1

Ad|tya Inst|tut|ons
M8A 3
rd
Sem
Compu|sory Sub[ect 8us|ness Lth|cs Corporate Governance
Modu|e1
An Cverv|ew of 8us|ness Lth|cs

O IN1kCDUC1ICN

1here |s a b|g d|fference between what you have a r|ght to do and what |s r|ght to
do lustice Potter 5tewort
Never /et your sense of moro/s qet in the woy of doinq whots riqht Issac As|mov

Man ls a soclal anlmal 1hough rules of naLure conLrol humans as Lhey conLrol
oLher llvlng belngs man hlmself has derlved cerLaln prlnclples Lo govern hls own
lndlvldual and group behavlor 1hese rules ln Lhe form of behavloral sLandards may
dlffer across culLures and Llmes buL Lhelr baslc ob[ecLlves are always muLual exlsLence
and peace wlLhln Lhe parLlcular communlLy or Lhe soclal group 8y ensurlng securlLy
and proLecLlon of Lhe group Lhese sLandards helps ln Lhe survlval of Lhe parLlcular
communlLy or a soclal group and Lhus lLs members 1hese sLandards of behavlor are
called eLhlcs"
lew socloblologlsLs argue LhaL humans have blologlcally lnherlLed capaclLy Lo make
eLhlcal [udgmenLs by evaluaLlng acLlons as elLher good or evll lnLernally ln an
organlzaLlon aparL from Lhe organlzaLlonal culLure lLs Lop leadershlp and Lhelr
ldeologles also lnfluence eLhlcal orlenLaLlon of a people

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As ln Lhe case of lndlvlduals organlzaLlons lrrespecLlve of Lhelr slze are also
monlLored and evaluaLed by a seL of eLhlcal sLandards AparL from lnLernal eLhlcal
code of conducL exLernal enLlLles llke professlonal and legal bodles governmenL and
oLher publlc lnLeresLs groups lnfluence Lhe norms of behavlor for organlzaLlons
lnLernaLlonal bodles llke unlLed naLlons and oLher nongovernmenL organlzaLlons llke
AmnesLy lnLernaLlonal also lnfluence Lhese norms 1hey Lry Lo govern eLhlcal concerns
LhaL are globally lmporLanL by lnfluenclng pollcles and rules framed by Lhe
governmenLs
O Jhat |s Lth|cs?
Lth|cs also known as mora| ph||osophy ls a branch of phllosophy LhaL
addresses quesLlons abouL morallLy LhaL ls concepLs such as good and evll
rlghL and wrong [usLlce and crlme eLc

LLhlcs has Lo do wlLh whaL my feellngs Lell me ls rlghL or wrong
LLhlcs has Lo do wlLh my rellglous bellefs
8elng eLhlcal ls dolng whaL Lhe law requlres
LLhlcs conslsLs of Lhe sLandards of behavlor our socleLy accepLs

llrsL eLhlcs refers Lo wellbased sLandards of rlghL and wrong LhaL prescrlbe
whaL humans oughL Lo do usually ln Lerms of rlghLs obllgaLlons beneflLs Lo
socleLy falrness or speclflc vlrLues

And eLhlcal sLandards lnclude
4 sLandards relaLlng Lo rlghLs such as Lhe rlghL Lo llfe
4 Lhe rlghL Lo freedom from ln[ury
4 And Lhe rlghL Lo prlvacy

O Cb[ect|ves of Lth|cs
4 SLudy of human behavlor maklng evaluaLlve assessmenL abouL LhaL as
moral or lmmoral
4 LsLabllshlng moral sLandards
4 Maklng [udgmenL upon human behavlor
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4 Maklng recommendaLlons abouL how Lo or how noL Lo behave
4 Lxpresslng an oplnlon

O Jhat |s 8us|ness Lth|cs?
8uslness LLhlcs refers Lo Lhe appllcaLlon of eLhlcs Lo buslness 1o be more
speclflc buslness eLhlcs ls Lhe sLudy of good evll rlghL wrong [usL
un[usL acLlons of buslnesses

lL ls Lhe behavlor LhaL a buslness adheres Lo ln lLs dally deallngs wlLh Lhe world
1he eLhlcs of a parLlcular buslness can be dlverse 1hey apply noL only Lo how
Lhe buslness lnLeracLs wlLh Lhe world aL large buL also Lo Lhelr oneonone
deallngs wlLh a slngle cusLomer

