Chapter 1 Business Ethics

Ethics

Ethics involves systematizing,

defending, and recommending (SDR) concepts of right and wrong conduct. It comes from the Greek word ethos, which means "character".

It focuses on standards, rules & codes of conduct that govern the behavior of individuals & groups

ETHICAL DILEMMAS
Situations when a person is faced with courses of actions that have differing ethical implications.

Arise from: questions of fairness. conflicts of interest. responsibility issues. power discrepancies. honesty issues.

Ethics
Meaning Character or manner Moral principles Principles Fairness Commit to agreements Considerateness Integrity Broad-mindedness Responsible citizenship Science of morals Recognized rules of conduct
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Attempt to excel

Accountability

Importance to human esteem and self respect

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Nature of Ethics
The Study of ethics is a set of systematic knowledge about

moral behavior and conduct.

Study of ethics is a science a social science. Science of ethics (Normative Science) : it judges the

value of the facts in terms of ideal situation. ( measuring facts in terms of ideal) Concerns with human conduct which is voluntary and not forced by persons or circumstances Are dealing with human judgment
Deals with human conduct which is voluntary, not forced or

coerced by persons or circumstances

Business Ethics
Business

ethics (also corporate ethics) is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment.

It applies to all aspects of

business conduct and is relevant to the conduct of individuals and entire organizations.

Functional business areas

Finance Fairness in trading practices, trading

conditions, financial contracting, sales practices, consultancy services, tax payments, audit etc Human resource management recruitment, training and development, trade unionism Sales and Marketing advertising truthfulness and fairness in pricing & distribution, possible health risks, financial risks, security risks

Objectives of Ethics (M/I, S/N, J, R, O/A)

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Study of human behavior and makes evaluative

assessment about that as moral or immoral Establishes moral standards and norms of behavior. Makes judgment upon human behavior based on these standards and norms. Prescribes moral behavior and makes recommendations about how to or how not to behave (Therapeutic goal). Expresses an opinion or attitude about human contact in general.

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Objective of Business Ethics

To Raise Awareness Not every member of the workforce knows what business ethics are, or what the phrase even means. Ethics training programs are designed to teach trainees all about business ethics, how ethics apply to them in the workforce and how to identify an ethical issue . It is important for training programs to help raise awareness throughout the organization, because it is dangerous to assume that everyone who works for a company already knows how to make ethical decisions or exemplify ethical behaviors. To Educate on Policies Businesses write ethics policies to provide guidelines to employees on what types of decisions or behaviors are considered ethical or unethical. Ethics policies help clarify the concept of business ethics by providing concrete examples of behaviors that are not tolerated by the company. For instance, sharing proprietary information outside of the organization may be an unethical behavior that a company identifies and writes into a policy.

Objective of Business Ethics

To Inform About Consequences It is important for employees to know what the consequences are for

violating an ethical policy. Business training ethics aim to call attention to the different consequences that could potentially occur. For instance, a demotion or termination from a company could be the result of an employee breaching the ethics policies. In severe cases, a company's public image could become scarred, causing the organization to lose stock value, profit, customers, clients and employees who jump ship. Consequences are brought up in business ethics training so that employees understand the imperativeness of ethics compliance.

Characteristics of Business Ethics

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Ethical decisions differ with individual

different persons.

perspective of

Each person views the ethical question in terms of his or

her own frame of reference. And this frame of reference is the persons own unique value system. Ethical decisions are not limited only to themselves, but affects a wide range of other situations as well. Similarly, unethical decisions do not end in themselves, but have widespread ramifications. Most ethical decisions involve a tradeoff between cost incurred and benefits received. Cost and benefits, profits and social responsibilities are two ends of a single spectrum. Both cannot be maximized simultaneously.
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Characteristics of Business Ethics

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The consequences of most ethical

decisions are not clear.

or unethical

The only certainty is that somewhere, sometime, somehow,

something positive will result from an ethical decision and something negative from unethical one. Every person is individually responsible for the ethical or unethical decision and action that he or she takes. Taking an ethical decision cannot be an impersonal activity as it involves the persons individual unique value system along with his moral standards. Ethical decisions are voluntary human actions. A person cannot escape his personal liability for his crimes citing force of circumstances or pressure.

