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Business Ethics as Competitive Advantage for

Companies in the Globalized Era

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 Kain &Sharma, Apeejay - Journal of Management Sciences and Technology 3 (1), June- 2014
(ISSN -2347-5005)

Business Ethics as Competitive Advantage for

Companies in the Globalized Era

Dr.Poonam Kain Dr. Sonika Sharma

School of Management Imperial College of Business Studies
Apeejay Institute of Technology , Greater Noida Bangalore
________________________________________________________________________________________________
Abstract: Business Ethics refer to rules and standards governing person's conduct. Ethics has only recently become
an important area of study in globalized era. It has been found that ethical behaviour is influenced not only by
individual or group behavior but also by factors in the cultural, organizational and external environment. Ethical
codes, role models, policies and practices and reward and punishment system comprise the organizational influences.
The external factors include development taking place in the political, legal, economic and international arena. All
these factors in determining the ethical behavior and groups in organizations. For most employers the relationship is
also of critical importance. The cost of labor, and the effective use of the HR, is often a major influence on the
success of an organization. The employee body as a whole will be important, although the economic importance of
individual employees will depend on the employers dependence on their skills, and ability to replace them if
necessary on the labor market. In the same way, the employees dependence on a particular employer will rest on
whether there are employment opportunities elsewhere.

Keywords: Ethical Culture, ICCPR, ICESCR, FICCI, CII, NHRC,Ethical Code and Conduct, Corporate Social
Responsibility

I INTRODUCTION
Since the inception of globalization, working culture of organizations has really attracted the attention of the
Researchers. It has been the interesting issue for the researchers to understand as to what factors are responsible for
developing the businesses ethics. In Global Era it is most important for the companies to follow the Business Ethics into
the different functional areas of management. A debate about appropriate ethical approaches to the management of
people at work has a much longer history. This widespread interest is not surprising because the types of employment
relationships that develop in society are important, not only for the success of organizations and for the life experience
of individual employees, but for the wider political and social culture of society as a whole. Clearly, the nature of
relationships between employees and employers can vary greatly. At one extreme are causal, short-term, and probably
strictly instrumental exchanges of small amounts of time and labor for limited rewards (e.g. a student paid an hourly
rate for evening or Saturday work at the local shop/garage/ restaurant or bar). At another extreme is the employment
relationship that consumes the majority of an employees time and emotional energy, with the expectation of a lifelong
career within one organization determining not only financial rewards and immediate lifestyle, but a persons lifetime
opportunities for personal development, organizational influence, and social prestige. For most employees, in most
countries, and for much of recent history, the rewards and job satisfaction associated with their employment relationship
will have a determining influence on their standard of living and life experience. For breadwinners with dependent
family, the standard of living of loved ones will also be involved.
For most employers the relationship is also of critical importance. The cost of labor, and the effective use of the HR, is
often a major influence on the success of an organization. The employee body as a whole will be important, although
the economic importance of individual employees will depend on the employers dependence on their skills, and ability
to replace them if necessary on the labor market. In the same way, the employees dependence on a particular employer
will rest on whether there are employment opportunities elsewhere. Nevertheless the employment relationship is
important for both sides. It is therefore not surprising that it has attached much attention and that ethical dilemmas
associated with the relationship have for long been the subject of analysis.

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A. Ethics at Workplace
Business ethics is the moral evaluation of the goals, policies, practices, and decisions taken within business
organizations as they impact on human well-being, fairness, justices, humanity, and decency. Here, the term ethics is
synonymous with morality which is in general equivalent terms. Often business ethics is presented in terms of the
decisions facing individuals as board members, managers, or employees and the dilemmas ( i.e. choices between
competing moral considerations), or temptations ( as in conflicts of interest) facing them. However, these individual
choices have to be seen in the context of the roles that people are expected to play within a specific organization
operating in a particular type of political, economic, and social system. This means that business ethics has to consider
the moral critique of business and management practices as a whole and not just address the behavior of individual
managers and others. It is individuals who must ultimately make moral choices, either on their own or collectively, but
identifying what choices exist and decisions they ought to make requires analysis of the morality of the existing and
potential system and its constituent roles.

