Chapter- 1

Introduction to Business Ethics

1.1 An Understanding of Ethics

In any organisation, from top
management to employees at all
levels, ethics is considered
as everybody's business. It is not just only
performance, but also to conduct one
achieving high levels of economic same
of business's most important
social challenges, ethically, at the
ethical problems which arise in
time simultaneously. What are the
or what can be done about them are
business and how to solve them
explained in this module.
Many of the vendors
The problems in a business are multifold. of their goods. These
the purchase
offer kickbacks to the buyers, for
bribes are many a times hefty
and within a short period, the buyers
make plenty of money.
of Boston
'Moneylaundering' isanother example. In USA, the Bank
and the
Corporation shipped over
$1 billion in cash to Swiss banks
without reporting these transactions
banks of other European nations failed to file the
to US bank regulators.
Twenty-one other banks also
it is learnt
transactions. After investigation,
required forms for big cash such large cash flows
officials suspected that
that drug enforcement other
gambling earnings, or illicit

make possible cloak secret drug sales,

and "cleaned.up" or "laundered" so as
to
gains that are hidden in banks
laundering, Business
appear the they were made honestly (Ref.:Money
Week, March 18, 1985, pp.74-82).

1.2 Ethical Problems, What We Face

in
available, Ethical problems
A number of ethical problems are beow:
personal, humar: way as
stated
business can arise also in a very
 2: Business Ethics

(1) When orders dropped in any

supervisor is asked to manufacturing
terminate a few employees tO company,
supervisor knows thatsome of save cost the
have to be terminated them though loyal, hard
to save his skin. He
terminate the knows it working,
is unfair
th
employees and still he is helpless.
two months Even if he is
termination time by the
plans of termination to the company, he willl not given
employees to be terminated with reveal his
employees would quit while a fear that
still needed or
usually did after being not work as hard as the:
told.The supervisor
rules and policies. For had toenforce all
him, the ethical company
dimensions: dilemma relates to twe
Personal
Professional
In another case,a
(i1)
senior librarian who
negligent in his attitude, was very casual and
had to make one of his
scapegoat at the end of the weak assistants
and nearly 500 books were year when library inventory was checked
short. The senior
that his assistant is highly librarian knew very well
loyal, sincere and
such a thing would not have honest in his work and
of the books lost happened from him. However, the
could not be found out reason
blame on his unior whois by him and he had to
put the
mentally weak and
had to take the full blame. He innocent. Otherwise, he
took the decision of putting
his junior rather than the blam on
on himnself.
There would be many
for a number of reasons. episodes like this, raising ethical questions
Sometimes society is harmed. At
the individual makes other times,
profit in an unfair way
We all know the at the expense of
story of the clever others.
smeared it on to the face of the monkey that ate the curd rice
and
by his master who goat. The goat was
punished severely
thought that it had eatern the same.
A business firn suffersmany
is 'embezzled' or
a times with higher costs when
when the firm has mnoney
to pay hidden costs for
(Embezzlement is fraudulent its supplies.
appropriation of another's
person to whom it was entrusted). property by the
Thus it can be noticed that 'money
laundering' cloaks illegal activities
and protects lawbreakers like
monkey-goat episode. the

1.3 Meaning of Ethics

Ethics in Latin language is
called 'Ethicus' and in
called Ethicos' In fact, this word has Greek, it is
character or manners. originated from ethos',meaning
Ethics is thus said to be the
source of morals; a treatise on this:
moral principles; recognised rules of
conduct.
Thecharacter of a man is expressed in terms of his
Fig. 1.1). conduct (ref.
 Introduction to Business Ethics :3
Leads to Good or

Decided Taken Bad,

by together Aight or
Character Conduct Series of

a Person considered Wrong,

of a Man of Actions
Moral or
as
Immoral

Known as
By which we Moral
can Judge Requires
Moral Judgement
again Standards

Fig. 1.1 Meaning of Ethics

character of a person
Ethics thus can be considered as the source of
expressed as right or wrong conduct or action.

1.4 Definition of Ethics and Business Ethics

We examine different
will definitions given for ethics in the
dictionaries as well as in books.
is relating to
According to Concise Oxford Dictionary, 'ethics'
morals treating of moral questionsi morally correct;
honourable.
It is the study of morals
and moral choices. It focuses on
standards, Tülesand codes of conductthat govern-the
behaviour ofindividuals and groups.
In thesimplest terms, business ethics are moralofprinciples
business.
that define right and wrong behaviour in the
world
in business is
What constitutes Tight and wrong behaviour
and business
determined by the public interest groups,
personal morals and
organistionS, as well as an individual's

values.
dictionary meaning of 'ethics'
is that it is the
The other
of philosophy, which is
'science of morals'; it is that branch
and conduct. It is a treatise
concerned with hman character
on morals (cápableof knowing right and wrong).
that guides an individual
Ethics'refer to the code of conduct
to the social rules that
while dealing in a situation. It relates
dealing with theother people.
influence people tobe honest in
distinguish between
Ethics are the principles of behaviour that
ethics is the evaluation
the right from the wrong. Business
as right or wrong. Ethical
of business activities and behaviour
with what a group or society, as a
whole
conduct conforms
considers right behaviour.
of what makes up good and
Ethics can be defined as the study
actions and values. Business
bad conduct inclusive of related
of the study of Ethics and
is defined
ethics, which is a subject
 4:Business Ethics

