BUSINESS ETHICS

MODULE -5

INTRODUCTION TO ETHICS:
Ethics or moral philosophy is a branch of philosophy that involves systematizing,
defending and recommending concepts of right and wrong conduct. Ethics refers to
the code of conduct that guides and individual in dealing with a situation. It refers to
the social rules that influence people to be honest in dealing with the other people.

DEFINITION:

According to Wayno Mondy, ‘ethics is the disciple dealing with what is good and bad
or right and wrong or with moral or with moral duty and obligation.’ Ethics is
concerned with right and wrong, good and bad and virtue and vice. For instance,
never break a promise, treat everyone fairly, and always tell the truth.

ETHICS AND VALUE:

Ethics is nothing but the degree of faith that one bestows upon oneself. Ethics
involves learning what is right or wrong.

Values are general beliefs concerning what is good or bad, desirable or not desirable
that is shared by individuals and organizations in society. They are not directed
towards any specific elements but used to access broad range of objects and
situations. For example someone who believes that honesty is important will likely act
honesty in more situations (a cashier being honest while dealing with money). Values
are important characteristics that influence individuals and organization and
behaviors. The way an individual’s cognitive structure (a person’s mind) works by
values that influence his beliefs. These beliefs form a person’s attitude and
subsequently this heavily influence his behavior.
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Various social institutions like family, school, other extra curricular bodies like sports
club, debating, painting, singing, religion and society or community play an important
role of inculcating values in individuals. Some common personal/organizational
values include the following:

 Honesty or truth
 Respect
 Self fulfillment
 Sense of accomplishment
 Social responsibility
 Courage
 Simplicity

A person with all these values has equanimity. Such a person can mobilize his own
energy and other’s energy and can help accomplish wonders.

IMPORTANCE OF ETHICS:

 Inhibit knowledge: first and foremost ethical norms help in gaining knowledge
analyzing the truth and avoiding any chances of errors while examining any
given circumstance or situation. Thus, ethics are most efficient for avoiding
errors and prohibiting against fabrication, falsifying or misrepresenting any
data.
 Enhances co-operation: working in any organization or workplace demands
great deal of co-operation and co-ordination amongst people at different level
and different fields. As such different values are promoted and shared amongst
these people such as trust, accountability, mutual respect and fairness. These
only contribute to better and improved working conditions, growth and success
in turn.
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 Assists in dealings: The right sense of thinking can help us deal with people on
a daily basis in the right and positive manner. The absence of the right
approach and wrong sense can only induce negative feelings, thereby effecting
our communication with people as well.
 Builds public support: by following proper ethical norms, they ensure, building
positivity and strong public support. For example, people are more likely to
invest in a project or fund if they are guaranteed about the quality and integrity
of the project. However if they are unsure of the quality and growth they
probably will step back and look for another similar project that will fulfill
their demand.
 Promotes moral and social values: ethics are considered to be of at most
importance simply because they assist in promoting other significant moral and
social values such as social responsibility, human rights, animal welfare etc.

BUSINESS ETHICS:
The term business ethics refers to the system of moral principles and rules of the
conduct applied to business. Business being a social organ shall not be conducted in a
way detrimental to the interests of the society and the business sector itself. Business
ethics is the code of conduct followed and performed by every business.

IMPORTANCE OF BUSINESS ETHICS:

 Corresponds to basic human needs: the basic need of every human being is that
they want to be a part of the organization which they can respect and be proud
of because they perceive it to be ethical. Everybody likes to be associated with
an organization which the society respects as an honest and socially
responsible organization. The basic needs of the employees as well as the
managers compel the organizations to be ethically oriented.
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 Credibility in the public: ethical values of an organization create credibility in

the public eye. People will like to buy the product of a company if they believe
that the company is honest and is offering value for money. The public issues
of such companies are bound to be success. Because of this reason only the
companies are spending huge sum of money on the advertisement nowadays to
convince the public that their products are safe and free from pesticides of any
kind.
 Credibility with the employees: when employees are convinced of the ethical
values of the organization they are working for they hold the organization in
high esteem. it creates common goal, values and languages. The HR manager
will have credibility in the eyes of the public. Perceived social rightness and
moral values can win the employees more than any other incentive plans.
 Better decision making: respect for ethics will force a management to take
various economic, social and ethical aspects into consideration while taking the
decisions. Decisions making will be better if the decisions are in the interest of
the public, employees and company’s own long tern good.
 Profitability: being ethical does not mean not making any profits. Every
organization has a responsibility towards itself also that is to earn profits.
Ethical companies are bound to be successful and more profitable in the long
run though in the short run they can lose money.
 Protection of society: ethics can protect the society in a better way than even
the legal system of the country. Where aw fails, ethics always succeed. The
government regulates all the activities that are harmful to the society. A HR
manager who is ethically sound can reach to agitated employees more
effectively that the police.