TABLE 1
TOP FIVE REASONS TO RUNA BUSINESS IN AN ETHICAL MANNER

Factors Rank
Protection of brand and reputation 1
The right thing to do 2
Customers trust and loyalty 3
Investor Confidence 4
Public acceptance/recognition 5

Source: A Global Study of Business Ethics 2005-2012

B. The Need for Code of Ethics for Indian Industry

India is a signatory to the Global Compact and Millennium Development Goals. Yet, there is a lack of code for
promoting ethical business practices. Therefore, there is a need to develop structures for facilitating adoption of code of
ethics by Indian industry. The Human Rights Council of the United Nations, at its Eleventh Session (June 2008),
unanimously welcomed the Special Representative Mr. John Ruggies proposal for establishing a policy framework
based on three principles of protect, respect and remedy in order to promote the cause of human rights in business
enterprises. Besides reemphasizing the state duty to protect human rights, this framework also lays down that businesses
have a responsibility to respect human rights.
Need for Formulating Industry-wide Code of Ethics have also come out with guidelines to promote ethical business
practices. Besides fulfilling regulatory compliance, a code of ethics should be an acknowledgment of the nations
growing economic clout. The growth in stature has been symbolically acknowledged by the recent adoption of currency
symbol for our Rupee, which bracketed the Rupee with elite league nations. A similar imperative needs to be extended
to the gamut of Corporate Ethics. Developing a code of Corporate Ethics in line with international best practices will
not only provides an imperative to tune in with latest global practices and standards but will also allow the Indian
Corporations to emerge as role models for others to follow.
Globally it has been realized that the challenge facing business is not just to market a product; rather it lies in making
the process Socially Acceptable. The rising concern for charting a road map for sustainable business manifests this
challenge to have an updated code of ethics for the industry.In a competitive world, an updated and well-defined code
of ethics reflects the core values of an organization. This can protect against harassment or dictum, fines and sanctions.

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To quote the Ruggie Report again, Companies have had to acknowledge that business as usual is not good enough for
anybody, including business itself.
II REVIEW OF THE PRESENT LITERATURE
In the UK, the Government encourages adoption and reporting on Corporate Social Responsibility (CSR) through
guidance on best practice, regulation, and fiscal incentives. In addition, within the corporate sector it would now appear
that there is also a growing interest in the development of corporate codes of conduct or ethics. In this respect the
Illionis Institute of Technology, Center for the Study of Ethics in the Professions, Codes of Ethics Online provides a
large and growing collection of code drawn from a wide variety of industries including communication, IT, engineering,
finance, and real estate. Given all of these initiatives in business ethics and CSR, one might expect a similar growth of
interest in ethics and HRM. After all an extremely important component of making business more ethical is to take
seriously the ethical aspects of managing people. A review of the literature does indeed reveal a modest growth of
interest in the subject. Over the last decade there have been a number of books, edited collection, and articles published
on ethics in academic journals and elsewhere. Nevertheless, it has not really kept pace with developments in the broader
field of business ethics. An article titled Second India Scandal Has Business Leaders Rethinking Ethical Standards
shows how grave the situation in India is. It states Recent scandals in Indias technology industry have triggered new
scrutiny of the countrys ethics practices and standards. In the most recent development, WIPRO, one of Indias biggest
computer outsourcing firms, was blacklisted by the World Bank for allegedly providing improper benefits to Bank
staff, reports Forbes.The human rights impact of companies is assessed by using the following international
conventions as yardsticks: the Universal Declaration of Human Rights (UDHR), the International Covenant on Civil
and Political Rights (ICCPR), the International Covenant on There are many more such examples. Such incidents
emphasize the maxim prevention is better than cure'.
India has been slow to join the international movement towards greater corporate respect for human rights and state
protection against corporate human rights abuses. Critics assert that the Indian government has hitherto ignored the link
between its promotion of greater freedom for business growth and the greater likelihood of harmful societal effects,
including human rights violations. Recently, however, the National Human Rights Commission (NHRC) of India has
decided to draft a Corporate Code of Ethics. The NHRC Code of Ethics for Indian Industry is a positive development
that should be welcomed by the public and private sector alike, as it gives recognition to the harmful effects on business
society and takes steps to protect against or mitigate such effects. Until now, Indian businesses have been left to their
own devices with regard to corporate social responsibility (CSR). Some have well developed and internationally
recognized CSR programs. The Tata Group provides the best example:
Every employee of a Tata company, including full-time directors and the chief executive, shall exhibit culturally
appropriate deportment in the countries they operate in, and deal on behalf of the company with professionalism,
honesty and integrity, while conforming to high moral and ethical standards. Such conduct shall be fair and transparent
and be perceived to be so by third parties. Every employee of a Tata company shall preserve the human rights of every
individual and the community, and shall strive to honour commitments. Every employee shall be responsible for the
implementation of and compliance with the Code in his /her environment. Failure to adhere to the Code could attract
severe consequences, including termination of employment.
The Corporate Public Sector Enterprises (CPSE), for instance, was initially introduced for ensuring equity and justice to
the society as a whole. Over the past few decades, it has worked hard to achieve this aim, with moderate success. The
government has recognized that public-sector business undertakings impact customers, employees, shareholders,
communities and the environment Tata takes its ethical obligations to the community quite seriously. It is clearly