bad conduct as
what makes up good and
asthe study of
(Business is defined related
to business activities and values as
any
a corporation, a partnership,
individual or organisation, joint
primary goalis to provide goods
ventures or a franchise whose
and services in order to obtain a return on
investment)
are the standards
Ethics are the rules we play by. They
are standar
behaviour generally accepted by a society. Ethics
conduct. Marketing ethics_ relate to a mora
of moral
principles
evaluatton of decisions based on commonly accepted
of behaviour. This evaluation results in action being judget
right or wrong. Ethics pertain to more than
what is legal.

According toR.Wayne Mondy, 'Ethics is the discipline dealing

with what is good and bad, or right and wrong, or with moral
duty and obligation."

Ethics is thatbranch of philosophy, which is concerned with

the rightness or wrongness, goodness or badness of human
conduct. Ethics provides the basis fordeciding that a particular
action is morally good or bad.
Ethics describes what is 'right'and what is 'wrong' in human
behaviour, and what 'ought to be'. Business ethics are the
desired norms of behaviour exclusively dealing with
commercial transactions. Ethics is a description of 'observed'
as well as 'desirablebehaviour' and 'conduct' that attempts to
articulate moral values.

Ethics concern the rightness orwrongness of human conduct.

According to John Donaldson, Business ethics,in short can
be described as the systematic study of moral (ethical) matters
pertaining to business, industry or related activities,
institutions,or practices and beliefs. It can also refer to the
actual standards, values or practices or beliefs (An example of
the latter use is Seen in the title of Max Weber's bok, The
Protestant Ethic and theSpirit of Capitalism). Business Ethics
is the systematic handling of values in business and industry.

The word 'ethics'is derived from the Greek word 'ethos'which

refers specificallyto the "character" and "sentiment of the
community."
Shea, in 1988 definesethics as the principles of conduct
governing an individual or a profession and "standards of
behaviour.

Ethics are the 'rules or standards thatgovern behaviours.' As

per Brian Harvey, 'ethics stands for a practice as well as a
reflection on that practice. As a practice, it can be described
as the conscious appeal to norms andvalues, to which, on
reasonable grounds,we hold ourselves obliged, as,
reciprocally.
we hold others cbliged to the same norms andvalues. As a
 Introduction to Business Ethics :5

ethics is the methodical and systematic elaboration

reflectlon,
of the norms and values, we appeal to in our daily activities.
Ethics are about noms and values of a certain seriousness,
about standards andideals,i.e., ones that people cannot easily
at
neglect without harming others, or without being looked
disdainfully by significant others. It is about keeping your
promises, respecting sentiment of beings, and distributing
benefits and burdens in a fair and equitable way.

Business ethics are the application of general ethical rules

to business behaviour.
According to Keith Davis and associates, ethics are a set of
rules that define right and wrong conduct. These rules tell
us
when our behaviour is acceptable and when it is disapproved
and considered to be wrong. Business ethics are the
application of general ethical rules to business behaviour.
Business ethics concentrate on moral standards as they apply
to business policies, institutions and behaviour. It is a
specialised study of moral right or wrong. It isa form
of applied
ethics. It includes not only the analysis of mnoral norms and
of
moral values, but also attempts to apply the conclusions
theanalysis to that assortment of institutions, technologies,
transactions, activities and pursuits that we call business.
Business ethics are nothing but the application of ethics in
business. It proves that businesses can be, and have
been
ethical and still make profits. Today, more and
more interest
practices in
is being given to the application of ethical
business dealings and the ethical implications of business.
the
Business ethics are rules of business conduct, by which
relates
proprietary of business activities may
be judged. It also
to the behaviour of managers.

1.5 Introduction to Business Ethics

Ethics is commonly defined as a set of principles prescribing a
and wrong. It
behaviour code, explains what is good and right, or bad
There is a combination
may even outline moral duties and obligations.
of two familiar words, namely business
and ethics in Business ethics'.
just as
Business ethics are concerned with moral issues in business
of medical practices and
medical ethics are concerned with morality
with the morality of political
policies, or political ethics are concerned
affairs. In business ethics, we arrive at two things:
issues in
Looking at the problems which raises moral
business.
for solving them.
Critically examining the various problems
 6:BusinessEthics

