A PROJECT REPORT ON

BUSINESS VALUES AND CHARACTER ETHICS

Submitted in partial fulfillment of the requirements

for the award of the Degree of

(BBA)GEN

TO

GURU GOBIND SINGH INDRAPRASTHA

UNIVERSITY, DELHI

GUIDE: SUBMITTED BY:

MS. SHIVANI MALIK DENNIS KUMAR

BBA 3RD SEM

BLS INSTITUTE OF TECHNOLOGY AND MANAGEMENT

Delhi- Rohtak Road, NH-10, Jakhoda, Bahadurgarh - 124 507

1
ACKNOWLEDGEMENT

The successful completion of the project would have been far from reality without
mentioning the people who made an indelible impression while making the project.

All the very outset thanks to Ms. Shivani Malik for instructing me and providing me the
opportunity to participate in the project and sharing her invaluable knowledge and
experience with me. Her innovative ideas provided me clarity of thoughts which helped
me to think in the right way.
Without her help and guidance completion of the project report would have been very
difficult. I would also like to give gratitude to all the other faculties who helped me in
making the project worth wile and successful.

Due to the proper guidance the making of project report became an enjoyable experience
and easy to workout.

DENNIS KUMAR
BBA 3rd sem

05020501709

2
 BLS INSTITUTE OF TECHNOLOGY AND MANAGEMENT

Delhi- Rohtak Road, NH-10, Jakhoda, Bahadurgarh - 124 507

Certificate
This is to certify that the project titled “BUSINESS VALUES AND CHARACTER

ETHICS” is a bonafide work carried out by Dennis Kumar, a student of BLS Institute of

Technology & Management. It is submitted in partial fulfillment of the requirement for

the award of the Degree of BBA under our guidance and direction.

To the best of our Knowledge, it is an original piece of work.

Date- Ms. Shivani Malik

3
 PREFACE

Initial in the one module of the project, which is allotted to me, “BUSINESS

VALUES AND CHARACTER ETHICS” is covered in this project report.

The report contains very nice and well arranged topics related to the subject

“BUSINESS VALUES AND CHARACTER ETHICS”. The main contents of this project

describes that ‘That what are ethics’, Code of Ethics’, ‘Business Ethics’ and many other

topics which is countable in the “BUSINESS VALUES AND CHARACTER ETHICS”.

The project report also contains a description of “Business Ethics “which is very

important for an organization to work fairly in an environment.

Overall this reports my work like a guide for the subject “BUSINESS VALUES AND

CHARACTER ETHICS”.

OBJECTIVES

The main objectives of the project were:

• To gain more information about values and character ethics

• To know the importance of values in business.

• To study and evaluate human conduct in the light of moral principles.

• To collect information about the involvement of ethics in human activities

including business.

4
Contents

5
TOPICS PAGE NO.

ACKNOWLEDGEMENT,CERTIFICATE ,PREFACE & OBJECTIVES 2-4

CONTENTS 5

CHAPTER 1-VALUES 6-13

a)BUSINESS VALUES

b)CRITICISMS

CHAPTER 2-ETHICS,VALUES AND MORALS 14

CHAPTER 3-INTRODUCTION ON ETHICS 15-26

a)DEFINITONS ON ETHICS

b)FEATURES OF ETHICS

c)BUSINESS ETHICS AND ITS TYPES

CHAPTER 4- RELATIONSHIP B/W BUSINESS ETHICS AND 27-28

MANAGERIAL VALUES AND UNETHICAL BUSINESS ETHICS

CHAPTER 5- CONCEPTUAL MODEL OF BUSINESS ETHICS 29

CHAPTER 6- LEVELS OF ETHICAL DECISIONS IN 30-31

BUSINESS

CHAPTER 7- NEED AND IMPORTANCE OF BUSINESS 32-33

ETHICS
CHAPTER 8- ELEMENTS OF BUSINESS ETHICS 33-34

CHAPTER 9-APPROACHES TO BUSINESS ETHICS 34

STUDY QUESTIONS FOR “APPROACHES TO BUSINESS 43

ETHICS”

CASE STUDY ON HDFC BANK 45

CONCLUSION 53

REFERENCES 54
6
Values

Values are convictions and a framework of philosophy of an individual on the basis of

which he judges what is good or bad, desirable or undesirable, ethical or unethical.

Rokeach defines values as –

“Values represent basic convictions that a specific mode of conduct is personally or

socially preferable to an opposite mode of conduct”

It has some characteristics like –

1. Part of culture

2. Learned Responses

3. Inculcated

4. Social Phenomenon

5. Gratifying Responses

6. Adaptive Process

Values are even classified into various categories that are –

1. Allport’s Values Classification

2. Grave’s Classification

3. England’s Classification

4. Rokech’s Classification

Values System is even adopted by Indian Managers in their own way. Various

researchers have attempted to identify the value systems of Indian managers. These

7
researchers have used Allport –Vernom –Lindzey model, Graves’s model and

England’s model. The major findings are given below –

1. Managers tend to have value orientation towards economic, theoretic,

political, social, aesthetic and religious in that order.

2. Managerial Values tend to be existential, conformistic, manipulative,

sociocentric, tribalistic and egocentric.

3. Indian managers are more pragmatist than moralist. There are generally some

acceptable unethical practices in business.

4. In term of work values, Indian managers tend to money orientation during

early days of their career and later shifts to matters like job satisfaction.

5. Indian mangers give importance to various occupational values in the order to

be free from supervision.

8
Business values

Physical Values

Accuracy

The precision, exactness, and conforming to fact in details of work.

Cleanliness

of offices, production and warehouse facilities, equipment, customer service areas, raw

material and finished product inventory, closets, bathrooms, and so on

Maximum Utilization of Resources

The desire and ability of the company to improve its performance by full utilization of its

current resources (i.e. as time, money, equipment, materials, space, people, etc.).

