Business Ethics and Corporate

Governance
 Business ethics an overview

Contents Objectives
Ethics An overview By the end of this unit, students should be
able to:
Nature of Ethics
Explain the concept of ethics, its
Objectives of ethics nature and its objectives.
Business ethics Discuss the concept and nature of
Nature of business ethics business ethics

Relationship between business and Identify the relationship between

ethics business and ethics

Stages of ethical consciousness in Define the various stages involved in

business the ethical consciousness in business

Need for business ethics Recognize the need for business

ethics
 ethics an overview

Ethics are set of moral principles which

when applied distinguishes what is
right from what is wrong. Ethics
evaluates human conduct/actions as
good or bad, right or wrong, moral,
immoral or amoral based on the set of
moral standards

Ethics is a normative science as it refers to well based standards of right and

wrong that prescribe what humans ought to do, usually in terms of rights,
obligations, benefits to society, fairness, or specific virtues.
 Nature of ethics

Ethics deals with human beings who are capable of judging

between right and wrong, and good and bad behavior. The
question of ethics arises as ethics is associated with values and
morals.
According to experts, ethics is more a science than an art it is
systematic knowledge about the moral behavior and conduct of
human beings.
Ethics is a normative science. The term normative implies a guide
or control of action. So, ethics tell us what we should do.
Ethics deals with human conduct that is voluntary and not forced
by any person/s or circumstances.
 Objectives of ethics
The objectives of Ethics are to establish moral standards, evaluate human
conduct based on these moral standards and also give prescriptive advices on
how to act morally in a given situation.

compared
Actions that has with
Established norms
been committed of acceptability

Evaluate as
right/wrong, Guide as to what
moral/immoral, has to be done
etc
 Business ethics
It is the written and unwritten codes of principles and values that govern decisions
within a company.

It is the study of what is right and wrong human behavior and conduct in business

Companies and business people who wish to thrive long term must adopt sound
ethical decision making practices and achieve a balance between their social
obligations and economic objectives.

Social
Responsi
bility

Economic
Objective
 Nature of Business Ethics
Overt
Ethical Clear and reprehensible
Problems

Two Types of
Ethical Problems
Covert Difficult to locate and
Ethical
Problems
eliminate

Characteristics of Ethical Decisions in Business:

Ethics is unstructured and abstract in concept

Ethical decisions differ with the individual perspective of different persons and hence do not have unique
decision but have multitude of alternatives

Consequences of most ethical decisions are unclear

Ethical decisions are voluntary human actions

Relationship between Ethics and Business

Three different views of relationship between ethics and business:

Unitarian Separatist Integration

View View View
Ethical behavior and
business are
Business should
integrated. The
concentrate on
Business is a part of external forces like
profits, and ethics
moral structure and government, market
and morality do not
moral ethics system, law and
form a part of
services will guide
business
the ethical behavior
of the business.
Stages of Ethical Consciousness in Business
Law of the Jungle
Philosophy of the
businesses was might
makes right
Corporate
Citizenship
Businesses operate at the high
level of ethical consciousness.
Social responsibility being the
major responsibility,
businesses seek to achieve
certain social objectives
Anything for Profit
Profit was the only goal of
business and anything was
done to generate profits
Stakeholder
Concept
Companies concentrate on
social and economic mission
and focus is to serve all
stakeholders in the business
and balance their respective
interests
Profit Maximizing
Short Term
Based on the belief that
good business is good
ethics, business aim was to
maximize profits within the
constraints of law
Profit Maximizing
Long Term
Shift in focus from business to
ethics. Sound ethics is good
business in long run.
Shareholders interest is the
primary concern with an equal
concern for running business
in right and profitable manner
Need for Business ethics

Being part of the society, businesses should

contribute to the societys welfare.

To survive in the market businesses should

gain loyal customers and being ethical and
moral would provide businesses with loyal
customers.

Business ethics makes businessmen

conscious of social responsibilities, operate
on ethical grounds.
 conclusion
In recent years, business ethics has gained lot of
importance with the increased awareness that it is critical to
a companys success. Till the 1990s, Indian organizations
considered business ethics as just an extension of
philanthropy. However, the definition of the term broadened
with the entry of multinationals into the country.
Over the years, stakeholders have become generally more
aware and this has forced organizations t follow ethical
business practices. Organizations have realized that today,
stakeholders are concerned about financial irregularities,
tax evasion, poor quality products and services, kickbacks,
non-compliance with environmental issues and hazardous
working conditions. They have come to understand that
integrity, transparency and open communication are the
norms of modern-day business and that the goodwill gained
from adopting a code of business ethics would , in the long
run, turn into economic gains in the form of growing stock
market capitalization.