FACTORS AFFECTING BUSINESS ETHICS:

The business executive working as a professional manager has to decide what is

ethical or unethical. Many factors influence this decision.
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 The individual’s personal code of behaviour: the personal code of behaviour is

the result of the complex environment that influences one’s life.
 The ethical standards imposed on a manager by his superiors: it also influence
him in his decision as to the morality of behavior. If the superior condones
unethical activities such as padding expenses account, the subordinate is
encouraged to look upon this activity as an acceptable practice.
 Policies of the company: policies of the company also influence the
determination of the ethical conduct. Standards of the behaviour in an industry
are often influenced greatly by the dominant firms in that industry. The authors
of the company policy obviously have an effect that is decisive.
 Ethical climate of a country: if it is poor then only giant corporations and large
undertakings can stand competition and be viable, a small concern is apt to go
bankrupt, since business is concerned with employment of large number of
persons. It has the obligation to see that it adheres to an ethical atmosphere.

THEORIES OF ETHICS:
Ethical theories provide part of the decision making foundation for decision making
when ethics are in play because these theories represent the view points from which
individual seek guidance as they make decisions. Each theory emphasizes different
points, a different decision making style or a decision rule such as predicting the
outcome and following one’s duties to others in order to reach what the individual
considers an ethically correct decision. In order to further understand ethical theory,
there must be some understanding of a common set of goals that decision makers seek
to achieve in order to be successful. Four of these goals include beneficence, least
harm, respect for autonomy and justice. Four broad categories of ethical theory
include the following:

 Deontology: the deontological class of ethical theories states that people should
adhere to their obligations and duties when engaged in decision making when
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ethics are in play. This means that a person will follow his or her obligations to
another individual or society because upholding one’s duty is what is
considered ethically correct.
 Utilitarianism: utilitarian ethical theories are based on one’s ability to predict
the consequences of an action. To a utilitarian, the choice that yields the
greatest benefit to the most people is the one that is ethically correct.
 Rights: I ethical theories based on rights, the rights established by a society are
protected and given the highest priority. Rights are considered to be ethically
correct and valid since a large population endorses them. Individuals may also
bestow rights upon others if they have the ability and resources to do so. The
major complication of this theory on a larger scale is that one must decipher
what the characteristics of a right are in a society. In order for the rights theory
to be useful it must be used in conjunction explain the goals of the society.
 Virtue: the virtue ethical theory judges a person by his/her character rather than
by an action that may deviate from their normal behaviour. It takes the
person’s morals, reputation and motivation into account when rating an
unusual and irregular behavior that is considered unethical.

VIRTUE ETHICS:
Virtue ethics discuss the nature and definition of virtues and other related problems.
These include how virtues are acquired, how they are applied in various real life
contexts, and whether they are rooted in a universal human nature or in a plurality of
culture.

Virtue ethics = Excellence of human character

Virtue ethics could be applied to business. If the virtues of a good business person are
the same as those of a good person. A moral virtue is an acquired disposition that is
valued as part of the character of a morally good human being and that is exhibited in
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the person’s habitual behaviour. Applying virtue ethics to business would require
determining the end at which business activity aims. If the business purpose is merely
to create as much health as possible then we get one set of virtues.

STRENGTHS OF VIRTUE ETHICS:

 Character traits: Virtue ethics deals with a person’s virtues and how they use
them in making the lives of other people better. If a person has virtues, he/she
can act morally and will be able to treat others with respect, compassion and
love. These virtues prompt a person to do good things to others because these
are inborn in him or her.
 Better people: virtues such as generosity, honesty, compassion, friendliness,
assertiveness are already present in people and should be practiced in everyday
living.
 Broad and holistic: having no particular criteria, virtue ethics encompasses
different virtues which are important to live in harmony with other people. It
also does not attempt to worsen the complexity of things by categorizing what
are moral acts or not instead had developed throughout the years. Also, as
compared to other theories which can be a threat to morality and are confusing,
virtue ethics is a holistic approach that it considers the totality of a person
including the skills character traits and emotions.
 Agent centered: another powerful attribute of virtue ethics is its focus on the
character of the moral agent and not concerned on consequence am duty or
obligation.
 Sense of community: virtue ethics motivates and individual to have high regard
to personnel relationships and encourage or motivates a person to be sensitive
of others and take care of other people.
 Preservation of goodness: according to tactics, people can be easily corrupted
with power and luxury which can impede liberty. Having said this virtue ethics
serves as a shield against polluting the minds of individuals and making them
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bad people. Instead this approach makes it possible for an individual to

preserve and make better the life they already has enjoy it rather than dream of
a life with luxury and power.

