Business Ethics

Ethics is a subject of social science that is related with moral principles and social
values. 'Business Ethics' can be termed as a study of proper business policies and
practices regarding potentially controversial issues, such as corporate governance,
insider trading, bribery, discrimination, corporate social responsibility, and fiduciary
responsibilities.
Businesses must abide by some basic principles. It should provide quality goods and
services at reasonable prices to their consumers. It must also avoid adulteration,
misleading advertisements, and other unfair malpractices.
According to Crane, "Business ethics is the study of business situations, activities,
and decisions where issues of right and wrong are addressed."
Baumhart defines, "The ethics of business is the ethics of responsibility. The
business man must promise that he will not harm knowingly."
Features of Business Ethics
There are eight major features of business ethics:
Code of Conduct
Business ethics is actually a form of codes of conduct. It lets us know what to do and
what not to do. Businesses must follow this code of conduct.
Based on Moral and Social Values
Business ethics is a subject that is based on moral and social values. It offers some
moral and social principles (rules) for conducting a business.
Protection to Social Groups
Business ethics protect various social groups including consumers, employees, small
business persons, government, shareholders, creditors, etc. For example: Dumping
and Anti-Dumping Laws
Predatory Pricing: Predatory pricing is the practice of sale of a product or service at a
negligible price, intending to throw competitors out of the market, or to create
barriers to entry.
Offers a Basic Framework
Business ethics is the basic framework for doing business properly. It constructs the
social, cultural, legal, economic, and other limits in which a business must operate.
Voluntary
Business ethics is meant to be voluntary. It should be self-practiced and must not be
enforced by law.
Requires Education and Guidance
Businessmen should get proper education and guidance about business ethics. Trade
Associations and Chambers of Commerce should be active enough in this matter.
Relative Term
Business ethics is a relative term. It changes from one business to another and from
one country to another.
New Concept
Business ethics is a relatively newer concept. Developed countries have more
exposure to business ethics, while poor and developing countries are relatively
backward in applying the principles of business ethics.
Principles of Business Ethics
The principles of business ethics are related to social groups that comprise of
consumers, employees, investors, and the local community. The important rules or
principles of business ethics are as follows:
Avoid Exploitation of Consumers
Do not cheat and exploit consumer with measures such as artificial price rise and
adulteration.
Avoid Profiteering
Unscrupulous business activities such as hoarding, black-marketing, selling banned
or harmful goods to earn exorbitant profits must be avoided.
Encourage Healthy Competition
A healthy competitive atmosphere that offers certain benefits to the consumers
must be encouraged, e.g., monopoly, duopoly, oligopoly.
Ensure Accuracy
Accuracy in weighing, packaging and quality of supplying goods to the consumers has
to be followed.
Pay Taxes Regularly
Taxes and other duties to the government must be honestly and regularly paid. For
example, Tax Evasion vs. Tax Avoidance.
Tax Avoidance: An action taken to lessen tax liability and maximize after-tax
income.
Tax Evasion: The failure to pay or a deliberate underpayment of taxes. underground
economy
Money-making activities that people don't report to the government, including both
illegal and legal activities.
Get the Accounts Audited
Proper business records, accounts must be managed. All authorized persons and
authorities should have access to these details, e.g.:
Conflict of Interest: Employees can have a conflict of interest with the company.
Some of these conflicts of interest are minor and include general workplace
conditions or situations. However, some other conflicts may be serious and can let
the employees to show disloyalty.
Generally, employees must avoid significant conflicts of interest by not involving
themselves in disloyal activities. However, it is difficult enough to decide when a
conflict is significant and it may not always clear what employees should do besides
resisting the temptation to be disloyal.
Fair Treatment to Employees
Fair wages or salaries, facilities and incentives must be provided to the employees.
For example, Telenor, Nestle, Unlever. Same qualification and different salaries in
gulf countries for different passports.
Keep the Investors Informed
The shareholders and investors must know about the financial and other important
decisions of the company.