Business Concerned with

Ehics
Moral Issues
in
Ethics

Similar to

Medical Ethics Concerned with

Moralitý of Medical

Practices and Policies

or

Political
Concerned with
Ethics
Morality of
Political Affairs

Fig. 1.2
Understanding of Business Ethics
By what method do
right and
we decide on answers
wrong in to questions of
business? There is no special or moral
do this, nothing more unique process to
orless than is
into complex involved in any
problems, whether in disciplined enquiry
business or anywhere else.
We can subject this to three
differentkinds of tests.
Test of agreement
with the evidence:
supportor deny the Does the evidence
explanation we have put
we are arguing for the forward? Example,
in the running of benefits of greater
worker participation
companies, what is the
employees actually want such evidence that
Test ofinternal involvement?
coherence: Are all the parts
in agreement with each of the explanation
other or is itself
way? Does it say thingswhich contradictory in some
so cannot be or are are somnehow in
unlikely to be, equally opposition and
time? true at the same
Example: We cannot accept the
interested in maximising workers who are exclusively
of an enhanced wages and argue for the
self esteem that importance to them
would come fromn
decision making. participation in
Test of its
compatibility (with our
belief):Does it fit in with what more general
this area or does we generally take to system
be
in
it somehow true in
at least test contradict our
uncomfortably with them? assumnptions, or
does the claim that the How well, for example,
workers are exclusively
maximising wages, fit in with interested in
human motivation? what we generally
accept about
We attempt to solve ethical
would solve any other problems in much the same
complex and contentious way as we
samerange of test available and questions. There is the
the same kind of critical
to theory. relationship
 Introduction to Business Ethics :7
1.6 Ethical Performance
Business frequently demonstrates a high level of ethical
performance t00. Ethicalbusiness performance means adhering to
society's basic rules that define right and wrong behaviour. The following

examples reveal the same.

(1) Johnson and Johnson protected its customers by recalling
stocks of Tylenol capsules twice within 5
years period when
poison was found in some Tylenol bottles on store shelves.

(i1) Parker Brothers voluntarily withdrew its all time best selling
toy when it found that two children were choked to death by
swallowing some of its parts which they never anticipated.
Even in India,HMT Ltd., a reputed public sector undertaking
(i11)

withdrew all its milk separators supplied through its dairy

machinery unit, Aurangabad, when it found that one of the
milk separators' lid atthe customers end flew off while running
and hit the roof. No major accident took place. Owing to this,
it withdrew all the separators supplied to the customers
for
re-checking and to make design changes for some time, so
that the same should not be repeated. Later on, HMT replaced
new separators to its customers. All this was done only to
regain the customers confidence in them, by incurring heavy
expenses.
By doing jugglery like this, the companies have to spend millions
of rupees or dollars on recalls/resupply etc.

One of the major social challenges faced by business is to balance

to be ethical and
ethics and economics. Society wants business
economically profitable at the same time.
The three terms used to define ethics are:
Right
Proper
Just

and the question is "what is right,proper and just?"

to the
These are highly important termns in the future, compared
the society is becoming more
past, as our economy is more competitive,
These terms and
crowded and technology is becoming more complex.
business executive who has to take
questions are important for any
his own control.
- multi-decisions in ways that are beyond
terms
The ethics of management is coined with the above three
and 'just' in the
and the determination of what is 'right, "proper'
- goes farbeyond simple
decisions and actions that affect other people
Collusion is a secret
questions of bribery, theft and collusion.
agreement to deceive.
 8:Business Ethics

1.7 Ethics in Business

All over the world, there is a growing
realisation that
important for any business and to achieve
the progress of anyethicsis
Ethics give rise to efficient
economy. It is not the government Society.
or
which will protect the society. But
ethics alone can protect it. lay
are good in itself. Ethics and
profits go together in the long Ethics
ethically responsible company is
one which has developed a
run. A
caring for people and culture ot
environment, a culture which flows
from the top managers and downwarda
leaders. Ethics can be
conscious appeal to normsand values to described as th
we hold ourselves obliged,as which, on reasonable grounds
same morms and values. As areciprocally, we hold others obliged to the
reflection, ethics are the
systemnatic elaboration of the methodical and
norms and values we appeal to
daily activities. Where in our
these activities are organised
issues, we face ethics in the under business
practical and reflective
ethics. variety of business

On innumerable occasions, people in

questions in which a balance has business are facing ethical
to be found between
often conflictingrights the differentand
and interests of the parties
even say that the involved. One may
weighing of rights and
determinate circumstances, interests, at stake in
business ethics. constitutes the common
domain of
Ethical rules are guides to
moral behaviour. For
societies have ethical example: All
rules forbidding, lying,
harming others, similar to stealing,deceiving and
the other ethical rules that
honesty, keeping promises, approve of
others. These are the helping others and respecting the
basic rules of behaviour right of
for the preservation and which are of much use
continuation of organised life.
Most of the people find major
source of ethical guidance and
meaning in religious beliefs and moral
is equally important as it organisations. The family institution
when they grow up, as schoolsaand
imparts sernseof right and
wrong in children
cultural associations and other similar institutions
like
televisionetc. The totality
will create in them a of these exposures
concept of. ethics, morality and
behaviour. sociallydesirable
Ethical rules are present
in all societies,all
individuals, though they may vary organisations and all
greatly from one to
considered ethical by one another. What is
society may be forbidden
One particular religious notion by another society.
of morality may
ethics is a universal differ with others.
human trait. AIl people wherever Still
rules to gvern their they are, need
conduct, rules thattell
are right or wrong, moral or them whether their actions
immoral, approved or
disapproved.
1.8 The Common Domain of
Business Ethics
Majority of the business
practitioners and ethicists alike
good and clear competence in show a
handling more dilemmas.
Experience
 Introduction to Business Ethics :9