Punctuality and Timeliness

in arriving on time to work, from breaks, from lunch, to meetings, in replying to letters

and phone calls, in paying bills on time, etc. Occurring at the most suitable or opportune

time.

Quality of Products and Services

in terms of presentation, functionality, choice, value, speed, timeliness, suitability,

repeatability, reliability, life span, repeatability, courtesy, friendliness, etc.

Regularity

of meetings, reports, sales calls, performance reviews, and so forth

9
Reliability

The way system or persons consistently produce the same results, preferably meeting or

exceeding its specifications. Dependability.

Responsiveness

The way people, the organization, systems, etc. react to a need coming from within or

without.

Speed of Operations

The measurement of whether actions occur in the fastest time.

Organizational Values

Accountability

of individuals, departments and divisions for performance, results, problems, and so on

Communications

up, down, and sideways within the company, with customers and vendors, in terms of

openness, frankness, clarity, frequency, accuracy, timeliness, and brevity

Cooperation (Teamwork)

among individuals, departments, divisions, branches, and so on

Coordination

horizontally between departments in terms of plans, activities, and systems

10
Psychological Values

Continuous Improvement

The desire and ability of the company to develop and incorporate ways to improve itself.

Creativity

in terms of new products, new ideas, new systems, new production methods, new

applications of technology, new methods of financing, new marketing strategies

Customer Delight

The positive emotional response and joy that the customer feels from interaction with our

people and our products and services.

Decisiveness

in solving problems, planning, executing plans, in terms of speed and commitment to

decisions once made

Develop People

The desire and ability of the company to improve the lot of its employees, including,

ultimately, their personal growth.

Harmony

The overall atmosphere and interaction between people, departments, divisions, systems,

11
activities, rules, and policies within the company and between these elements and the

external environment, customers, vendors, community laws, and so on.

Innovation

The desire and ability of the company to venture into new, breakthrough areas of

opportunity. (e.g. in the industry, in emerging trends in society, etc.)

Integrity

Keeping to one's word, promises, agreements, being truthful, non-deceitful etc. with

employees, customers, vendors, government, etc.

Loyalty

to and from suppliers, customers, and employees

Resourcefulness

The ability to deal resourcefully, i.e. creatively, imaginatively, self-reliably with unusual

problems, difficult situations, or unanticipated opportunities.

Respect for the Individual

in establishing rules and policies, design of systems, making decisions, executing

instructions, and so on in terms of people's health, safety, self-esteem, feelings, and

opinions

Service to Society

Community welfare, environmental protection, development of products and services that

meet real physical, social, or psychological needs.

12
(A Will to) Succeed

in any aspect of work.

Criticisms

Business value is an informal concept and there is no consensus, either in academic

circles or among management professionals, on its meaning or role in effective decision-

making. The term could even be described as a "buzz word" used by various consultants,

analyst firms, executives, authors, and academics.

Some critics believe that measuring economic value, economic profit, or shareholder

value is sufficiently complete to guide decision-making. Their logic is that all other forms

of value are essentially intermediate to the ultimate goal of economic profit. Furthermore,

if they do not contribute to economic profit, they are actually a distraction for the firm.

Other critics believe that extensive efforts to measure business value will be more of a

distraction than a boon. For example, there is a fear that decision-makers will be confused

if there are too many goals and measures that need to be accommodated.

Ethics, Values and Morals

13
Values are our fundamental beliefs. They are the principles we use to define what is right,

good and just. Values provide guidance in determining the right versus the wrong, the

good versus bad. They are our standards. Another way to characterize values is that they

are what an individual believes to be having worth and importance to their life. Values do

not encompass all beliefs, but only those beliefs that define importance.

Morals are values that we attribute to a system of beliefs that help the individual define

right versus wrong, good versus bad. These values typically get their authority from

something outside the individual – a higher authority.

In business world we often find ourselves avoiding framing our ethical choices in moral

terms for fear that doing so might prove offensive to someone whose moral frame of

reference might be different. The moral concept of justice has one meaning concerned

with developing rational normative claims and theories.

Ethics is the study of what we understand to be good and right behavior and how people

make those judgments. When one’s action are not congruent with our moral values – our

sense of right, good and just – we will view that are acting unethically. Defining what is

ethical is not an individual exercise. However, if it were then one could have argued that

what Hitler did was ethical since his action conformed to his definition of right, wrong or

just.

Ethics is the discipline that examines one’s moral standards or the moral standards of the

society. It asks how these moral standards apply to our lives and whether these standards

are reasonable or unreasonable. Ethics is not the only way to study morality. The social

sciences – such as anthropology, sociology and psychology – also study morality, but do

so in a quite different way from the approach to morality that is characteristics of ethics.

14
A descriptive study is one that does try to attain any conclusions about what things are

truly good or bad.

Introduction on Ethics

The term ethics refers to value oriented decisions and behavior. It comes from the Greek

word ‘Ethos’ which means character, guiding beliefs, standards or ideals that pervade a

group, community or people. Today, ethics is considered as the study of morals behavior.

Terms such as business ethics, corporate ethics, medical ethics or legal ethics are used to

indicate the particular area of application. Ethics involved in such area must still refer to

value – oriented decisions and behavior of individuals. A famous saying is there –

“If a man violates some rules he is wrong according to law, but in ethics he is wrong only

if he thinks of doing so.”

Some Definitions of Ethics

1. Ethics are kind of like morals and common sense. it is what you think is right or

wrong. Being "ethical" means trying to be reasonable and doing what you think is

right.

15
2. Ethics can be considered as moral philosophy. It deals with critical analysis of

morality. Ethics searches a reasonable ground to our moral standards. It deals with

answering questions such as `what ought to be`, not `what is`.

3. The science of moral obligation; a system of moral principles, quality, or practice.

The moral obligation to render to the patient the best possible quality of dental

service and to maintain an honest relationship with other members of the

profession and mankind in general.