Avoid Injustice and Discrimination
Avoid all types of injustice and partiality to employees. Discrimination based on
gender, race, religion, language, nationality, etc. should be avoided. Dialect based on
account and language.
No Bribe and Corruption
Do not give expensive gifts, commissions and payoffs to people having influence.
Discourage Secret Agreement
Making secret agreements with other business people to influence production,
distribution, pricing etc. are unethical. For example, Employee Poaching.
Employee poaching is when a competing business tries to lure away your skilled
employees by offering them a new job, typically with better perks.
Service before Profit
Accept the principle of "service first and profit next."
Practice Fair Business
Businesses should be fair, humane, efficient and dynamic to offer certain benefits to
consumers.
Avoid Monopoly
No private monopolies and concentration of economic power should be practiced.
Cartels and Consortium:
Antitrust laws are enforced to control cartels.
Fulfil Customers’ Expectations
Adjust your business activities as per the demands, needs and expectations of the
customers.
Respect Consumers Rights
Honor the basic rights of the consumers. Right to privacy, don’t sell their personal
data.
Accept Social Responsibilities
Honor responsibilities towards the society.
Satisfy Consumers’ Wants
Satisfy the wants of the consumers as the main objective of the business is to satisfy
the consumer’s wants. All business operations must have this aim.
Service Motive
Service and consumer's satisfaction should get more attention than profit-
maximization.
Optimum Utilization of Resources
Ensure optimum utilization of resources to remove poverty and to increase the
standard of living of people.
Intentions of Business
Use permitted legal and sacred means to do business. Avoid Illegal, unscrupulous
and evil means.
Other Terms
Insider Trading
Insider trading occurs when an employee has access to company information that’s
usually unavailable to the public and can have an impact on the stock prices. For
example, some employees may come to know that their company is going to be
bankrupt before general public and they can sell all their stock. People who tend to
buy the stocks will be deceived. It is also a kind of insider trading to encourage near
ones to sell their stock having such “insider information.”
Fiduciary Responsibility
In business ethics, fiduciary responsibility is a legal and ethical obligation to act in the
best interests of another party, prioritizing their needs over one's own, and
maintaining trust and good faith.
Ethical Dilemma
An ethical dilemma is a situation where a decision must be made between two or
more options, none of which are entirely ethical or morally sound, and where each
option presents potential negative consequences.
Whistle blowing
Whistleblowing is the act of going public with significantly immoral or illegal acts of
an organization one is part of. However, someone is not a whistle blower for
discussing the embarrassing or rude behavior with public, and a whistle blower
doesn’t need to involve in sabotage or violence.
Counterfeit and Infringement
Counterfeiting and infringement involve the unauthorized copying or imitation of
products, trademarks, or intellectual property, which is unethical and often illegal,
damaging legitimate businesses and consumers.
Counterfeiting:
The deliberate creation of fake or imitation goods, often bearing trademarks or logos
of genuine products, to deceive consumers and pass them off as authentic.
Infringement:
The violation of intellectual property rights, such as patents, copyrights, or
trademarks, by using or copying protected material without permission.
Sexual Harassment
Employees often do not understand what they should do if they see one of their co-
workers harassing another, either mentally, sexually or physically. Employees have
to worry for their jobs while attempting to report a superior for harassment. They
may fear that they might be labelled a troublemaker if they report inappropriate
behavior.
The best way rests with the staff members who generally develop the company's
employee handbook. It is their job to tell employees that, they will not be penalized
for reporting the harassing behavior or inappropriate actions.
Financial Embezzlement
Financial embezzlement involves the illegal appropriation of funds or assets
entrusted to an individual by an employer, often disguised as legitimate expenses or
transactions.
Devil’s Advocate
"Devil's Advocate" involves intentionally challenging a proposed course of action or
idea to uncover potential flaws and risks, ensuring a more thorough and well-
rounded decision-making process.

Website:
https://www.tutorialspoint.com/business_ethics/business_ethics_quick_guide.htm