and reflectionhave taught them how to spot the ethical implications of

adiven situation and how to approach them in an orderly way. 'Moral
noint of view' is to be adopted to track moral elements, adequately. This
involves that one tries to determine the specificinterests and rights of
all parties involved. Taking the moral point of view as the first moral
decision, one makes in a process of forming a moral judgement.
As an example, a young girl is suffering from neuro-blastom, the
parties concerned are her parents, family doctor on one hand and the
insurance company on the other. All insurance companies might have
excluded from their policies willingly or inadvertently, cases facing lethal
illness of clients, similar to the one of the young girl. If equity is the
basic moral concept, one cannot accept a moral obligation in one case,
andreject it in another that, in all relevant respects is similar to the
first.

The moral core issue is to be determined in addition to two or

three possible core issues in a given situation. Once the core issue
has been identified,however, it is another thing to come up with a well
argued position to give good reasons, that is for a moral preference in
the case. The real hard work of ethical analysis takes place with-the
joint effort of the concerned (preferably) who are in a position
to
influence the decision and with some support of ethical expertise if

required.

1.9 0bjectives of Ethics

The objectives of ethics are as shown in figure 1.3 below:

Study of human behaviour: Makes evalutative assessment

about that as moral or immoral (adiagnostic goal)

Establishes moral standards/norms of behaviour

Makes judgement upon human behaviour based on these

Ethical standards and norms
Objectives
Prescribes moral behaviour; makes recommendations about

how to or how not to behave (therapeuticgoal)

Expresses an opinion or attitude about human conduct in

general.

Fig. 1.3 Ethical Objectives

good of man
(1)The primary objective is to define the highest
and set a standard for the same. Here we have to consider

ethics to deal with several interrelated and complex

problems

which may be of psychological, legal, commercial,

in nature.
philosophical, sociological and political
 10: Business Ethics

(11) The other objectives are many. These are

Study of human behaviour; making evaluative
about them as moral or immoral (a diagnostic assessment
goal)
Establishing moral standards and norms of t
behaviour.
Making judgement upon human behaviour
these standards/norms. based on

Prescribing moral behaviour and

making recommendation.
about how to behave or vice versa
(therapeutic goal).
Expressing an opinion or attitude about human
in general. conduct

1.10 Nature of Ethics

The concept of ethics deals with human
beings only. Only
human beings are endorsed with the freedom of choice.
The study of ethics has become a set of
about moral behaviour and conduct; systematic knowledge
study is a science - a
field of social science.
The science of ethics is a normative science. Normative
sciences judge the value of the
facts in terms of an idea:
concerned with judgements of 'what ought to
be,' but not with
factual judgements.
Ethics deals with human conduct
which is voluntary and not
forced or coerced by persons
or circumstances. Eg.
even killing a person who has Injuring or
come to kill you is not
considered a moral or legal offence, but a
cold blooded murder
is considered to be the
highest kind of moral or legal
Ethics is basically an area crime.
dealing with moral judgement
regarding voluntary human conduct.
Business ethics is nothing, but the application of
ethics in
business.
Business ethics can be, and has been, ethical and can still
make profits.

More interests shown today in the

application of ethical
practices in business dealings and
the ethical implications.
Profit maximisation and
discharging of social responsibilities
at the maximum limit cannot be
done simultarteously as they
are at opposite ends. (eg.
concern for task i.e.,
and concern of workers). productivity

By introducting advancedl technology to replace

of ageold inhabitants occupations
is an ethicaldilemma.
decisions have ethical Many managerial
implications and these decisions
rise to managerial give
dilermmas.
The nature of ethics is shown in
fig. 1.4 which is self explanatory.
 Introduction to Business Ethics :1l

• Voluntary; not Deals with

forced of beals with human beings only
coerced by Concept, as they are en
Human of Ethics
persons or dowed with freedom
Conduct
circunstances. of choice and
(example: means of free will.

Injuring or a person who

killing Human being can distinguish
has come to kill you is not a Nature of
between good and evil, right
Ethics
moral or legal offence; A cold and wrong, just and proper
blooded murder the highest (4 Points)
is Human being can distinguish
kind of moral or legal crime) between the end he wishes to
pursue and the means to gain
Judge the values thatend.
of the facts in terms Science Only human being does the
of an ideal situation.
of ethics question of ethics, values and
Concerned not with (Normative moral conduct
factual judgements $cience)
but with judge set
A of
ments of what ought
be' to
Study of Syst e ma tic
Ethics is concerned with júdgement
Ethics knowledge about
of value or what ought to be;seeks behaviour
moral
to determine the nature of the norm
and conduct
ideal or standrds and seeks to
A science - a
enquire into the fitness of human field of social science
actions to this ideal

Fig. 1.4 Nature of Ethics

1.11 Sources of Ethics

No one takes a course to learn business ethics. Ethics is a natural
market consequence of business as few ethics experts argue. Six
primary sources of ethics have been identified in the American
business area by ethics scholars George and John Stever as under:
(1) GeneticInheritance
In recent years, socio-biologists have lots of evidence and
arguments to suggest that the evolutionary forces of natural selection
influence the development of traits such as cooperation and alteration
that lie at the core of our ethical systems.