Many buslnesses have galned a bad repuLaLlon [usL by belng ln buslness 1o
some people buslnesses are lnLeresLed ln maklng money and LhaL ls Lhe
boLLom llne lL could be called caplLallsm ln lLs puresL form Maklng money ls noL
wrong ln lLself lL ls Lhe manner ln whlch some buslnesses conducL Lhemselves
LhaL brlngs up Lhe quesLlon of eLhlcal behavlor

O Def|ne 8us|ness Lth|cs
8us|ness eth|cs (also corporate eth|cs) ls a form of applled eLhlcs or professlonal
eLhlcs LhaL examlnes eLhlcal prlnclples and moral or eLhlcal problems LhaL arlse ln a
buslness envlronmenL lL applles Lo all aspecLs of buslness conducL and ls relevanL
Lo Lhe conducL of lndlvlduals and enLlre organlzaLlons
O thico/ lssues ke/ote to 4// lunctiono/ 4reos

O AccounLlng
O llnance
O ManagemenL
O MarkeLlng

4

O Lth|ca| |ssues and examp|es
?ou'll flnd loLs of examples of buslness eLhlcal declslons and dllemmas ln areas such
as


et's take one of the above supp||ers
A buslness cannoL clalm Lo be eLhlcal flrm lf lL lgnores uneLhlcal pracLlces by lLs
suppllers eg
O use of chlld labour and forced labour
O vlolaLlon of Lhe baslc rlghLs of workers
O lgnorlng healLh safeLy and envlronmenLal sLandards
An eLhlcal buslness has Lo be concerned wlLh Lhe behavlour of all buslnesses LhaL
operaLe ln Lhe supply chaln le
O Suppllers
O ConLracLors
O ulsLrlbuLors
O Sales agenLs
1he Lwo arLlcles below provlde a good example of Lhe eLhlcal lssues LhaL arlse ln Lhe
supply chaln cllck on Lhe lmages Lo read Lhe sLorles
3


Consumer acLlon can also be poslLlve supporLlng buslnesses wlLh a sLrong eLhlcal
sLance record A good example of Lhls ls lalrLrade
O Is eth|ca| behav|or good or bad for bus|ness?
?ou mlghL Lhlnk Lhe above quesLlon ls an easy one for buslnesses Lo answer? Surely
acLlng eLhlcally makes good buslness sense? As wlLh all lssues ln buslness sLudles
Lhere are Lwo sldes Lo every argumenL
1he advantages of eth|ca| behav|our |nc|ude
O Plgher revenues demand from poslLlve consumer supporL
O lmproved brand and buslness awareness and recognlLlon
O 8eLLer employee moLlvaLlon and recrulLmenL
O new sources of flnance eg from eLhlcal lnvesLors
1he d|sadvantages c|a|med for eth|ca| bus|ness |nc|ude
O Plgher cosLs eg sourclng from lalrLrade suppllers raLher Lhan lowesL prlce
O Plgher overheads eg Lralnlng communlcaLlon of eLhlcal pollcy
O A danger of bulldlng up false expecLaLlons

O IMCk1ANCL (Need) CI 8USINLSS L1nICS
4 lL ls now recognlzed LhaL lL ls good buslness Lo be eLhlcal An eLhlcal lmage
for a company can bulld goodwlll and loyalLy among cusLomers and
cllenLs
LLhlcal MoLlvaLlon
8alance Lhe needs wlshes of sLake holders
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Clobal Challenge
1echnology
LLhlcal 8eLenLlon
revenLlon reducLlon of Crlmlnal enalLles
MarkeL Leadershlp
SeLLlng Lhe examples

O Nature of 8us|ness Lth|cs

1 Long run exlsLence
2 SusLalned roflLablllLy
3 CorporaLe clLlzen of Lhe counLry
4 ueslrable 8ehavlour

O 8enef|ts of 8us|ness Lth|cs
8e 1rustfu| 8ecognlze cusLomers wanL Lo do buslness wlLh a company Lhey
can LrusL when LrusL ls aL Lhe core of a company lLs easy Lo recognlze 1rusL
deflned ls assured rellance on Lhe characLer ablllLy sLrengLh and LruLh of a
buslness
keep An Cpen M|nd lor conLlnuous lmprovemenL of a company Lhe
leader of an organlzaLlon musL be open Lo new ldeas Ask for oplnlons and
feedback from boLh cusLomers and Leam members and your company wlll
conLlnue Lo grow
3 Meet Cb||gat|ons 8egardless of Lhe clrcumsLances do everyLhlng ln your
power Lo galn Lhe LrusL of pasL cusLomers and cllenLs parLlcularly lf
someLhlng has gone awry 8eclalm any losL buslness by honorlng all
commlLmenLs and obllgaLlons
4 nave C|ear Documents 8eevaluaLe all prlnL maLerlals lncludlng small
buslness adverLlslng brochures and oLher buslness documenLs maklng sure
7