4. Ethics is the science of morality or the systematic study of moral rules and

principles. The term "morality" refers to rules which prescribe the way people

ought to behave and principles which reflect what is ultimately good or desirable

for human beings.

5. .The study and evaluation of human conduct in the light of moral principles.

Moral principles may be viewed either as the standard of conduct that individuals

have constructed for themselves or as the body of obligations and duties that a

particular society requires of its members.

16
Features of Ethics

• It contains principles of personnel and professional conduct.

• Existing norms and judgments may contain valuable insights but ethics sets out to

criticize and test them in terms of ultimate norms.

• It does not rest on feelings of approval or disapproval but in the careful examination

of the reality around us.

• It is not a law. Even though law enshrines many ethical judgments. It criticizes law

and customs to obtain more perfect rules for the conduct of life. Law may permit things

which are unethical.

• What constitutes ethical behaviors in one society may be unethical in others.

• Ethics is involved in all human activities including business. There is need for a

science of ethics in every human Endeavour.

Business Ethics

In business, ethics can be defined as the capacity to reflect on values in the corporate

decision making process, to determine how these values and decision affect various

stakeholders groups, and to establish how managers can use these observations in day to

day company management. Ethical managers strive for success within the confines of

sound management practices that are characterized by fairness and justice.

17
Business Ethics refers to the moral principles which should govern business activities. It

provides a code of conduct for the managers. The purpose of business ethics is to guide

managers and employees in performing their jobs. Ethics are concerned with what is right

and what is wrong in human behavior. They lay down norms of human behavior by the

business. A few examples of ethics are:

1. To charge fair prices.

2. To use fair weights for measurement of commodities.

3. To pay taxes to government.

4. To earn reasonable profits.

5. To give fair treatment to workers.

The purpose of business ethics is to regulate both objectives of business and the means

adopted to achieve these objectives. Ethics covers all possible areas of business ends and

means must be justifiable as per norms of the society.

A business is an integral part of the society. It is in fact, a trustee of the resources of the

society. So the business must observe the ethical standards of the society while using the

resources. If a business fails to observe the social norms it will loose its public image.

Business ethics can be both a normative and a descriptive discipline. As a corporate

practice and a career specialization, the field is primarily normative. In academia

descriptive approaches are also taken. The range and quantity of business ethical issues

reflects the degree to which business is perceived to be at odds with non-economic social

values.

18
Types of Business Ethics

General business ethics

• This part of business ethics overlaps with the philosophy of business, one of the

aims of which is to determine the fundamental purposes of a company. If a

company's main purpose is to maximize the returns to its shareholders, then it

could be seen as unethical for a company to consider the interests and rights of

anyone else.

• Corporate social responsibility or CSR: an umbrella term under which the ethical

rights and duties existing between companies and society is debated.

• Issues regarding the moral rights and duties between a company and its

shareholders: fiduciary responsibility, stakeholder concept v. shareholder concept.

• Ethical issues concerning relations between different companies: e.g. hostile take-

overs, industrial espionage.

• Leadership issues: corporate governance.

• Political contributions made by corporations.

• Law reform, such as the ethical debate over introducing a crime of corporate

manslaughter.

• The misuse of corporate ethics policies as marketing instruments.

19
 Professional ethics

Professional ethics covers the myriad practical ethical problems and phenomena which

arise out of specific functional areas of companies or in relation to recognized business

professions.

Ethics of accounting information

• Creative accounting, earnings management, misleading financial analysis.

• Insider trading, securities fraud, bucket shops, forex scams: concerns (criminal)

manipulation of the financial markets.

• Executive compensation: concerns excessive payments made to corporate CEO's

and top management.

• Bribery, kickbacks, and facilitation payments: while these may be in the (short-

term) interests of the company and its shareholders, these practices may be anti-

competitive or offend against the values of society.

Ethics of human resource management

The ethics of human resource management (HRM) covers those ethical issues arising

around the employer-employee relationship, such as the rights and duties owed between

employer and employee.

20
 • Discrimination issues include discrimination on the bases of age (ageism), gender,

race, religion, disabilities, weight and attractiveness. See also: affirmative action,

sexual harassment.

• Issues surrounding the representation of employees and the democratization of the

workplace: union busting, strike breaking.

• Issues affecting the privacy of the employee: workplace surveillance, drug testing.

See also: privacy.

• Issues affecting the privacy of the employer: whistle-blowing.

• Issues relating to the fairness of the employment contract and the balance of

power between employer and employee: slavery,[4] indentured servitude,

employment law.

• Occupational safety and health.

Ethics of sales and marketing

Marketing which goes beyond the mere provision of information about (and access to) a

product may seek to manipulate our values and behavior. To some extent society regards

this as acceptable, but where is the ethical line to be drawn? Marketing ethics overlaps

strongly with media ethics, because marketing makes heavy use of media. However,

media ethics is a much larger topic and extends outside business ethics.

• Pricing: price fixing, price discrimination, price skimming.

• Anti-competitive practices: these include but go beyond pricing tactics to cover

issues such as manipulation of loyalty and supply chains. See: anti-competitive

practices, antitrust law.

21
 • Specific marketing strategies: green wash, bait and switch, shill, viral marketing,

spam (electronic), pyramid scheme, planned obsolescence.

• Content of advertisements: attack ads, subliminal messages, sex in advertising,

products regarded as immoral or harmful

• Children and marketing: marketing in schools.

• Black markets, grey markets.

Ethics of production

This area of business ethics deals with the duties of a company to ensure that products

and production processes do not cause harm. Some of the more acute dilemmas in this

area arise out of the fact that there is usually a degree of danger in any product or

production process and it is difficult to define a degree of permissibility, or the degree of

permissibility may depend on the changing state of preventative technologies or changing

social perceptions of acceptable risk.

• Defective, addictive and inherently dangerous products and services (e.g. tobacco,

alcohol, weapons, motor vehicles, chemical manufacturing, bungee jumping).

