1 BUSINESS ETHICS

2 MEANING OF ETHICS Ethics has a variety of meanings. Some of them are: 1.The term comes from the root words ‘ETHICOS’ (Greek) and ‘MORALIS’ (Latin) both meaning Character, habit or behavior. 2.Ethics is a set of inner guiding moral principles that a person or group uses to analyse and interpret a situation and then decide what is the ‘Right’ and appropriate way to behave.

3 MEANING (Cont) 3. Ethics is a set of moral principles. Morals are accepted standards of behavior and rules about whether an action is good or bad, right or wrong. 4. Ethics is a discipline dealing with that which is good or bad and moral duty and obligation. 5. Ethics is about good and evil, right and wrong and of duty and obligation in human conduct and how we reason and make choices about them.

4 MORALITY AND MORAL STANDARDS Morality are the standards that an individual or a group has about what is right and wrong or good and evil. Moral standards are the norms we have about the kind of action we believe are morally right and wrong as well as the value we place on the objects we think morally good or bad. They are normally expressed as general rules or statements. Eg. Killing innocent people is bad.

5 NATURE OF MORAL STANDARDS 1.Moral stds deal with matters that concern human beings. 2.Their validity rests on the adequacy of reasons that support or justify them. 3.These have to be preferred to other values including self interest. 4.They are based on impartial considerations. 5.Their transgression is associated with feelings of guilt and shame. 6.Ethics examines these moral stds to see whether they are reasonable or acceptable. 7.The ultimate aim of Ethics is to develop a body of moral principles that are reasonable to hold. Ethics is therefore a Normative Science.

6 ETHICAL ISSUES Ethical issue is a situation, problem or opportunity in which an individual must choose among several actions that must be evaluated as right or wrong. Ethical issues in work place include: - Sexual harassment. - Discrimination in pay and promotion. - Right to privacy. - Discrimination on the basis of caste & creed.

7 SOURCES OF ETHICS 1.Religion. 2.Culture – Family. - Social group. - Norms of justice and fairness. - Personal value system. - Respect for the rights of others. - Social responsibility. 3. Law both written and common law.

8 ETHICAL VALUES Ethical values are the principles that are held as worthwhile for individual honour and social life and well being. These values control the behavior of the person and the society and channelize the individual efforts for the pursuit of common benefits. Values create credibility with the public as the individual is expected to follow those values.

9 ETHICAL SYSTEMS 1.Moral philosophy – values people use in deciding what is right or wrong. 2.Universalism –Individual must uphold certain basic values like honesty. 3.Teleology – an act is right if it produces a desired result. - Egoism – maximum benefit for the individual. - Utilitarianism – Maximum benefit to a maximum number.

10 ETHICAL SYSTEMS (CON) 4. Deontology – focus on the rights of individuals. 5. Relativism –Defines ethical behavior based on the opinions and behavior of relevant other people. 6. Virtue Ethics – What is moral must also come from what a mature person with ‘good’ moral character would deem right.

11 UNIVERSAL ETHICAL VALUES Some of the universally accepted values are: 1.Truthfulness. 2.Transparency and honesty. 3.Compassion and Charity. 4.Trust and cooperation. 5.Equality and brotherhood. 6.Tolerance and pluralism. 7.Gratitude and respectfulness. 8.Harmony with self, society and Nature. 9.Respect for Law, professional codes and rules. 10.Respect for the freedom of others.

12 BUSINESS ETHICS Business Ethics is the study of Moral standards of right and wrong in business decisions. The field of business ethics includes the values, beliefs and the moral stds governing the day to day conduct of the business. It mainly concentrates on those standards of morality as they apply to business policies and practices.

13 CONTEXT OF BUSINESS ETHICS 1.Business as a social institution with a specific responsibility Viz: - production of goods and services needed for the society. - distribution of these goods and services to the members of the society equitably. 2. It uses the resources like land, lobour, capital and technology which belong to the society in the process of converting them into goods and services.

14 CONTEXT (CONT) 3. Business corporations have become powerful economic institutions. - Concept of Joint Stock Company. - concept of limited liability. 4. Separate corporate legal personality. 5. Multiplicity of Stakeholders. 6. Organizations need rules and structures. 7. Business functions through human agents whose value system is a vital element.

15 DETERMINANTS OF THE NATURE OF BUSINESS ETHICS 1.The ethical climate of the organization. 2.Corporate ethical standards- especially competitors who are influential. 3.Emphasis on short term revenues over long term considerations. 4.Failure to establish a written code of ethics. 5.A desire for quick fix solutions to ethical problems

16 DETERMINANTS (cont) 6. Unwillingness to take an ethical stand that may involve financial costs. 7. Lack of clear procedures for handling ethical problems. 8. Giving in to the demands of the shareholders only. 9. Ethics Codes existing in the business. 10. Ethics Programs – to prevent, detect and punish violations. Legal based and integrity based. 11.Ethical decision making.

17 WHY STUDY BUSINESS ETHICS? 1.Crises in business morality. - Accounting frauds. - Defective and dangerous products. - Misleading Advertisements. - Bribery and corruption. 2. Individual’s personal values and moral philosophy affect the ethical decision making process. 3. Ethical dilemma in decision making

18 WHY STUDY (CON) 4. Business ethical problems are complex 5. Cultural diversity of organizations reflected in differing value systems. 6. Conflict between personal values and goals and those of the organization. 7. Need to learn the ethical decision making process. 8. Integrating profit seeking with service to society.

19 BENEFITS OF GOOD BUSINESS ETHICS 1.Good Ethics leads to employee commitment – Conducive ethical climate. 2.It Breeds investor loyalty. 3.It paves the way for customer satisfaction – Trust, confidence, goodwill and reputation. 4.It ensures long term viability of business and its profitability. 5.The society expects the business to act ethically with a good value system. 6.Carrying out the social responsibility.

20 STAKEHOLDERS IN A BUSINESS 1.Shareholders. 2.Customers. 3.Employees. 4.Managers. 5.Local community. 6.Suppliers. 7.Environment.