Business Ethics

And
Corporate Governance
 What is Ethics ?
• Ethics is a branch of philosophy. Its objective is to
study both moral and immoral behavior in order to
make well-founded judgments and to arrive at
adequate recommendations.
• Ethics has two-fold objectives: Evaluate human
practices (implying analysis and evaluation) by
calling on Moral Standards, give Prescriptive advice
on how to act morally in a specific kind of situation.
• Ethics is defined by the Webster’s dictionary as ‘the
discipline dealing with what is good and bad and with
moral duty and obligation’.
 Discipline and Object of Ethics
• We distinguish the study of discipline of ethics or the ethical
reflections, from its object or field of study.
• This distinction shows that ethics has its own approach
towards morality. It is not swallowed by the subject matter.
• In practice, the distinction between ethical reflections and
conventional moral behavior is often blurred, as the best
examples of applied ethical thought are found amongst
practitioners.
• In particular, those who live in situations where different
cultural conventions make different conflicting claims ,
develop ethical reflections. If we are immersed in one moral
code, we often take its moral standards for granted.
 Rising Expectations
• The organizations were not only expected to follow
certain ethical standards but also demonstrate a level
of social responsibilities and accountability to all its
stakeholders as well as the society.
• Integration of ethics into business depends on its
values and leadership, Important values for the top
management in the context of conduct of business
include Integrity, Responsibility , and Corporate
Reputation.
 The Concept of Business Ethics
• The concept of business Ethics evolved in
1960s when social awareness movements
raised expectations from business to use their
financial strength to solve social problems such
as crime, environmental protection, equal
rights, poverty, public health , and providing
education.
• Some businesses were making profits by using
resources provided by society, the expectations
were that they should work to improve society.
 Introduction to Business Ethics
• Business Ethics refers to the application of ethical judgments to
business activities.
• Business Ethics concerns itself with what is wrong or right in
the workplace.
• It is said to be normative study of moral standards as they apply
to business policies, institutions, and human behavior.
• It is also an ethical analysis of business practices.
• Business ethics explains that business can generate profits being
ethical. Any business that wants to survive and grow in the long
run must strike a balance between its social obligations and
economic objectives.
• It studies specific moral standards that apply to the issue of
morality in business. Hence it studies both profit and non-profit
corporations.
 An Ideal Ethical Decision
• An ideal ethical decision comprises of virtues like–
Right– morally correct, Equitable, just & equal;
Good– highest good for all concerned, proper–
appropriate and acceptable; Fair– honesty, Just --
action.
• Important values for top management in the context
of conduct of business include Integrity,
Responsibility, Corporate Reputation.
• Clear vision and picture of integrity throughout the
organization are characteristics of a high integrity
organization.
 Corporate Organizations
• A corporation has been described by American
Heritage Dictionary as ‘ a body of persons granted a
charter legally recognizing them as a separate entity
having its own rights, privileges, and liabilities
distinct from those of its members.
• The need for greater number of investors to support
larger firms, economy of scale and mass production,
acceptance of private ownership of private property
as a social norm have led to the evolution of
Corporations.
• Characteristics of corporation are : limited liability,
transferability of stake in stocks, legal personality and
centralized management .
 Corporate Governance
• Ethical behavior and business should be integrated in
a new area called business ethics. Business has the
right to make profits but it should discharge its social
obligations.
• ‘Fundamental objective of corporate governance is
the enhancement of long term share holder value
while, at the same time, protecting the interests of
other stake holders’.(Kumarmangalam Committee on Corporate
Governance- 1999)
• Corporate values are, therefore, classified as
Espoused values and Values in Practice.