• Ethical relations between the company and the environment: pollution,

environmental ethics, carbon emissions trading

• Ethical problems arising out of new technologies: genetically modified food,

mobile phone radiation and health.

• Product testing ethics: animal rights and animal testing, use of economically

disadvantaged groups (such as students) as test objects.

22
Ethics of intellectual property, knowledge and skills

Knowledge and skills are valuable but not easily "own able" as objects. Nor is it obvious

that has the greater rights to an idea: the company who trained the employee or the

employee themselves? The country in which the plant grew or the company which

discovered and developed the plant's medicinal potential? As a result, attempts to assert

ownership and ethical disputes over ownership arise.

• Patent infringement, copyright infringement, trademark infringement.

• Misuse of the intellectual property systems to stifle competition: patent misuse,

copyright misuse, patent troll, submarine patent.

• Even the notion of intellectual property itself has been criticized on ethical

grounds: see intellectual property.

International business ethics

While business ethics emerged as a field in the 1970s, international business ethics did

not emerge until the late 1990s, looking back on the international developments of that

decade. Many new practical issues arose out of the international context of business.

Theoretical issues such as cultural relativity of ethical values receive more emphasis in

this field. Other, older issues can be grouped here as well. Issues and subfields include:

• The search for universal values as a basis for international commercial behavior.

• Comparison of business ethical traditions in different countries.

23
 • Comparison of business ethical traditions from various religious perspectives.

• Ethical issues arising out of international business transactions; e.g.

bioprospecting and biopiracy in the pharmaceutical industry; the fair trade

movement; transfer pricing.

• Issues such as globalization and cultural imperialism.

• Varying global standards - e.g. the use of child labor.

Ethics of economic systems

This vaguely defined area, perhaps not part of but only related to business ethics, is

where business ethicists venture into the fields of political economy and political

philosophy, focusing on the rights and wrongs of various systems for the distribution of

economic benefits. The work of John Rawls and Robert Nozick are both notable

contributors.

Conflicting interests

Business ethics can be examined from various perspectives, including the perspective of

the employee, the commercial enterprise, and society as a whole. Very often, situations

arise in which there is conflict between one and more of the parties, such that serving the

interest of one party is a detriment to the other(s). For example, a particular outcome

might be good for the employee, whereas, it would be bad for the company, society, or

vice versa. Some ethicists (e.g., Henry Sedgwick) see the principal role of ethics as the

harmonization and reconciliation of conflicting interests.

24
Corporate ethics policies

As part of more comprehensive compliance and ethics programs, many companies have

formulated internal policies pertaining to the ethical conduct of employees. These

policies can be simple exhortations in broad, highly-generalized language (typically

called a corporate ethics statement), or they can be more detailed policies, containing

specific behavioral requirements (typically called corporate ethics codes). They are

generally meant to identify the company's expectations of workers and to offer guidance

on handling some of the more common ethical problems that might arise in the course of

doing business. It is hoped that having such a policy will lead to greater ethical

awareness, consistency in application, and the avoidance of ethical disasters.

An increasing number of companies also requires employees to attend seminars regarding

business conduct, which often include discussion of the company's policies, specific case

studies, and legal requirements. Some companies even require their employees to sign

agreements stating that they will abide by the company's rules of conduct.

Many companies are assessing the environmental factors that can lead employees to

engage in unethical conduct.

25
Not everyone supports corporate policies that govern ethical conduct. Some claim that

ethical problems are better dealt with by depending upon employees to use their own

judgment.

To be successful, most ethicists would suggest that an ethics policy should be:

• Given the unequivocal support of top management, by both word and example.

• Explained in writing and orally, with periodic reinforcement.

• Doable....something employees can both understand and perform.

• Monitored by top management, with routine inspections for compliance and

improvement.

• Backed up by clearly stated consequences in the case of disobedience.

• Remain neutral and nonsexist.

Religious views on business ethics

The historical and global importance of religious views on business ethics is sometimes

underestimated in standard introductions to business ethics. Particularly in Asia and the

Middle East, religious and cultural perspectives have a strong influence on the conduct of

business and the creation of business values.

Examples include:

• Islamic banking, associated with the avoidance of charging interest on loans.

• Traditional Confucian disapproval of the profit-seeking motive.

• Quaker testimony on fair dealing

26
Relationship between business ethics and managerial values

Ethics refers to the entire body of moral values that society attaches to the actions of

human being. Ethics are interrelated with values. In fact values are considered the

language of ethics. Ethics in business emanate from the values of top management which

are in turn shaped by social, cultural and national values.

Values can be moral, immoral or amoral, depending upon whether they conform to, go

against or are different towards certain norms of morality. But ethics represent only moral

values. The value judgments do have ethical content when they are linked with the

element of morality. Values help to establish proper relationship between ends and

means. If the management of a business is pursuing sound values, and it will follow those

business practices that are ethical and socially justifiable. And in absence of sound value

system, the management of a business may be tempted to pursue unethical business

practices.

Unethical behaviors constitutes of

1. Bribing public officials to obtain undue favors.

2. Using false claims in advertisements.

3. Keeping two sets of books to evade taxes.

4. Using co. property for personal use.

5. Overlooking safety violations to get the job done.

6. Revealing confidential information or trade secrets to competitors.

7. Artificially inflating profits to get re- elected as directors.

27
Unethical Business Practices

• Against Employees

1. Paying salaries lower than those fixed by the government to the employees.

2. Poor working conditions like dirty water, poor lightning.

3. Lack of safety measures for workers.

• Against Government

1. Evasion of excise duty, sales tax, income tax etc.

2. Smuggling of goods.

3. Offering bribes to government officials and politicians for getting favors.

• Against consumers and society

1. Adulteration of goods like mixing of papaya seed with black pepper.

2. Sale of spurious goods

3. Sale of duplicate products under popular brand names.

4. Sale of products injurious to public health like charas, heroine.

5. Pollution of environment.

6. Deceptive advertisements and false claims in advertisements.

28
 Conceptual model of Business ethics

Business Ethics

Managerial Moral problems that

Beliefs manager face in decision making

Managerial beliefs concerning:

1. Illegal acts

2. Unethical or questionable practices

Examples:

1. Fraud, Bribery

2. Dumping of pesticides

Micro level problems:

1. Fairness in performance appraisal

2. Accepting Gifts

3. Confidentiality of company

4. Treatment of problem employees

5. Confronting expense account

29
Levels of Ethical Decisions in business

Level 4
Individual

Level 3
Internal policy

Level 2
Stakeholders

Level 1
Society

1. Societal level

2. Stakeholders level

3. Internal policy

4. Individual Level

30
1. Societal Level:

At this level, ethical questions about the basic institutions in society are asked.