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opposed to Corruption and fraud by promoting transparency in all aspects of its business. However, the example it has
set is not widely followed.
While some companies have worked hard to install the values of social responsibilities into their business practices,
Indian businesses generally do not adhere to any codes of ethical conduct. As a result, the public sector has a major role
to play in implementing CSR programs. It has already made some progress with regard to state-owned businesses.
Indian industry organizations have taken similar initiatives. The Confederation of Indian Industry (CII) released a Code
of Business Ethics to its members (more than 8000 member companies), aiming to reduce corruption and ensure
transparency among business communities through effective ethical practices in the organization.
The Federation of Indian Chambers of Commerce and Industry (FICCI) have also adopted a similar stand when it
comes to ethics in business. It promotes a value-based business model for creating social and economic values. A few of
the measures include:
Calculating benefits and costs to make the business case;
Identifying and managing positive as well as negative impacts;
Integrating CSR best practices into key business areas;
Recognizing outstanding efforts towards this end.
Despite these initiatives, private businesses still do not adhere to codes of ethical conduct. Thus, in addition to
inter-organizational policies, the government must also be vigilant and draft laws concerning corporate liability for
human rights violations.

TABLE 2
TOP FIVE BUSINESS DRIVERS IN TERMS OF THEIR IMPACT ON BUSINESS ETHICS
Factors Rank Today Rank in 10 Years
Corporate scandals 1 4
Marketplace competition 2 2
Demands by investors 3 5
Pressure from customers 4 3
Globalization 5 1
Source: A Global Study of Business Ethics 2005-2012

III EXPLORING THE DIMENSIONS OF ETHICAL PRACTICES IN INDIAN INDUSTRIES

This paper will explore the state of ethics in companies in India, giving business leaders and researchers critical insight
into this increasingly important player in the global marketplace.
Over three decades ago, British historian E.P. Thompson commented that India is the most important country for the
future of the world. Today, Indias critical and growing role in the global economy is widely acknowledged. Because
of its large and diverse population, including a high percentage of working age adults, India is becoming a major
player in the global marketplace and of great interest to multinational companies seeking an educated and cost effective
workforce. Yet challenges remain. In the words of Tushar Poddar , Managing Director, Global Investment Research , at
Goldman Sachs, Governance is going to be a critical challenge and has been over the past few years , and the way
India resolve it would also affect its potential growth rates. More needs to be known about the governance and ethics
challenges in companies operating in India. This paper has tried to identify a proven approach that provides statistically
reliable findings regarding employee perception of ethics in the Indian workplace.
The research focuses on culture metrics because it has been proven that when companies have a well implemented
program and a strong ethical culture, risk is reduced. This translate into reduced misconduct, greater reporting of

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misconduct reduced pressure to compromise standards or the law, and reduce retaliation for reporting misconduct. Here
ethical culture is defined and measured based upon the following factors:

A. Ethical Leadership
Leaders set the tone at the top and model ethical culture as a part of earning the trust of employees
B. Supervisor reinforcement
Employees look to immediate supervisors for the signs that the tone at the top is important and taken seriously.
C. Peer commitment
Peers talk about the importance of ethics and support one another in doing the right thing.
Some common elements have been identified that are part of every well implemented ethics and compliance
program.
A well implemented program includes:
Written standards for ethical conduct
Training on standard of ethical workplace conduct
Mechanism for seeking ethics related advice or information
A well implemented program should yield several positive outcomes.
Willingness to seek ethics advice
Receipt of positive feedback for ethical conduct
Feeling of preparedness to handle situations that invite misconduct
Able to question the decision of management without fear of reprisal
Rewarded for the following ethics standards
Employees who achieve standards
Employees who achieve success through questionable means are not rewarded

IV RESEARCH METHODOLOGY
A. Objectives
This study on Business Ethics and Indian industries in Globalized Era has the following objectives:
To study the competitive advantage of adopting Business Ethics at workplaces.
To study, compare and analyze the perceptions of the employees with regard to the Ethical and
Employment practices being adopted by the Indian Industries.
To assess, compare and analyze the factors influencing the satisfaction of the employees towards the
Ethics and Employment practices.

B. Design
The general intent of this descriptive study was manifold. Therefore a systematic and organized methodology was
obtained for the study. A survey design was used to obtain the required information. The population for this study
comprised of employees working in various IT organizations in Bangalore Region. A sample size of 100 was chosen for
this study. Simple random sampling technique was used to gather data from the respondents, because of which
respondents diverged from every age group, gender, organization, marital status etc. The questionnaire was intricately
designed to tap the demographic variables including age, education, gender, marital status, and tenure of the
respondents. The instrument is divided into two parts, part one of the instrument has 14 items to check the ethical
standard for the internal equity of the organization while part two has 16 items to check the ethical standards for the

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external equity of the organization. The perceptions and satisfaction of the respondents towards the Ethical and its
competitive advantage to Employment practices in the IT industry are measured by the thirty statements, qualifying as
the factors being derived from a review of literature in the area of study, on Likerts (1932) five-point scale of strongly
agree strongly disagree, the scale in quantitative terms being: 5 as strongly disagree, 4 as disagree, 3 as
neutral, 2 as agree and 1 as strongly agree.
The data collection began in the month of January 2013. Statistical Package for the Social Sciences (SPSS) version 17.0
was religiously used for the statistical analyses. The significance of the study lies in the detonation of the IT industry in
the recent years. Where on one hand the sector is growing with leaps and bounds, on the other the employee turnover
has been alarmingly high, thus costing a lot to the company. The middle level and low level employees are victims of
dearth of motivation and employee satisfaction also seems to be brandishing. The study is an attempt to assess the
Ethics and its competitive advantage in IT industry. Thus, not only it is significant for academicians but also for
professionals who can exploit it to control the employee turnover and improve the working conditions.
To test the validity of the instrument, a pilot study was done on 25 participants in the month of December 2012. Based
on their responses, validity tests were done to check for the validity and usability of the instrument. Cronbach alpha,
KMO measure of adequacy and Bartletts test of sphericity were conducted. Cronbach alpha was calculated to measure
the internal consistency reliability of the instrument. The cronbach alpha came as 0.898 for Part II and 0.963 for Part III
thus the instrument was considered reliable for the study. Kaiser-Meyer-Olkin test was done to measure the
homogeneity of variables and Bartlett's test of sphericity was done to test for the correlation among the variables used.
The KMO value for part I of the instrument was 0.745, and for part II was 0.767, both of which are acceptable as a
middling value. The Bartletts test showed significant results for both the parts and hence the instrument was accepted
for further study. On getting quite meritorious results of the validity, the instrument was floated for data collection.