(i) Religion
The great world religions as we have sen are:

Judaism
Christianity
Islam
The business people in these religions believe that their religion
provides them with eth:cal principles/standards, which can be applied
in business. The Jewish tradition and the Christian tradition
refer
are
the religious ethical teaching as the Ten Commandments' which
believed to have been divinely revealed as the will of God.
 Ethics
12:Business

VI. Codes of Conduct

. Genetic Inheritance
The qualities of
goodness is
traits
Steiner and Steiner
identified a product of genetic
of over time by
categories strengthened
three primary
codes the evolutinary process
Company codes +II, Religion
Company operating is clearly a
Religious morality
policies shaping our
ethics Six primary focus in
Codes of (through a
Primary societal ethics
the golden
The legal system
V. Sources rule exemplified by
Law is an everchanging of Ethics rule and the ten
approximation of current commandments)
wrong.
perception of right and
II. Philosophical Systems
Laws represen! a rough
of society's The quality of pleasure to be
approximation
derived from an act was
the
ethical standards
essential measure of its
V. Cultural Experience
goodness as per the
John Steiner refers to the epicureans. The stoics like
rules, customs and the puritans and many
standards transmitted
contemporary Americans
from generation to
advocated a discussed
generation as guidelines
hardwoking, thrifty life style.
for appropriate conduct.
Individual values are Such philosophies have been
instrumental in our society's
shaped in large measure
by the norms of the moral development
society.

1.5SixPrimary Sources of Ethics

 18:Business Ethics

1.12 Six Primary sources of Ethics in the American

Business are

George and John Steiner, noted scholars have identified si

primary sources of ethics in the American business arena. These ar
already explained in fig. 1.14.

Six Primary Sources of Ethics

• The Legal System

Religion

Genetic Inheritance

Philosophical Systems
• Code of Conduct

Cultural Experience

Fig. 1.6 Sir Primary sources Ethics

of
Religion
The religion is as explained in page 11-19.
Via a rule exemplified by the Golden
Rule (or its variations in
many religions) and the Ten Commandments,
religious
morality is clearly a primary force in shaping our societal
ethics

The applicability of religious ethics to the

is the concern business community

The question the more relevant since the Golden

is all
is not limited Rule
to
western thought
Could the Golden Rule srve
as a universal, practical,helpful
standard for the business persons
conduct?
Philosophical Systems
To the Epicureans, the quality of
an act was the essential measure pleasure to be derived from
of its goodness. The stoics,
like the puritans and
many contemporary Americans
advocated a disciplined,
hardworking, thrifty life style.These
philosophers like other philosophers,
have been instrumental
in our society'smoral
development
The Legal Systen
Laws representa rough approximation of society's ethical
standards. Thus, the law serves to
educate abcut the ethical
 Introduction to Business Ethics 19:
causes in life. The law should not be treated as a vehicle for
expressing all of society's ethical preference

Codes ofConduct
Steiner and Steiner identified three primary categories of such
codes:

Company codes,ordinarily brief and highly generalised

express broad expectations about its conduct.
Company operating policies often contain an ethical
dimension.Express policies as to gifts, customer complaints,
hiring and other decisions serve as a guide to conduct and as
a shield by which the employeecan protect against unethical
advances from thcse outside the firm.
Affirmative ethical principles ofthe American Institute of
Certified Public Accountants:Many professional and Industry
Associations have developed codes of ethics as above.Codes
of conduct seem to be a growing expression of the business
community'ssincere concern about ethics. However the utility
of such codes remains unsettled.

GeneticInheritance

As already said in page 11,Socio-biologists in the modern age

have amassed persuasive evidence and arguments suggested
the evolutionary forces of natural selection influence the
development of traits such as cooperation and altruism that
lie in the core of our ethical systems.

Those qualities of goodness often associated with ethical

conduct may in some measure be a product of genetic traits
strengthened over time by evolutionary process.

Cultural Experience
Steiners referto the rules, customs and standardstransmitted
from generation togeneration as guide lines for appropriate
conduct.Individual values are shaped in large measure by
the norms of the society.
Some of the experts in business ethics have statedthe following
(0Business Operates within the Society: It is a part of
subsystem of society. Business's functioning must contribute
to the welfare of the society. In order to survive, develop
and
excel, business must earn social
sanction of the society where it exists
and functions. Without earning social
sanctions, business cannot get loyal
customers, cannot operate in the
market place. It will soon collapse and
die away.
Business
If business grows larger. the public
takes more interest in it, since this will
lead to a impact on the
greater
Society
community. Managers are tuned to
publíc opinion and they react toit. They
seek to maintain a proper image of their
Fig.1.1IBusiness is a company in the public mind. This leads
to the assumption of greater
Subset ofSociety
responsibilities.
 28 :
Business Ethics

(i) Eery business irrespective of size exists more

means or in on ethico
to tal regard to its
social concern to surui
long: Otherwise, resorting to
unethical behaviour or nos
concerning with social welfare, it will call
for its own doom
Thus, business should be ethical
and socially responsible.
As a statement of purpose, maximising of
profit is not only
unsatisfying. it is not even accurate. Business
needs to remain
ethical for its ewn good. Unethical
actions and taking decisions
will shorten the life of the
business like a flash in the pan.
quickly growing and even more quickly
dying and forgotten.
(iii) Business needs to function as responsible
corporate citizens
in the country: It is that organ of the
society which creates
wealth for the country.Hence, narrow
mentality and narrower
goals and motives are to be avoided.