These represent an ongoing debate among major competing institutions

including business.

2. Stakeholders Level:

In a business enterprise include employees, suppliers etc. Here they ask about

how they deal with external groups. For example, should a company inform

its customers about the potential dangers of its product?

3. Internal Policy Level:

At this level we ask questions about the nature of enterprise relations with

employee both managers and workers. So also questions of motivation

techniques, leadership roles, work rules etc. are involved at this level.

4. Individual Level:

At this level, we ask questions concerning how individual person should treat

one another within the firm. These questions deal with day to day issues of

life in any enterprise but in the ultimate analysis, they set the tone of ethical

behavior of business at higher levels.

31
Need and Importance of Business Ethics

More important is the fact that today a businessman is pressurized by various

environmental factors to follow a business practice which is ethical from society’s point

of view irrespective of its impact on business profits. Such a significance of business

ethics is attributable to following reasons:

1. Environmental Pressures:

As apart of overall economic system, a business organization is pressurized by

various environmental factors to act credibly and behave ethically. Thus a

business enterprise may have no option but to desist from undesirable trade

practices like hoarding and profiteering due to pressure from consumer

forums.

2. Enlightened self interest:

Today’s businessman firmly believes that business ethics are in their own self

interest. That is if business enterprise follows business practices, it will lead to

higher profits and prosperity in the long run.

3. Moral consciousness:

It would not be an exaggeration to say that most business people behave

ethically because of their moral consciousness. Like any other member of the

32
 society business people also believe that ethical business conduct is good

business as well as good citizenship.

4. Legal Requirements:

In almost every sphere of business activity laws have been enacted which

declare certain business practices. In short, obedience to such laws is ethical.

Elements of business ethics

Business Managers must come to appreciate the key elements that comprise making

ethical judgments. There are six major elements that are essential ethical judgments:

1. Ethical Imagination:

Developing ethical imagination means being sensitive to ethical issues in business

decision making and the ability to identify those situations where people are likely

to be detrimentally effected by decision making.

2. Ethical Identification and Ordering:

It refers to the ability to judge the relevance or non relevance of ethical factors in

decision making situations. In addition to their identification, ethical issues must be

ranked.

33
3. Ethical Evaluation:

To evaluate ethical factors business persons have to develop clear principles, basis

of weighing those factors and the ability to make out the likely ethical as well as

economic outcomes of a decision.

4. Sense of Ethical Obligation:

This refers to the intuitive or learned understanding that ethical fibers – a concern

for fairness, justice and due process to people, groups and communities should be

woven into the fabric of managerial decision making.

APPROACHES TO BUSINESS ETHICS

When business people speak about “business ethics” they usually mean one of three

things:

(1) Avoid breaking the criminal law in one’s work-related activity;

(2) Avoid action that may result in civil law suits against the company; and

(3) Avoid actions that are bad for the company image.

Businesses are especially concerned with these three things since they involve

loss of money and company reputation. In theory, a business could address these three

concerns by assigning corporate attorneys and public relations experts to escort

employees on their daily activities. Anytime an employee might stray from the straight

and narrow path of acceptable conduct, the experts would guide him back. Obviously this

34
solution would be a financial disaster if carried out in practice since it would cost a

business more in attorney and public relations fees than they would save from proper

employee conduct. Perhaps reluctantly, businesses turn to philosophers to instruct

employees on becoming “moral.” For over 2,000 years philosophers have systematically

addressed the issue of right and wrong conduct. Presumably, then, philosophers can teach

employees a basic understanding of morality will keep them out of trouble.

Deriving Business Ethics from the Profit Motive

Some businesspeople argue that there is a symbiotic relation between ethics and business

in which ethics naturally emerges from a profit-oriented business. There are both weak

and strong versions of this approach. The weak version is often expressed in the dictum

that good ethics results in good business, which simply means that moral businesses

practices are profitable. For example, it is profitable to make safe products since this will

reduce product liability lawsuits. Similarly, it may be in the best financial interests of

businesses to respect employee privacy, since this will improve morale and thus improve

work efficiency. Robert F. Hartley's book, Business Ethics, takes this approach. Using 20

case studies as illustrations, Hartley argues that the long-term best interests of businesses

are served by seeking a trusting relation with the public (Hartley, 1993). This weak

version, however, has problems. First, many moral business practices will have an

economic advantage only in the long run. This provides little incentive for businesses that

are designed to exclusively to seek short-term profits.

35
 As more and more businesses compete for the same market, short-term profits

will dictate the decisions of many companies simply as a matter of survival. Second,

some moral business practices may not be economically viable even in the long run. For

example, this might be the case with retaining older workers who are inefficient, as

opposed to replacing them with younger and more efficient workers. Third, and most

importantly, those moral business practices that are good for business depend upon what

at that time will produce a profit. In a different market, the same practices might not be

economically viable. Thus, any overlap that exists between morality and profit is both

limited and incidental.