WEAKNESSES OF VIRTUE ETHICS:

 Without focus: critics of virtue ethics says that this theory lacks focus when it
comes to determining the types of action that are morally acceptable and
permitted from the one that should be avoided.
 Nature of virtue: Another weakness attributed to virtue ethics is the difficulty
in determining the nature of virtue. This is due to the difference in opinion and
perspective of people who are inherently different from each other comes from
diverse cultures and societies. These aspects lead to differences on what is
morally right or wrong for people. Thus it is hard to find out the virtues.
 Self-centeredness: according to opponents of virtue ethics, it deals with a
person’s own character when it is supposed to be how actions of an individual
affect the other people. Other theory of ethics expects a person to think or
regard other people instead of personal gain and interest.
 Misguidance: those who are not in favour of virtue ethics find this theory to be
misguiding when it comes to educating or motivating people. This is because it
leads people to rely of luck when it comes to attaining moral maturity.
 Limited: since virtue ethics concentrate on only a limited number of virtues it
will not be able to help a population but only an individual. This is one of the
weaknesses seen by opponents saying that this theory is not converting on the
bigger picture.

ETHICAL DILEMMA:
An ethical dilemma as ethical paradox is a decision making problem between 2
possible moral imperatives neither of which is unambiguously acceptable or
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preferable. The complexity arises out of the situational conflict in which obeying one
would result in transgressing another. It is sometimes called ethical paradoxes in
moral philosophy, ethical dilemmas maybe invoked to disprove and ethical system or
moral code or to improve it so as to resolve the paradox.

ETHICAL LEADERSHIP:
Leadership involves planning, organizing and controlling the resources of the
organisation so as to achieve the goals and objectives of the organization to make
some rules, to coordinate and control their subordinates in the right manner. These
rules can be determined by the environment and the culture of the organization. These
rules also define the relationship of the managers with their subordinated and peer.
The moral awareness of the managers can be ascertained by the organizational
administration. Management ethics is the organization that deals with the morality and
the conduct of the individuals and the responsibilities of the management. Therefore,
ethical management or ethical leadership deals with issues relating to managerial
misbehaviuor and the moral conduct of the management.

The ethical leadership manifest itself has three dimensions:

1. Leader’s intention/motive
2. Leader’s influence strategy
3. Leader’s character

WHISTLE BLOWING:
This term was first used for the government employees who go to public with
complaints of corruption or mismanagement in government agencies. This was later
used even in the private sector when similar activities were noticed whistle blowing is
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an attempt by a member or an ex member of an organization to disclose wrong doing

in or by the organization.

TRADE SECRET:
A trade secret is a type of intellectual property in the form of a formula, practice,
design, instrument, pattern, commercial method or compilation of information not
generally known or reasonably ascertainable by other by which a business can obtain
an economic advantage over competitors or customers. In some jurisdictions, such
secrets are referred to as confidential information.

A trade secret is information that:

- Is not generally known to the public.

- Confers economic benefit on its holder because the information is not
publically known
- Where the holder makes efforts to maintain its secrecy.

ETHICS AND BUSINESS STRATEGY

Personal values and ethics are important for all human beings. They are especially
important for business managers as they are custodian of the immense economic
power vested in business or organization society.

It is often observed from failed corporations that management executives while

working out their business strategy are guided generally by what they personally want
to do, rather what they have been directed to do by the board, or the company policy
in the absence of direct supervision. As a result, somewhere down the line, the right
connection between values, ethics and strategy is lost while managing business.
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Using ethical consideration in strategic decision making will result in the

development of most effective long term and short term strategies. Specially, ethical
process in before profit decisions rather than after profit decision. This will enable the
company to maximize profits and enhance the development of strategy and its
implementation.

AREAS OF BUSINESS STRATEGY

The goal of sound ethics and an ethical culture is shared by most organizations,
however building and maintaining an ethical organization is often made difficult
because the management of ethics is not prioritized. Ethics is frequently only
addressed reactively after a problem was occurred or in another way.

 Setting the ethical standards: the ethical standards of an organization need to be

clearly defined via the company’s values and rules including the code of
conduct and policies. The values should identify the desired behavioral
parameters, which should be translated in to acceptable and unacceptable
behaviours in the company code of conduct.
 Setting up an ethic committee: the companies act now mandates, that most
companies establish a social and ethics committee. But even in the absence of
legislation, an ethics company can be a valuable face of an ethics strategy.
 Building ethical awareness: Ethics awareness is a powerful approach in the
pursuit of improved workplace ethics, particular as regards reducing unethical
behaviour. Visible policing provides a good example of the impact of
awareness. The private security vehicle which patrols the neighborhood may
not result in many (or any) criminals being apprehended, but their regular
presence serves to raise ethical awareness and, in so doing, acts as a deterrent
to crime being committed in that area.