Lhey are clear preclse and professlonal MosL lmporLanL make sure Lhey do
noL mlsrepresenL or mlslnLerpreL
8ecome Commun|ty Invo|ved 8emaln lnvolved ln communlLyrelaLed
lssues and acLlvlLles Lhereby demonsLraLlng LhaL your buslness ls a
responslble communlLy conLrlbuLor ln oLher words sLay lnvolved
6 Ma|nta|n Account|ng Contro| 1ake a handson approach Lo accounLlng
and record keeplng noL only as a means of galnlng a beLLer feel for Lhe
progress of your company buL as a resource for any quesLlonable
acLlvlLles Calnlng conLrol of accounLlng and record keeplng allows you Lo
end any dublous acLlvlLles prompLly
7 8e kespectfu| 1reaL oLhers wlLh Lhe uLmosL of respecL 8egardless of
dlfferences poslLlons LlLles ages or oLher Lypes of dlsLlncLlons always LreaL
oLhers wlLh professlonal respecL and courLesy










8

O n|story of 8us|ness Lth|cs
1he Lerm buslness eLhlcs ls used ln a loL of dlfferenL ways and Lhe hlsLory of
buslness eLhlcs wlll vary dependlng on how one concelves of Lhe ob[ecL under
dlscusslon
1he prlmary sense of Lhe Lerm refers Lo recenL developmenLs and Lo Lhe perlod
slnce roughly Lhe early 1970s when Lhe Lerm buslness eLhlcs came lnLo common
use ln Lhe unlLed SLaLes
lLs orlgln ln Lhls sense ls found ln Lhe academy ln academlc wrlLlngs and
meeLlngs and ln Lhe developmenL of a fleld of academlc Leachlng research and
publlcaLlon 1haL ls one sLrand of Lhe sLory
As Lhe Lerm enLered more general usage ln Lhe medla and publlc dlscourse lL
ofLen became equaLed wlLh elLher buslness scandals or more broadly wlLh whaL
can called eLhlcs ln buslness ln Lhls broader sense Lhe hlsLory of bosloess etblcs
goes back Lo Lhe orlgln of bosloess agaln Laken ln a broad sense meanlng
commerclal exchanges and laLer meanlng economlc sysLems as well 1haL ls
anoLher sLrand of Lhe hlsLory
1he Lhlrd sLand corresponds Lo a Lhlrd sense of buslness eLhlcs whlch refers Lo a
movemenL wlLhln buslness or Lhe movemenL Lo expllclLly bulld eLhlcs lnLo Lhe
sLrucLures of corporaLlons ln Lhe form of eLhlcs codes eLhlcs offlcers eLhlcs
commlLLees and eLhlcs Lralnlng
1he Lerm moreover has been adopLed worldwlde and lLs meanlng ln Lurope
for lnsLance ls somewhaL dlfferenL from lLs meanlng ln Lhe unlLed SLaLes
O ke|at|onsh|ps between Lth|cs 8us|ness
4 LLhlcs confllcL wlLh proflLs
4 8uslness always choose proflLs over eLhlcs

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O Iar|ous sources of 8us|ness Lth|cs
4 8ellglon
4 CulLure
4 Law
O Iactors Inf|uenc|ng 8us|ness Lth|cs
4 Leadershlp
4 SLraLegy erformance
4 CorporaLe CulLure
4 LnvlronmenL