The strong version of this profit approach takes a reverse strategy and maintains

that, in a competitive and free market, the profit motive will in fact bring about a morally

proper environment. That is, if customers demand safe products, or workers demand

privacy, then they will buy from or work for only those businesses that meet their

demands. Businesses that do not heed these demands will not survive. Since this view

maintains that the drive for profit will create morality, the strong version can be

expressed in the dictum that good business results in good ethics, which is the converse

of the above dictum. Proponents of this view, such as Milton Friedman, argue that this

would happen in the United States if the government would allow a truly competitive and

free market. But this strong view also has problems, since it assumes that consumers or

workers will demand the morally proper thing. In fact, consumers may opt for less safe

products if they know they will be saving money. For example, consumers might prefer a

cheaper car without air bags, even though doing so places their own lives and the lives of

36
their passengers at greater risk, which is morally irresponsible. Similarly, workers may

forego demands of privacy at work if they are compensated with high enough wages. In

short, not every moral business practice will simply emerge from the profit principle as

suggested by either the weak or strong views.

Business Ethics Restricted to Following the Law

A second approach to business ethics is that moral obligations in business are

restricted to what the law requires. The most universal aspects of Western morality have

already been put into our legal system, such as with laws against killing, stealing, fraud,

harassment, or reckless endangerment. Moral principles beyond what the law requires –

or supra-legal principles -- appear to be optional since philosophers dispute about their

validity and society wavers about its acceptance. For any specific issue under

consideration, such as determining what counts as responsible marketing or adequate

privacy in the workplace, we will find opposing positions on our supra-legal moral

obligations. It is, therefore, unreasonable to expect businesses to perform duties about

which there is so much disagreement and which appear to be optional.

The unreasonableness of such a moral requirement in our society becomes all the

more evident when we consider societies that do have a strong external source of

morality. Islam, for example, contains a broad range of moral requirements such as an

alms mandate, prohibitions against sleeping partners that collect unearned money, and

restrictions on charging interest for certain types of loans, particularly for relief aid. Thus,

in Muslim countries that are not necessarily ruled by Islamic law, there is a strong source

37
of external morality that would be binding on Muslim businesses apart from what their

laws would require. Similarly, Confucianism has a strong emphasis on filial piety; thus,

in Chinese and other Confucian societies, it is reasonable to expect their businesses to

maintain a respect for elders even if it is not part of the legal system. In Western culture,

or at least in the United States, we lack a counterpart to an external source of morality as

is present in Muslim or Confucian societies. One reason is because of our cultural

pluralism and the presence of a wide range of belief systems. Even within Christianity,

the diversity of denominations and beliefs prevents it from being a homogeneous source

of Christian values. In short, without a widely recognized system of ethics that is external

to the law, supra-legal moral obligations in our society appear to be optional; and, it is

unreasonable to expect business people to be obligated to principles which appear to be

optional.

In our culturally pluralistic society, the only business-related moral obligations

that are majority-endorsed by our national social group are those obligations that are

already contained in the law. These include a range of guidelines for honesty in

advertising, product safety, safe working conditions, and fair hiring and firing practices.

In fact, the unifying moral force of businesses within our diverse society is the law itself.

Beyond the law we find that the moral obligations of businesses are contextually bound

by subgroups, such as with a business that is operated by traditional Muslims or

environmental activists. In these cases, the individual businesses may be bound by the

obligations of their subgroups, but such obligations are contingent upon one's association

with these social subgroups. And, clearly, the obligations within those subgroups are not

binding on those outside the subgroups. If a business does not belong to any subgroup,

38
then its only moral obligations will be those within the context of society at large, and

these obligations are in the law.

Corporations that assume an obligation beyond the law, either in their corporate codes or

in practice, take on responsibilities that most outsiders would designate as optional. A

good example is found in the mission statement of Ben & Jerry's Ice Cream, which

includes the following:

• Social Mission -- To operate the company in a way that actively recognizes the

central role that business plays in the structure of society by initiating innovative

ways to improve the quality of life of a broad community -- local, national, and

international.

Consistent with this mission, the highest paid employees of Ben & Jerry's would not

earn more than seven times more than the lowest paid full-time employees. "We do this,"

they explain, "because we believe that most American corporations overpay top

management, and underpay entry-level employees -- and because everyone who works at

Ben & Jerry's is a major contributor to our success." In spite of the merits of this pay

scale policy, it clearly lacks majority endorsement in our national social group, and

would not be a binding obligation. In fact, it is not even binding on Ben & Jerry’s itself

since, in recent years, Ben & Jerry’s had to abandon its own ideal pay scale in an effort to

attract a CEO with the right skills to expand their company.

Strictly following this legal approach to business ethics may indeed prompt businesses to

do the right thing, as prescribed by law. Nevertheless, there are two key problems with

restricting morality solely to what the law requires. First, even in the best legal context,

39
the law will lag behind our moral condemnation of certain unscrupulous, yet legal

business practices.

Deriving Business Ethics from General Moral Obligations

The third approach to business ethics is that morality must be introduced as a

factor that is external from both the profit motive and the law. This is the approach taken

by most philosophers who write on business ethics, and is expressed most clearly in the

following from a well known business ethics essay:

Proper ethical behavior exists on a plane above the law. The law merely specifies

the lowest common denominator of acceptable behavior. (Gene Laczniak, "Business

Ethics: A Manager's Primer," 1983)

The most convenient way to explore this approach is to consider the supra-legal

moral principles that philosophers commonly offer. Five fairly broad moral principles

suggested by philosophers are as follows:

• Harm principle: businesses should avoid causing unwarranted harm.

• Fairness principle: business should be fair in all of their practices.

• Human rights principle: businesses should respect human rights.

• Autonomy principle: businesses should not infringe on the rationally reflective

choices of people.

• Veracity principle: businesses should not be deceptive in their practices.