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Nature of business in ethics

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Overt problem

Can clearly see e.g. Bribery Theft Sabotage collusion

Covert More complex in nature Not transparent Difficult to locate, eliminate Dangerous to country & people Threatening to business Eg; merger/ acquisitions/promotion & demotion

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Why we need business ethics

Business operates within a society Must contribute to the welfare of the society
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To get social sanction of the society to earn loyal

customers It should have great impact on community To keep a good image of the company Ethical actions & decisions may not yield immediate results but is good in long run. It is only ethical organization which will grow & survive Business needs to function as an corporate citizens of the country. To come out of narrow mentality & narrow goals

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Importance of the business ethics

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Personal gain

Individual values vis--vis organizational goals

Manager values & attitudes Competitive pressures

Cross cultural contradictions

Eg sales P I M C C

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Importance of the business ethics

It can be difficult, or even impossible, to recover your business

from a corporate scandal, once evidence of unethical business practices have leaked to the public. not become involved in unethical issues is to train employees on business ethics.

The preventative solution to ensuring that your company does

Business ethics apply to making legitimate, legal, moral and

upstanding decisions in the workplace, and training programs teach employees about the company's policies on ethics.

Code of Ethics American Marketing Association

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Responsibilities of Marketer :

a) not to do harm knowingly, b) to adhere all applicable laws and regulations, c) the accurate representation of their education, training and experience, d) active support, practice and promotion of this code of ethics.
Honesty and Fairness :

a) being honest in serving consumers, clients, employees, suppliers, distributors and the public. b) no knowingly participating in conflict of interest without prior notice to all parties involved, c) establishing equitable fee schedules including the payment or receipt of usual, customary and/or legal compensation for marketing exchange.
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Qualities Required for Ethical Decision-making

The competence to identify ethical issues and evaluate the consequences of alternative courses of action The self-confidence to seek out different opinions about the issue and decide what is right in terms of a situation
Tough-mindedness--the willingness to make decisions when all that needs to be known cannot be known and when the ethical issue has no established, unambiguous solution

Individual/Organizational Model of Ethical Behavior

Individual Influences
Value systems Locus of control Machiavellianism Cognitive moral development

Organizational Influences
Codes of conduct Norms Modeling Rewards and punishments

Ethical Behavior

Benefit of Business Ethics

The advantages of ethical behavior include: Higher revenues demand from positive consumer support Improved brand and business awareness and recognition Better employee motivation and recruitment New sources of finance e.g. from ethical investors The disadvantages claimed for ethical business include: Higher costs e.g. sourcing from Fair trade suppliers rather than lowest price Higher overheads e.g. training & communication of ethical policy A danger of building up false expectations

Concepts in Business Ethics

The most basic business ethics concepts can be summed up as

the values of honesty, integrity and fairness. The exact behavior will depend on the country and the company. Honesty has to do with ethical advertising and a reasonable cost for the quality of the product or service as well as the company keeping its word to everyone it deals with and in everything it does. Integrity covers a wide range of ethics, but includes issues such as social and environmental responsibility. Fairness is one of the very basic business ethics concepts in that it can refer to the simplest form of treating all people in commercial dealings, whether buyers, employees or customers, fairly.

Concepts in Business Ethics

Fairness in business dealings means being objective and

having an interest in creating a win-win situation for both parties whether that is employer-employee or company-client. The basic business ethics concepts of fairness can be tested through the analysis of negotiations and commercial dealings from both parties by an objective observer. Sometimes referred to as a fair playing field, ethical business dealings should be profitable or beneficial for both parties. Ethical business concepts of fair play include the fact that profit must be made, but not at the expense of deception.