1.18 Importanceof Business Ethics

Business ethics has already been defined earlier.
However, (it is
the application of general ethical rules to
business behaviour. It is not
a special set of ethical rules different from
ethics in general and
applicable only to business. For
example: If asocity's ethicalrule says
that dishonesty is unethical and
immoral, then
who is dishonest with employees, customers, anyone in business,
creditors, stockholders
or competitors is acting unethically and
immorally. Similarly, if
protecting people from harm is considered
ethical, then business firm
that recall a defective and dangerous
product is acting in an ethical
way.
In most cases, the general public expects
business to exhibit high
levels of ethical performance and social responsibility.Business firms
and their employees are encouraged to act
ethically is to prevent harm
to society."Do no harm" is one of the
strongest ethical principles. Next
is to protectbusiness
firms from abuse by
and kickback schemes have become very unethical competitors. Bribery
common and penalise honest
business firms. High ethical performance
protects the individual who
work in business.
Businesses that treat their employees
with dignity and
reap many rewards in the integrity
form of high morale and improved
productivity.People feel good about
working in an ethicalcompany since
they are protected along with
the general public.
In spite of the positive
benefits of good ethical
problems occur for the following practices, ethical
reasons:
Personal gain/dubious
character
Individual values widely
differ with
organisational goals
Managers values and attitudes
Competitive pressures
Cross-cultural contradictions
 Introduction to Business Ethics :29
gain
()Personal whose personal
Business who employs people sometimes wrongly People
are less than desirable. This will cause ethical problems.
of all
values ahead
be sometimes greedy, and put down their own welfare
the
of the fellow employees,
will
not bothered about the welfare
others, to anticipate
or society. Since ethical qualities are difficult the
company at the time of recruiting employees, many
people of
measure
and to weedout ethically
willcreep in, though an effort
above mentioned type account
made. The embezzler, the expense
undesirable applicants are in. Since perfect
leaver and the bribetaker slip
naddler,the chronic sick eliminate this
system is lacking, business is not likely to
screening proceed carefully
entirely. Business has to
kind of unethical behaviour trample individual rights
taking care not to
in screening applicants, to popular
unethical employees. Contrary
in the search for potentially reason why unethical
is not the most important
opinion, personal gain
in business.
practices occur
a company in Bangalore, with the
One of the marketing officers of gain is making lot of money apart
of personal
above mentioned qualities
The proprietor of the
company knows and
highest salary.
from his what is going on.
pretending as though he does not know
tolerates this, is very good in his
being, is that this marketing officer
The reason issues.
the proprietor on critical
work and support many a times
a vis organisational goals
vis
Individual values are not
uses methods that
(i1)

pursues goals or
A company if it its employees will create ethical conflicts in
-
of
acceptable to some
'goes
blowing' would be the outcome if an employee the
business. 'Whistle to convince
which results after he fails
public' with
a complaint
to correct the alleged abuse. an
company companies in India,
tool manufacturing in
In one of the machine and vast experience
good qualifications under one of
abroad had
officer posted
suddenly and asked to work
foreigncountries
was recalled The methods,
who was not much qualified.
of the company not accepted
the directors
in the department
by the director was many
followed even though
procedures,
there used to be heated arguments these were in
by the officer and with his experience. All
were made the officer and made
the
good suggestions so furious about
was
vain and the
director responsibility assigned
an isolated place without any own.
officer to work
in to resign on his
the officer was forced
to him. Eventually,
in these
the above, the protesting employees to correct
from
As could be seen trouble makers. Instead, they wanted
Companies were not company's goals,
procedures. They felt that the
the internal company harm everyone
employers were following would public. On
methods etc. which and the general
as well as customers
are right and the
Including themselves helm felt that they
at the This was a ethical
le contrary, the people are wrong and unethical.
Protesting employees
 30 :
Business Ethics

Alemma. The protesters or the

employees who do notlike
pracuccs Blow whistle'by revealing the situation to the
the compa
() Managers values and attitudes
general pu

As decision makers,
managers have more
others to set an ethicaltone for
the company. Theyopportunities
are the t
to act ethically or key pe
unethically.Ethical guidance
by the top levels to the usually will be
employees down below. The values provic
top managers are important in held
promoting ethical activities.
Managers ask three key questions
when making a decision:
Willit work?
(Pragmatic approach) Major
orientations of managers from decision maki
five nations referred
pragmatic approach and ethical
approach contributes
major approaches.
Is it right? (Ethical
approach)
Is it pleasant? (Affective
approach)
Values most likely to
influence managers at
work are:
Service to customers