40
 The attraction of these principles is that they appeal to universal moral notions that no

one would reasonably reject. But, the problem with these principles is that they are too

general. These principles do not tell us specifically what counts as harm, unfairness, or a

violation of human rights. Does all damage to the environment constitute harm? Does it

violate an employee's right to privacy if an employer places hidden surveillance cameras

in an employee lounge area? Does child-oriented advertising mislead children and thus

violate the principle of veracity?

The above principles are abstract in nature. That is, they broadly mandate against

harm, and broadly endorse autonomy. Because they are abstract, they will be difficult to

apply to concrete situations and consequently not give clear guidance in complex

situations. An alternative approach is to forget the abstract, and focus instead on concrete

situations that affect the particular interests of consumers, workers, stockholders, or the

community. The recent stakeholder approach to business ethics attempts to do this

systematically. It may be expressed in the following:

• Stakeholder principle: businesses should consider all stakeholders' interests that

are affected by a business practice.

A stakeholder is any party affected by a business practice, including employees,

suppliers, customers, creditors, competitors, governments, and communities.

Accordingly, the stakeholder approach to business ethics emphasizes that we should map

out of the various parties affected by a business practice. But this approach is limited

since proponents of this view give us no clear formula for how to prioritize the various

41
interests once we map them out. Should all stakeholders' interests be treated equally –

from the largest stockholder down to the garbage man who empties the factory dumpster?

Probably no defenders of the stakeholder approach would advocate treating all interests

equally. Alternatively, should the stockholders' interests have special priority? If we take

this route, then the stakeholder principle is merely a revision of the profit principle.

Another way of looking at concrete moral obligations in business is to list them issue by

issue. This is the strategy behind corporate codes of ethics that address specific topics

such as confidentiality of corporate information, conflicts of interest, bribes, and political

contributions. Consider the following issues from Johnson and Johnson's Credo:

Code of Conduct

Characteristics

The codes of conduct or codes of practice adopted by a number of mainly multinational

enterprises include a variable number of principles which define the ethical standards of

the enterprise. These may be general principles such as, for example, the concept of non-

discrimination while, in a number of cases, there is a detailed description of the social

practices which the enterprise wishes to see respected in the production and sale of the

goods and services which it markets. Some enterprises make a distinction between the

basic principles which regulate its internal activity and those which it wants to apply in

the selection and monitoring of activities of its subcontractors. A number of codes make

explicit reference to ILO Conventions, in particular those concerning the respect of

42
human rights at work. In other cases, the reference is more indirect, even if the principles

established are often based on fundamental ILO Conventions.

The Agrofood, forestry, chemicals and consumer products sectors are amongst those

which have progressively introduced a number of codes of practice. However, while the

concept of ethical practice has made a remarkable comeback in recent years in the

strategic policy of industrial and commercial enterprises, it is above all in the textile

sector, and in particular in clothing and footwear, that the trend is the most evident.

United States enterprises have played a pioneering role in this respect. Since Levi Strauss

adopted in 1992 a code entitled "Business partner terms of engagement and guidelines for

country selection", many other enterprises producing apparel and footwear as well as

major retail groups have followed suit. In Europe, the trend has been longer in coming,

Study Questions for “Approaches to Business Ethics”

Introduction

(1) What three things do business people usually mean by “business ethics”?

(2) Why can’t philosophers “teach” people to be ethical?

Deriving Business Ethics from the Profit Motive

(3) What is the weak version of theory that connects business ethics to the profit

motive?

(4) What are problems with the weak version?

(5) What is the strong version of theory that connects business ethics to the profit

motive?

43
 (6) What are problems with this?

Business Ethics Restricted to Following the Law

(7) Define “supra-legal” principle.

(8) Why is it unreasonable to expect businesses to follow supra-legal moral

principles?

(9) What are some supra-legal moral principles that are binding in Muslim

countries?

(10) What are the problems with restricting business ethics to what the law

requires?

Deriving Business Ethics from General Moral Obligations

(11) Give an example of a broad moral principle suggested by philosophers.

(12) What is the problem with deriving business ethics from broad moral

principles?

(13) What is a stakeholder?

(14) What is the problem with articulating good business behavior in corporate

codes of ethics?

Conclusion

(15) What are some benefits of all three approaches to business ethics?

(16) What can we learn by looking at case studies in business ethics?

44
 CASE STUDY ON HDFC BANK

HDFC PROFILE

HDFC Bank was incorporated in August 1994, and, currently has an nationwide network

of 1229 Branches and 2526 ATM's in 444 Indian towns and cities.

The Housing Development Finance Corporation Limited (HDFC) was amongst the first

to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a

bank in the private sector, as part of the RBI's liberalisation of the Indian Banking

Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank

Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations

as a Scheduled Commercial Bank in January 1995.

45
Business Focus

HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build

sound customer franchises across distinct businesses so as to be the preferred provider of

banking services for target retail and wholesale customer segments, and to achieve

healthy growth in profitability, consistent with the bank's risk appetite. The bank is

committed to maintain the highest level of ethical standards, professional integrity,

corporate governance and regulatory compliance. HDFC Bank's business philosophy is

based on four core values - Operational Excellence, Customer Focus, Product Leadership

and People.

Management

Mr. Jagdish Kapoor took over as the bank's Chairman in July 2001. Prior to this, Mr.

Kapoor was a Deputy Governor of the Reserve Bank of India.

The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25

years, and before joining HDFC Bank in 1994 was heading Citibank's operations in

Malaysia.

The Bank's Board of Directors is composed of eminent individuals with a wealth

of experience in public policy, administration, industry and commercial banking. Senior

executives representing HDFC are also on the Board.

Senior banking professionals with substantial experience in India and abroad head

various businesses and functions and report to the Managing Director. Given the

professional expertise of the management team and the overall focus on recruiting and

46
retaining the best talent in the industry, the bank believes that its people are a significant

competitive strength.