O Arguments for aga|nst bus|ness Lth|cs
4 Argument Aga|nst 8us|ness Lth|cs
1here ls an argumenL LhaL buslness belng economlc enLlLles should
have noLhlng Lo do wlLh eLhlcs morals 1hey agree LhaL buslness
should assume no oLher responslblllLles oLher Lhan Lo produce goods
servlces efflclenLly Lo maxlmlze proflLs for Lhe share holders
MllLon lrledman a famous economlsL ln hls book 'CaplLallsm
lreedom' puL forward hls classlcal vlew LhaL Lhe only responslblllLy of
buslness ls Lo earn proflLs CusLomer would have Lo pay for Lhe eLhlcs
lL was belleved LhaL buslnesses should use Lhelr resources engage lLs
acLlvlLles Lo deslgned Lo lncreases proflLs(CompeLlLlon)
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4 Argument for 8us|ness Lth|cs
8uslness orgs 1oday have accepLed eLhlcs as a parL of Lhelr buslness
conducL
1hey reallze LhaL buslness exlsLs operaLes wlLhln Lhe socleLy ls a
parL of a subsysLem socleLy
1here ls a greaLer soclal responslblllLy on Lhe managers Lo malnLaln a
proper lmage of Lhelr company ln Lhe publlc mlnd
1he company cannoL resorL Lo uneLhlcal behavlor
LLhlcal moral behavlor glves a unlque edge advanLage ln Lhe
markeL place
Lg 1aLa Croup
O Corporate Cu|ture
CorporaLe CulLure ls Lhe seL of shared values LhaL deflnes for lLs members whaL Lhe
organlzaLlon sLands for how lLs funcLlons whaL lL conslders lmporLanL
ko|e of Corporate cu|ture
4 SLrong lmpacL on buslness eLhlcs lL ls very lmporLanL
4 Leadershlp
4 8eward sysLems
4 lalrness
4 Lmp auLhorlLy sLrucLure
4 Care for emps Lhe communlLy
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Iar|ous Issues of 8us|ness Lth|cs
1 Lconom|c Issues
l rovlde goods servlces
ll roflL moLlve was esLabllshes as Lhe prlmary lncenLlves
lll 8aslc economlc unlL ln our socleLy
ega| Issues
l Laws 8egulaLlons by federal sLaLe local govLs
ll Soclal ConLracL beLween buslness socleLy
lll Legal 8esponslblllLy
3 Lth|ca| Issues
l lalrness !usLlce
ll LLhlcal 8esponslblllLy
lll SLandard norms
lv 8especL for sLakeholders
v CorporaLe Soclal 8esponslblllLy
4 h||anthrop|c Issues
| 8uslnesses be good corporaLe clLlzen
|| romoLe human welfare or goodwlll
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||| Lg conLrlbuLlon Lo Lhe ArLs educaLlon or Lhe communlLy
|v lL ls an volunLary
4 Crgan|zat|ona| Ind|v|dua| Iactor that affect bus|ness eth|cs
Managers Lry Lo undersLand how Lhe managers respond Lo dllemma Lry Lo
resolve Lhem
1he personal LralLs characLerlsLlcs of Lhe manager have an lnfluence on Lhe
response of Lhe manager Lo LLhlcal dllemma
1he organ|zat|ona| factors that |nf|uence bus|ness eth|cs are
l 1he company pollcles rules workprocedure sysLems
ll 1he org culLure shared values
lll AuLhorlLy orlenLaLlon hlerarchy ln Lhe org
lv 1he aLLlLude of Lop managemenL Lowards eLhlcal problem solvlng
1he Ind|v|dua| factors wh|ch affect bus|ness eth|cs are
l 1he manager's percepLlon of Lhe [ob
ll 1he personal background characLerlsLlcs of Lhe manager
lll 1he personal value sysLem code of eLhlcs of Lhe manager




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4 Go|den ku|e the ten commandments of re||g|on under eth|cs
4 Colden 8ule AcL ln a way you would expecL oLhers Lo acL Lowards you"
4 1en commandments of re||g|on under eth|cs are
l ?ou shall noL klll
ll ?ou shall noL commlL adulLery
lll ?ou shall noL sLeal
lv ?ou shall noL bear false wlLness agalnsL your nelghbour
v ?ou shall noL coveL your nelghbour's house noL nelghbour's wlfe
nor anyLhlng else LhaL belongs Lo hlm
vl Ponor your faLher your moLher
4 koh|berg's theory of mora| deve|opment
4 eve| 1 reconvent|ona| eve|
SLage 1 Cbey rules Lo avold punlshmenL
SLage 2 lollow rules only lf lL ls ln own lnLeresL buL leL oLhers do
Lhe same
4 eve| Convent|ona| eve|
SLage 3 Conform Lo meeL Lhe expecLaLlons of oLhers lease oLhers
SLage 4 uolng rlghL ls one's duLy Cbey Lhe law
4 eve| 3 ost Convent|ona| eve|
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SLage 3 Laws duLy are obeyed on raLlonal calculaLlons Lo serve
Lhe greaLesL number
SLage 6 lollow self chosen unlversal eLhlcal prlnclples
4 Cr|ter|a for un|versa||sab|||ty
unlversallsablllLy means LhaL every person should acL only on Lhose prlnclples
LhaL she or he as a raLlonal person would prescrlbe as unlversal laws Lo be
applled Lo Lhe whole of manklnd
Accord|ng to kant what |s r|ght for one |s r|ght for a||
1) JhaL you do noL wlsh done Lo yourself do noL do Lo oLhers
2) uo noL wlsh for qulck resulL
3) Jhen you see someone of worLh Lhlnk of how you may
emulaLe
4) JealLh rank are whaL people deslre buL unless Lhey are
obLalned ln Lhe rlghL way
3) leel klndly Lowards everyone