Ability

Company loyalty
Achievement
Organisational efficiency
High productivity
A 1982 report on a
group of over 1400
values are important as corporation executives rated
under:
Responsibilityand honesty 88%
Capable
66%
Imaginative
55%
Logical
49%
Ambitions
37%
The above value preferences
are due to the
companies have on the managers. Another influence of theif
reason is the
responsibilitythat managers feel professional
concerning their jobs.
Organisational
theorganisation is toeffectiveness is their
centralgoal while at
be made effective, good work.
Then other goals are: management is requireu
Organisational efficiency
C
Organisation reputation
High morale W
Organtsatíonal leadership
High productivity
 Introduction to Business Ethics:31

Similarly.
Organisational growth
Organisational stability

Profit maximisation - also would follow

Lastly.

Organisational value to community

Service to public - are also necessary

The factors which might cause the managers to make unethical

(January
decisions as per an article in Harvard Business Review,
February 1997, p.66)are as under:
Behaviour of the supervisors in the company is most important.
Followed by this are:
Behaviours of one's equals in company
Industry's ethical climate
Society's moral climate
Formal company policy (orlack there of)

Personal financial need

attitudes of
These research findings show that the values and
ethical performance.
managers are a critical element in a company's

(iv) Competitive pressures

When companies compete for a similar product, they sometimes
a competitor from
engage in unethical activities in order to wipe out
for advancement can motivate
the market. Rivalry between employees
some kind of unethical behaviour.
In one of the cases, a private company,
was there fromn a long time
had a very good collaborator
making certain machinery. This company
those products. The design of the
from Europe to back up them for
customers. The
and liked by its
product was good, products were light
had enjoyed nearly 50years solid
private company after collaboration
the products with less
foot holding and doing very well by marketing
with high prices for their products.
competition and making high profits
good and it was well
However, the performance of the products were
long time and they could sustain
established in the market since a
even without business for certain years.
A well established public sector
the government to take up the
at the same time was forced by
and tocompete
manufacture of similar products of the private company
with them.
with the private
The public sector company could not compete
company for the following reasons:
with a firm abroad of less repute
Publicsector company collaborated
of that company
which was not popular in the market. The products
 32 :
Business Ethics

not so good. Added to this,

was robust. performance wise
very adequate
back up support was not there.

Further. the private company

ha amassed high profits every v
They were able to
and monopolised more or less from a long time. products
of their
down to any price and compete. The price when
competition developed was always kept 10%
lesser than public secto

and was supplying better products to customers.

The public sector could not compete due to its high overheade
high collaboration fees,uncompetitable products, poor backup service
from collaborator,high cost of machinery installed,high salary of people
etc.

Further, the private sector was able to secure orders through

not
discounts, presentations, gifts, etc.,which the public sector could
afford to do it. The main intention of private sector was to wipe out the
public sector andit succeeded to the major extent and is sitting pretty

even today making the public sector, almost in the verge of closing.

(v)Cross-cultural contradictions
Ethical problems occur when certain corporations cannot do
business at home, would try to enter other societies where ethical
standards differ. At home, if it is difficult to follow the ethical standards,
then such unsafe products (their countries doesn't permit) are sold
where and there is demand in other countries and where ethical
standards permit to use such products. Acceptable safety standards differ
among nations and that honest differences of opinion exist among
scientists and safety experts. There are some companies who have
built factoriesin nations whose pollution control laws are less stringent
than a particularcountry regulations.They are charged with "exporting
pollution".
What is thought to be ethically acceptable by one nation is
considered unethical by another. The resultant ethical dilemmas can
be difficult ones for business firms and their managers to solve.
Four groups to which business has a responsibility. Companies
have a responsibilityto:
Society
Employees
Customers (Consumers)
Investors
 Introduction to Business Ethics :33
(Open apparent)
to view, public
Considered reprehensible
Majority deplore this and most
Overt Ethical
businesses takecare not to be so
c Probiems
openly unethical
E.g., bribery, theft, sabotage,
Ethical collusion, etc
Questions
(Covered,concealed or secret)
Most complex, not transpare
generaly defyethical solutions
Covert Ethical e.g., corporate acquisitions,
Problems marketing and personpel
policies, capital investment etc.
Difficult to locate, to eliminate
More dangerousand threatening
to business

Fig. 1.12 EthicalQuestions

 :
40 Business Ethics
all such
about mishappening,
us than before
reminding
is more loudly than before.
to listen more
and we
began