Concepts in Business Ethics

Integrity in business includes the social aspect of being considerate and fair

to others while at the same time realizing a profit. It also means keeping agreements and promises. Whether an employer promises an employee a raise or a vendor agrees to supply top quality merchandise, the basic business ethics concepts of integrity mean keeping one's word and following through. are used in all aspects of business from serving customers to hiring and firing employees.

Dependability and telling the truth are basic integrity ethics concepts that

Honesty applies to every part of running a business while making a profit. Honesty also relates to fairness and integrity as it means telling the truth to

others. Honest businesses sell quality products at reasonable prices. They make a profit through ethical business strategies rather than trying to take advantage of others through dishonest pricing.

Concepts in Business Ethics

Personal ethics are usually considered as the

foundation for running ethical businesses. Basic business ethics concepts should flow down from the top ownership and management of a company to all workers. Leadership ethics also influence customer relations and how well the values are enforced in the workplace environment.

Ethics value system

A value system is a set of

consistent ethic values (more specifically the personal and cultural values) and measures used for the purpose of ethical or ideological integrity.

A well defined value system

is a moral code. Eg- TATA group A structure for corporate value systems that consists of three value categories.

Ethics value system

Core Value-The first value category is Core Values, which

prescribe the attitude and character of an organization, and are often found in sections on Code of conduct on its web page. Protected values- Protected Values are protected through rules, standards and certifications. They are often concerned with areas such as health, environment and safety. Created values-The third category, Created Values, is the values that stakeholders, including the shareholders expect in return for their contributions to the firm.

Social Economic values and responsibility

Social economics as "a discipline studying the reciprocal relationship

between economic science on the one hand and social philosophy, ethics, and human dignity on the other" toward social reconstruction and improvement. Socioeconomists focus on the social impact of some sort of economic change. Such changes might include a closing factory, market manipulation, the signing of international trade treaties, new natural gas regulation, etc.
Such social effects can be wide-ranging in size, anywhere from local effects

on a small community to changes to an entire society. Examples of causes of socioeconomic impacts include new technologies, changes in laws, changes in the physical environment (such as increasing crowding within cities), and ecological changes (such as prolonged drought or declining fish stocks

SINGUR issue

Relationship between Ethics and Business

The relationship between business and ethics is

intrinsically entwined. Businesses that exhibit and promote strong corporate codes of ethics are more prosperous in the long run because they show a commitment to an expectation of sound moral behavior. This demonstrates a dedication to society, customers, employees and the business itself. It also enhances a company's reputation if they become commonly known as an ethical company, and this brings more value to the organization. Pressure from market, stakeholders can result in unethical decisions being made in order to deliver positive results. When this occurs it usually results in a pattern that gets passed down through the organization

Relationship between Ethics and Business

As leaders show unethical behavior and perhaps even justify it even

though they know to be wrong, this eventually becomes a part of organizational culture. People follow by example, and the lack of moral judgment will spread While the immediate bottom lines show a healthy profit through immoral acts, the reputations of these companies ultimately suffer which over the course of time and this can really hurt a business and its' profits. Good business practices starts with management setting standards of what's expected, and they should lead by example. There is no good reason why a company cannot make ethically sound decisions and still turn a profit. Cheating and/or lying do not bring value to a business, and it also affects employee morale.

Relationship between Ethics and Business

Employees and reputation are two very valuable assets, and by

promoting a morally sound environment for both employees and customers; this can only enhance those assets. Consumer trust and confidence in a business can only serve to benefit the company. Economic rules dictate that the larger a network, the more value is added to that network. If customers can accurately rely on the fair treatment, expertise and knowledge of a company, this will further expand their reputation as honest and as a result attract more customers. This ultimately economically benefits the company as well, and their network will grow. This being the case, it would be in a company's best interest to promote universal ethically good behavior in the workplace. A positive reputation leads to higher profits and provides better service for the public. Ethics and business go hand in hand and cannot effectively be separated. Ultimately implementing a strong ethical policy is a win-win situation for all. In today's competitive environment why wouldn't a company want to do all they can do to promote success on all levels?