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O Caro| G||||gans concept|on of mora| deve|opment
O llrsL focus Carlng for self ensurlng survlval
O 1ranslLlonal SLage Self locus as unaccepLably selflsh
O Second focus 8esponslblllLy maLerlal care for dependenL oLhers self
sacrlflce
O 1ranslLlon SLage CuesLlons llloglc of lnequallLy beLween needs of oLhers
self
O 1hlrd focus uynamlc relaLlonshlp beLween self oLhers
O Lth|ca| Dec|s|on Mak|ng
O 1he essence of managemenL ls declslon maklng ln Lhe conLexL of
declslon maklng your eLhlcs are your personal sLandards of rlghL and
wrong 1hey are your basls for maklng eLhlcally senslLlve declslons

1 8ecognlzlng an LLhlcal lssues
2 llndlng lf Lhe lssue has gone beyond legal or lnsLlLuLlonal concerns
3 CeLLlng Lhe relevanL facLs flndlng lf Lhe facLs are unknown
4 knowlng wheLher any lndlvlduals or group have an lmporLanL sLake
ln Lhe ouLcome
3 llndlng whaL opLlon are avallable for acLlng lf all Lhe relevanL
persons groups been consulLed
6 LvaluaLlng alLernaLlve acLlons from varlous eLhlcal perspecLlves
analyzlng whlch opLlon wlll produce Lhe mosL good do Lhe leasL
harm
7 uLlllLarlan approach
8 8lghLs approach
9 lalrness or [usLlce approach
10Common good approach
11vlrLue approach
16

12lmplemenLlng your declslons
O Soc|a| respons|b|||ty of a bus|ness

A buslness's lnLenLlon beyond lLs legal and economlc obllgaLlons Lo do
Lhe rlghL Lhlngs and acL ln ways LhaL are good for socleLy

1oday corporaLlons carry ouL a number of soclal acLlons 1he span lncludes
programmes of educaLlon publlc healLh emp welfare houslng urban
developmenL envlronmenLal proLecLlon resource conservaLlon many more
O Corporate Governance
CorporaLe governance ls a Lerm LhaL refers broadly Lo Lhe rules processes or
laws by whlch buslnesses are operaLed regulaLed and conLrolled 1he Lerm can
refer Lo lnLernal facLors deflned by Lhe offlcers sLockholders or consLlLuLlon of a
corporaLlon as well as Lo exLernal forces such as consumer groups cllenLs and
governmenL regulaLlons
17

Ad|tya Inst|tut|on M8A 3rd Sem
8us|ness Lth|cs Corporate Governance
Modu|e 1
Ass|gnment uest|ons
Marks uest|on Answers
1 JhaL ls geneLlc lnherlLance?
2 JhaL ls code of conducL?
3 JhaL do you mean by LransacLlonal eLhlcs?
4 JhaL ls parLlclpaLory eLhlcs?
3 JhaL ls recognlLlonal eLhlcs?
6 JhaL ls eplcure?
7 JhaL ls Lplcurlanlsm?
8 ueflne culLure relaLlvlsm
9 JhaL do you mean by money launderlng?
10JhaL ls Lhe dlfference beLween values eLhlcs?
Marks uest|on Answers
1 8rlng ouL Lhe relevance of 8uslness LLhlcs ln Lhe conLemporary buslness
scenarlo of lncreaslng compeLlLlon proflL maxlmlsaLlon
2 Should eLhlcs be LaughL ln colleges?
1 Marks uest|on Answers
1 ls buslness [usL anoLher form of war dlscuss
2Pow can 8hagwaL ClLa be a source of buslness eLhlcs?



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