 Measuring and monitoring ethical status: The measurement and monitoring of

a company’s ethical status is also a crucial part of an effective ethics strategy.
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The dictum that if you can’t measure something, you can’t manage it applies to
ethics as much as any other area of a business. 

 Taking action: Improving workplace ethics is optimally addressed by a dual

approach which includes actions to improve ethical behaviour and actions to
reduce unethical behaviour 

 Maintaining an ethical culture: Building an ethical workplace and reaching a

high ethical status are good achievements. The task of maintaining an ethical
culture eclipses them, however, because maintenance is a never-ending task.
To realise this requires that companies adopt a strategy based on the proactive,
regular management of ethics which pays on-going attention to the steps
outlined above.

INFLUENCE OF ORGANISATIONAL CULTURE IN

ETHICS:
Ethics is an integral part of a functioning society, but many people struggle to define
ethics and put it into practice in a business setting. Owners and managers set the bar
for ethics in an organization, but they aren't the only participants. Employees and
other business players also influence and perpetuate ethics. In the case of small
businesses, managers need to know how to carry out ethical policies in addition to
knowing the virtues.

 Employees: From the point of view of employees, management sets the tone
and shapes the overall working environment. It's easy to sow the seeds of
unethical behavior into the minds of subordinates, especially if the people who
sign the paychecks are not setting a good example. 
 Business Customers: Small businesses frequently interact with other
companies, such as suppliers and bankers. It is important to gain the trust and
respect of these third-party organizations. 
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 Consumers: While most people understand the concept of paying for goods and
services that are consumed, the public usually does not take kindly to unfair
pricing and billing practices. Also, consumers want assurances that they will
get quality products and services, based on truthful advertisements and
presentation. 
 Community: Local businesses need to respect the institutions that keep a
community intact and vibrant. In particular, city councils, county boards and
state legislatures are all gaining influence in local, national and even global
business matters.
 Society: In addition to respecting citizens, employees and community
institutions, companies must respect the environment that society depends on.
Social responsibility is the term that describes how businesses set out to be
good stewards of the earth.

ETHICS COMMITTEE
An ethics committee is a body responsible for ensuring that medical experimentation
and human research are carried out in an ethical manner in accordance with national
and international law.

BUSINESS ETHICS COMMITTEE

An ethics committee will be able to provide an overarching view of how the company
does its business. It will have responsibility for establishing and embetting corporate
ethical values, ethics policy and code and ensuring and monitoring ethical business
practice.

RESPONSIBILITIES OF ETHICS COMMITTEE

The responsibility will include:

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- Ensuring that there is an effective training in the code of ethics at all levels.
- Ensuring that there is an effective communication reinforcing ethical values
and good practice in the business and ensuring unacceptable practices.
- Setting up monitoring helps lines or mechanisms used by staff to raise
concerns.
- Accessing report and overseeing subsequent actions following breaches of the
ethics policy or allegation of misconduct.
- Developing and reviewing the effectiveness of and updating ethics and
related policies and KPIs.
- The liaison with stakeholders over ethical issues.
- Ethical due to diligence prior to a merger or an acquisition or the undertaking
of a major new project.

The committee will need authority to seek any information it requires in order to carry
out its work effectively. This authority should be set out in committee terms of
reference.

Also the Ethics Committee should report at least annually and meeting minutes should
be sent to the board.

ETHICAL AUDIT
Evaluation on an entity’s moral and legitimate performance. Measures on
organization’s perspective and execution in that which is ethical done by neutral, third
party.

PURPOSE OF AN ETHICS AUDIT

The primary purpose of an ethics audit to provide social workers with a practical way
to:

- Identify pertinent ethical issues in their practice setting.

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- Review and assess the adequacy of their current practices.

- Design a practical strategy to modify current practices as needed.
- Monitor the implementation of their quality assurances strategy.
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GROUP MEMBERS:
ANCY A.M: ancymariyajesus@gmail.com
ASHIK B.S: ashikbs.19971997@gmail.com
MUZAMMIL RASHEED: muzammilrasheed00@gmail.com
NAJLA NAZAR: najlanazar15pas@gmail.com
PRIYA PRASAD: priyaprasads1947@gmail.com
RAHUL: rahulsimon27@gmail.com
SHEREENA S: shereenaraziya@gmail.com