECTIVE:
I take time to enter each day quietly
in a mood of self-reflection.

This helps me to get myself focused and

allows me to listen to my inner self and
to see things more clearly.
 Decision-Making

 Ethical decision-making involves the ability to

separate right from wrong along with the
commitment to do what is right

 Decision-Maker’s Personal Moral Philosophy (Moral

philosophy involves systematizing, defending, and
recommending concepts of right and wrong
behavior)
 Ethical Decision Making
Process
1 Recognizing a Problem & Define the
problem
2 Identify the underlying principles,
legislation and policies
3 Identify and consider the options
4 Choosing a Solution
5 Implementation
6 Evaluating the Solution
 Define the problem
Gather as much information as you can that will
illuminate the situation. In doing so, it is
important to be as specific and objective as
possible. Writing ideas on paper may help you
gain clarity. Outline the facts, separating out
assumptions, hypotheses, or suspicions. There
are several questions you can ask yourself:
 What is difficult about the situation?
 What other factors are involved (e.g. whole of
government policy)?
 Who else is involved and what are their points
of view on the matter? Is there a need to work
cooperatively?
 What effect does your behaviour have on them
 Identify the underlying
principles
After you have clarified the problem, refer to the Code of Ethics to see if the
issue is addressed there. If there is an applicable standard or several
standards and they are specific and clear, following the course of action
indicated should lead to a resolution of the problem. To be able to apply
the ethical standards, it is essential that you have read them carefully and
that you understand their implications.
If the problem is more complex and a resolution does not seem apparent,
then you probably have a true ethical dilemma and need to proceed with
further steps in the ethical decision making process. The following area can
help to understand the Underlying Principles

 Do your personal interests conflict, or reasonably appear to conflict, with

the public interest?
 What are your duties as a public sector employee?
 Does the Code of Conduct require you to behave in a certain way?
 Is there a relevant guideline, determination or policy?
 Are there any legal implications? Where necessary, seek legal advice.
Identify and consider
the options
List all alternative options. For each option apply
risk management principles to identify the
impact on different stakeholders, the legal
implications and the relevant principles of the
Code of Conduct.
For decisions that could have a large impact, or
if you are still unsure as to the preferred
action, get a second opinion from an
independent, trusted person.
Where necessary, seek advice from manager,
organisation’s human resources unit or ethics
advisor, or other agencies.
Choosing a Solution
Considering the information you have gathered and the
priorities you have set, evaluate each option and assess the
potential consequences for all the parties involved. Ponder
the implications of each course of action for the client, for
others who will be effected, and for yourself as a counsellor.
Eliminate the options that clearly do not give the desired
results or cause even more problematic consequences.
Review the remaining options to determine which option or
combination of options best fits the situation and addresses
the priorities you have identified.
 What would your family or chief executive say if your actions
were reported on the front page of a newspaper?
 How will this decision be viewed by future generations?
 Would you be happy if this action was performed on you?
 Implementation
 Create a detailed, step-by-step plan for implementing
the solutions you choose
 Who will do what, when, how?

This should include a means of evaluating the solutions

effectiveness by following ways
 Your choice of action must be within the legislation,
policies and guidelines both for your organisation and
the whole of government.
 Your behaviour must reflect the Code of Conduct.
 You must be able to justify your course of action.
 Evaluating the Solution
This is done after the solution has been
implemented and involves comparing
the results of what happened to what
you expected to happen.

In addition, you would want to consider

what you might do differently if the
situation were to occur again.
Benefits of Ethics
The list of potential benefits:

 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
 Increased employee loyalty, higher commitment and morale as
well as lower staff turnover
 Reputation benefits (customers and suppliers)
 More open and innovative culture
 Generation of good-will in the communities in which the
business operates
HOW ORGANIZATIONS SHAPE ETHICAL CONDUCT
 Ethical Awareness
Code of Conduct Formal statement that defines how the organization expects and
requires employees to resolve ethical questions.

 Ethical Reasoning
Codes of conduct cannot detail a solution for every ethical situation, so corporations
provide training in ethical reasoning.