Business

HDFC Bank offers a wide range of commercial and transactional banking services and

treasury products to wholesale and retail customers. The bank has three key business

segments:

Fair Practices for lending

1. The bank would have loan application forms for retail advances and credit cards.

These would include information about the fees/charges, if any, payable for

processing, the amount of such fees refundable in the case of non acceptance of

application, pre-payment options and any other matter which affects the interest

of the borrower, so that a meaningful comparison with that of other banks can be

made and an informed decision can be taken by the borrower.

2. As part of the wholesale banking business, the bank has various segments to

which credit facilities are provided for their business requirements. These

include a wide range of customers and range from small & medium enterprises

to large corporate borrowers. The bank has a process for identification of target

customers to whom facilities can be provided based on customer selection and

47
 risk assessment for that segment. Thus, the focus is on contacting prospective

customers and encouraging them to avail of banking services from HDFC Bank

based on the incremental value we can add to a customer's business, rather than

customers making applications to the Bank for facilities / services.

Thus, for the wholesale banking segment, we do not have any standardized

application forms to be submitted by prospective customers.

Code of Ethics

1. Be aware of frauds

2. Security tips

3. Security Meaasures of HDFC

4. Code of Corporate Governance

5. Code of corporate Rating

6. Composition of board

7. Committee of Directors

8. Profile of Directors

9. Ownership Right

10. Promoters Rights

11. Keyshareholders Right

12. Dividend Policy

13. Memorandum of Association

48
 14. Articles of Association

15. Fair Practices

16. Code of Lending

17. Internet Browsing

18. Money mules

Introduction:

The Board members / Officials shall engage in and promote honest and ethical

conduct of business, including the ethical handling of actual and / or apparent conflicts of

interest between personal and professional relationships.

Applicability:

This Code of Ethics/Conduct is applicable to the following persons.

1. The Board Members

2. Officials of the Bank one level below the Board

Ethical Conduct:

The Board members / Officials shall engage in and promote honest and ethical

conduct of business, including the ethical handling of actual and / or apparent conflicts of

interest between personal and professional relationships.

49
Conflict of Interest:

The Board members / Officials shall avoid conflict of interest and disclose to the

Board any material transaction or relationship that reasonably could be expected to give

rise to such a conflict.

Confidentiality of Information:

The Board members / Officials shall ensure and take all reasonable measures to

protect the confidentiality of non-public information about the Bank, its business,

customers and other materially significant information obtained or created in connection

with any activities with the Bank and to prevent the unauthorized disclosure of such

information unless required by applicable laws or regulations or legal or regulatory

process.

Disclosure of Information:

The Board members / Officials shall endeavor to produce full, fair, accurate,

timely and understandable disclosures in reports and documents that the Bank files with or

submits to the Securities and Exchange commission and other regulators and in other

public communications made by the Bank.Compliance with Governmental Laws, Rules

and Regulations:

50
The Board members / Officials shall comply with all the applicable governmental laws

and the applicable rules and regulations.

Variation of the Code and Waivers:

The Code shall be reviewed from time to time for updation thereof. Any variation in the

Code or any waivers from the provisions of the Code shall be approved by the Board and

shall be disclosed on the Bank's website.

Contract or Term of Employment:

Nothing in this Code or other related communications by itself creates or implies an

employment contract or terms of employment.

Violation of the Code:

The Board shall have the powers to take necessary action in case of any violation of the

code.

Dividend Policy

Your Bank has had a track record of moderate but steady increases in dividend

declarations for the last 10 years and dividend payout ratio in the last few years has been

in the range of 20-25 %. Your Bank's dividend policy is based on the need to balance the

twin objectives of appropriately rewarding shareholders with cash dividends and of

retaining capital to maintain a healthy capital adequacy ratio to support future growth. In

51
line with this policy and recognisation of healthy performance during 2007-08, your

directors pleased to recommend a dividend of 85% for the year ended on March 31,2008

as against 70% for the year ended March 31, 2007. This dividend shall be subject to

distribution tax to be paid by the Bank but will be tax-free in the hands of the members.

52
Conclusion

We’ve looked at three approaches to business ethics, and we’ve seen that all three

have limitations. If we hope to find an approach to business ethics that is free from

conceptual problems, we will not likely find any. Ethics is a complex subject and its

history is filled with diverse theories that are systematically refuted by rival theories. So,

we should expect to find controversies when applying ethics to the specific practices of

business. However, following any of the above three approaches to business ethics will

bring us closer to acceptable moral behavior than we might otherwise be. Close attention

to one’s profit motive and the moral interests of consumers might in fact generate some

morally responsible business decisions. We can indeed find additional moral guidance by

looking at the laws that apply specifically to businesses. In gray areas of moral

controversy that are not adequately addressed profit motives and the law, we can turn for

guidance to a variety of general and specific moral principles.

In addition to the above three approaches to business ethics, it also helps to

examine stories of businesses that have been morally irresponsible. By citing specific

cases deceptive advertising, environmental irresponsibility, or unsafe products, we can

learn by example what we should not do. Such cases often reveal blatantly crude,

insensitive, or reckless attitudes of businesses, which we can view as warning signs of

unethical conduct.

53
References

1. "Ethics the easy way". H.E.R.O...

2. "Miliband draws up green tax plan". BBC.

3. Friedman, Milton (1970-09-13). "The Social Responsibility of Business is to

Increase Its Profits", The New York Times Magazine.

4. Hare, R. M. (1979). "What is wrong with slavery". Philosophy and Public Affairs

8: 103–121.

5. Enderle, Georges (1999). International Business Ethics. University of Notre Dame

Press, 1. ISBN 0-268-01214-8.

6. George, Richard de (1999). Business Ethics.

7. http://www.stthom.edu/academics/centers/cbes/jonachan.html

Further reading

• Albertson, Todd. (2007). The Gods of Business: The Intersection of Faith and the

Marketplace. Los Angeles, CA: Trinity Alumni Press.

• Behrman, Jack N. (1988). Essays on Ethics in Business and the Professions.

Englewood Cliffs, NJ:

54