Ethical Responsibility
1.21 Business and responsibility
to becom
Business has an ethical mn,
As many agree with social concerns. Business
in dealing ratherthan being a
more active partner a,part of solutions,
creatively find
ways to become fro
should not isolate themselves
Corporations it up to
part of problems. problems, leaving
solving our environmental
participation in to do. There are
the answers and to tell them what not
others to find
such leadership, even when
this
of corporations dèmonstrating business
example Though Bowie admits that
has been a risk to their selfinterest.
the public and promote environmentally
has a responsibilityto educate moral
is to be understood that corporate
.
responsible behaviour, it
educational campaigns, needing
moral
leadership goes farbeyond public
risk and sacrifice.Business is capable
vision, commitment and courage,
of such a challenge. Business ethics
movement should do nothing short
of encouraging such leadership demanded
by morality.
When
Good ethics may be good business in majority of the cases.
interests, any
thecrunch comes, when ethics conflicts with the firm's
isdoomed
ethics program that has not already faced up to this possibility
of the program itself. In
to fail because it will undercut the rationale
business, as in all other human endeavours, we must be prepared to
pay the costs of ethical behaviour. So also in the environmental
movement, a similar danger occurs with corporations choosing or being
wooed to be environmentally friendly on the grounds that it will be in
their selfinterest.There is the risk of participating in the movement
for the wrong reasons. The frequent strategy of the hew
environmentalists is a business to help solve environmental problems
by finding pure or virtually costless ways for them to participate. They
feel that compromise, not confrontation, is the only way to
save the
earth.

Á.22 Scope of Business Ethics

Ethical.issues exist at all levels of business activity.
Business
ethics concern the ground rules of individual
behaviour.
company and societal
See figure 1.17 on the next page.

1.23 Objectives of BusinessEthics

As per Peter Pratley, Business ethics has a two fold objective:
Evaluates human practicesby calling upon moral standards
Gives prescriptive advice on how to act morally in a specific
kind of situation.
 Introduction to Business Ethics :41

Personal policy level

Not to use office car, stationery and other

(Stakeholders level facilities for personal us

Not to fall prey to short ends.

Employees Not to misuse others for personal
Security of job Not to indulge in politics to gain power
• Better working conditions Not to spoil promotional
Better recommendation chances to others
Societal Level
Participative management Promise keeping
Welfare facilities Mutual help
Customers
Better quality of goods Concern for poor and
Goods and services at downtrodden
price Scopeof
reasonable No discrimination against any
Business Ethics
Not to corner stocks and create particular section or group
securities Concern for clean environment
Not to practice discriminatory Preservation of scarce
pricing resources for pOsterity
Not to make false claims about products Contributing to better quality of life
inadvertisements
Shareholders
Ensure capital appreciation Internal Policy Level)
Ensure steady and regular dividends
Disclose all relevant information
shareholder's interests Fair practices relating to
Protect minority
Not to window dress ba!ance sheets requirement, compensation,
etc.
Protect interests in times of mergers, layoffs, perks, promotion
Transformational leadership to
amalgamations and takeovers
Banks and other lending institutions motivate employees to aim at
better and higher things in life
Guarantee safety of borrowed funds
Better communication at levels
Prompt repayment of loans
Government
Complying with rules and regulations
dues
Honesty in paying taxes and other
of the country
Acting as partner in the progress
 Transition Stage
Dynamic relationship
and Caring for self and
between self
Three One
ensuring survival
others
focus as (sell
unacceptabl
selfish)
Focus

Two
Responsibility and material
carefor
dependent others
(Questions
illogic
of inequality between needs of
others and self)

Fig. 1.23 Conception Moraldevelopment asper Carol Gilligan

of

"In a Different Voice (Cambridge: Harvard University Press, 1982

1.29 Functionsof Ethics

The functions of ethics are as shown below:

is an area regarding
Ethics Moral Voluntary Human
dealing with Judgenent Conduct

Sets the judge

to
standard
requires
Moral Related to
Moral
Standards Obligations

Ultimate end or • The duty to do

The highest what we
good consider to be
'right' and
'proper'

Fig. 1.24 Functions ofEthics

1.30 Criteria for Universalisability

Universalisability is the doctrine or belief of

universal salvation, tr
ultimate salvation ofmankind. Whateverbe the
context and if it is involvi
prioritising generally accepted standard ethical
do anything that we would not like to be done toprinciples, we should no
us in similar situation
This is the criterion of universalisability as
stated by Kant in 1985. Th
ds applicable evenwhatever be the context and even if it
if
involve
prioritising generally accepted standard
principles. It may be noted that:
code of behaviour can be universally applied,
if it is considered ethical!
correct. This can be treated as a
general principle in enabling to evalua
other values and providing a balance when there is
a conflict of value
A.31 Characteristics of Business Ethics
decisions differ with the individual perspective of
Ethical
Each person views the ethical question in
different persons.
terms of his/her own frame
of reference.

to themselves, but affects

a
are not limited
Ethical decisions decisions do
as well. Ethical
wide range of other situations
have widespread ramifications.
not end in themselves, but
involves a trade-off- between costs
Most ethical decision
received. It needs to be clearly
incurred and benefits
and benefits, profits and responsíbilities
understood that costs
spectrum.
are two ends ofa single
 48 :
Business Ethics

decisions are not clear and

Theconsequences of most ehtical
clear what th:
nature. It is not often
are amnbiguous in
will be of an unethical decision, either of a
consequences
individual or of an organisation
Every person is individuallyresponsible for the ethical o

unethical decision or action that he or she takes.

Ethical decisions are voluntary human actions. All huma
beings have the freedom of choice and of free will.