 Ethical Action
Helping employees recognize and reason through ethical problems and turning them
into ethical actions.

 Ethical Leadership
Executives must demonstrate ethical behavior in their actions.
Personal Traits

Three personal traits act as

moderators of an individuals
personal values in decision making
activities. They are
 Ego strength
 Field dependence and
 Locus of control
Ego Strength

Ego strength is actually another term

for self-confidences. Ego strength is
associated with personal beliefs.
A person with high ego strength would
be expected to rely more on his own
personal values and beliefs of what
is right and what is wrong and be
less influenced by others.
Field dependence

The tendency to rely on oneself or the field as

the primary referent for behavior is field
dependence. People who have a tendency to
rely on self as a primary referent for their
behavior are field-independent people.
They are relatively cold and distant in relations
with others, and more able to separate
themselves from others and the environment.
However, they have greater accuracy in
personal perception, have a more articulated
body concept, and have higher restructuring
ability.
Locus of Control
The degree to which people believe they are masters of their
own fate.

Internals (Internal locus of control)

Individuals who believe that they control what happens to
them.
Externals (External locus of control)
Individuals who believe that what happens to them is
controlled by outside forces such as luck or chance.
 Morality
Morality can be explained in all these ways:

 Morality can be defined as the standards that an

individual or a group has about what is right and
wrong, or good and evil.
 Moral quality or character; rightness or wrongness, as
of an action; the character of being in accord with the
principles or standards of right conduct.
 Morality is an informal public system applying to all
rational persons, governing behavior that affects
others, and has the lessening of evil or harm as its
goal.
Stages of Moral
Development
There are six stages of moral development and an
individual develops sequentially through the stages.
 Stage one: actions that avoid punishment.
 Stage two: actions that serve one‘s needs
 Stage three: actions that gain approval from others;
 Stage four: actions that abide laws and authority;
 Stage Five: actions taken to abide by social contracts
and
 Stage six actions supported by universal principles.
All six stages provide a rational moral Action
 Moral Judgments
The Moral judgments should be
(i) logical, ( Moral judgments should be able to
support our Moral judgments with reason and
evidence. )
(ii) based on facts. ( Moral judgments should be
based on facts. Adequate moral judgments cannot be
made in a vacuum. We must collect as much relevant
information as possible for making them.)
(iii) based on acceptable moral principles.
Global Ethical Issues
Wages and hours

Child labour

Discrimination

Legal and ethical business practices

Product safety and quality

Environment
What causes unethical
behaviour
 Stress

 Confusion

 Pressure to perform at expected levels

 Competition within the industry

 No knowledge
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
Unethical business
practices (contd)

 Government corruption
 Financial scandals
 Product safety
 Discrimination
“What’s in it for me to be
ethical?”
- A more accurate perception of the world around you,
follow your conscience.

-Have the courage to do what is right and do try new

things even when it is hard or costly.

-Don’t loose heart if you fail or don’t get what you

want

-A stronger personality, and greater likelihood of being

happy in life
CONSIDER CONSEQUENCES
 IS IT ETHICAL ? Is it fair ?

 IS IT LEGAL ? Does it hurt anyone ?

Have I been honest

 IS IT OK ? with those affected?

 IS IT RIGHT ? Can my conscience live

with this decision ?
5 Part Structure of
Business Ethics

 Specifications of moral judgment

 Moral judgments and moral standards
 Justification of moral judgement
 Logical reasoning and moral judgement
 Moral judgement and moral responsibility
ETHICAL RELATIVISM

The theory that suggest what is

right is determined by what a culture
or society says what is right.
CONCLUSION

In the last few years we have seen a drastic

change in society as well as in all facets of the
business world. The consumer, today, is more
aware of his rights and his requirements. He
demands the best quality at the regular prices.
Companies today need to incorporate a strong
or responsible culture to face the instance
reaction of the consumer.

Today’s market calls for stringent business

ethics to be imposed in the corporate world.
Which Way Will
Your Organization
Swing?
“Good Ethics
Means Good
Business”