TABLE 3
TESTS OF VALIDITY OF THE QUESTIONNAIRE

No. Cronbachs Kaiser-Meyer-Olkin Bartlett's Test of

of Alpha Measure of Sphericity
items Sampling Adequacy

Part 1 14 .898 .745 Approx Chi -square 6052.012

Df 210.000
Sig .000

Part II 16 .963 .767 Approx Chi -square 12554.051

Df 190.000
Sig .000

V FINDINGS
Findings represent the views of the Indian workforce in the IT sector. They provide business leaders a snapshot of
trends in workplace ethics and an identification of the drivers that improve ethical workforce behavior. Researcher
identifies the strategies that business leaders can adopt to strengthen ethics cultures of their businesses.
1. Companies investments in ethics and compliance are paying off, but there remains room for improvement. The data
show just enough negative results to suggest that progress is not necessarily irreversible especially if a revitalized
economy arouses workers willingness to engage in riskier behavior. It is clear that manager behavior could be
improved, and that reducing retaliation is essential. Building strong ethics cultures remains a constant work in progress.
It is also possible -- and we believe probable -- that increasingly sophisticated ethics and compliance (E&C) programs

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are creating new norms in worker conduct. By almost every measure, companies are working harder to build strong
cultures and further develop their ethics and compliance programs.

The percentage of companies providing ethics training rose from 74 percent to 81 percent between 2011 and
2013.
Two-thirds of companies (67 percent) included ethical conduct as a performance measure in employee
evaluations, up from 60 percent in 2011.
Almost three out of four companies (74 percent) communicated internally about disciplinary actions when
wrongdoing occurs.
Companies are doing a better job of holding workers accountable, imposing discipline for misconduct, and
letting it be known that bad behavior is being punished.

2.The elements considered as part of an ethics and compliance program include: 1) written standards of ethical
workplace conduct, 2) training on the standards, 3) company resources that provide advice about ethics issues, 4) a
means to report potential violations confidentially or anonymously, 5) performance evaluations of ethical conduct, and
6) systems to discipline violators. A seventh element is a stated set of guiding values or principles.

3. Two elements i.e. evaluation and discipline are proven to be most critical for reducing misconduct. That is significant
because data shows discipline and ethics as a part of employee evaluations are two of the most powerful tools in
effective E&C programs. Robust and well-implemented ethics and compliance programs have a profound positive
impact on companies commitment to standards and good conduct, i.e., their ethics cultures. Following from the
improvements in programs, strong ethics cultures are also on the rise. The percentage of companies with strong or
strong-leaning ethics cultures climbed to 66 percent.
4. The increase in ethical commitment is significant because ethics culture drives employee conduct. When companies
value ethical performance and build strong cultures, misconduct is substantially lower. Culture is another way of
referring to the way things are done around here. .In business, culture encompasses everything from how employees
dress, to the way they work with customers, and their interactions with the boss.

5.Ethics is a component of culture. The study measures critical aspects of ethical culture, including: managements
trustworthiness, whether managers at all levels talk about ethics and model appropriate behavior, the extent to which
employees value and support ethical conduct, accountability, and transparency.The strength of ethical culture indicates
the extent to which employees at all levels of the company are committed to doing what is right and successfully
upholding values and standards.
VI CONCLUSIONS
Both legally and strategically, India stands to benefit from improving business ethical standards. From a legal
perspective, the growing international consensus on the state responsibility to prevent corporate human rights violations
obliges India to take further steps to protect its citizens from such abuses. From a strategic perspective, India needs to
strengthen its position in the international community. It can do so by pushing for stronger laws to curb corporate
human rights abuses that will signal its intent to conform to international laws and guidelines. India, as a member
country of the United Nations, has pledged under Articles 55 and 56 of the UN Charter to take joint and separate action
to promote universal respect for, and observance of, human rights and fundamental freedoms, without distinction as to
race, sex, language, or religion. India has also ratified the ICCPR and the ICESCR, and has definite human rights
obligations. Since business operations affect human rights on a large scale, the State has a responsibility to ensure that

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corporate conduct is conducive towards creating an atmosphere of respect for the human rights of all. Before the Indian
government acts, though, Indian corporations must take their own affirmative steps towards greater respect for human
rights. By adopting the NHRC code of ethics, they would follow the lead of hundreds of multinational corporations that
have adopted the U.N.s Protect, Respect and Remedy framework or similar frameworks. The sustainability of Indias
economic growth demands nothing less.

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