Business ethics is the 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. Law often
guides business ethics, while other times business ethics provide a basic framework that
businesses may follow to gain public acceptance.

Business ethics ensure that a certain required level of trust exists between consumers
and various forms of market participants with businesses. For example, a portfolio
manager must give the same consideration to the portfolios of family members and
small individual investors. Such practices ensure the public receives fair treatment.
The concept of business ethics arose in the 1960s as companies became more aware of a
rising consumer-based society that showed concerns regarding the environment, social
causes and corporate responsibility. Business ethics goes beyond just a moral code of
right and wrong; it attempts to reconcile what companies must do legally versus
maintaining a competitive advantage over other businesses. Firms display business
ethics in several ways.
Business Ethics Benefits
The importance of business ethics reaches far beyond employee loyalty and morale or
the strength of a management team bond. As with all business initiatives, the ethical
operation of a company is directly related to profitability in both the short and long
term. The reputation of a business in the surrounding community, other businesses and
individual investors is paramount in determining whether a company is a worthwhile
investment. If a company is perceived to not operate ethically, investors are less inclined
to buy stock or otherwise support its operations.

Companies have more and more of an incentive to be ethical as the area of socially
responsible and ethical investing keeps growing. The increasing number of investors
seeking out ethically operating companies to invest in is driving more firms to take this
issue more seriously.

With consistent ethical behavior comes an increasingly positive public image, and there
are few other considerations as important to potential investors and
current shareholders. To retain a positive image, businesses must be committed to
operating on an ethical foundation as it relates to treatment of employees, respecting the
surrounding environment and fair market practices in terms of price and consumer
treatment.

1. PROFITABILITY: The aims and objectives of every business is to make profit

although some organisation are formed for charity purpose but most business are
formed because they want to make profit and meet the demand of its customers at all
time.
2. ETHICAL AND SOCIAL RESPONSIBILITY: The purpose of every business
objective is based on the belief and how to make its environment friendly to customers
and safe. Some business also belief to take care or provide for the less privilege in our
society especially the disabled who need special care, for instance in the UK the
government provide special disable toilet for all the disable and they can make use of the
toilet in all the public places.

3. MEET THE STAKEHOLDERS EXPECTATION: Every business is formed

by people who are responsible for the affairs and who has interest in all the activities of
the organisation. There are various stakeholders who are part of the success and
management of every business in an organisation. For examples, customers, suppliers,
employees, shareholders and communities are all stakeholders in an organisation who
contribute to all the activities in an organisation. The aims of every business are to meet
the expectation of all the stakeholders because they are part of the decision maker and
they contribute to the success of the business.

4. SALE GROWTH: The aims of most business are to increase its sales. Expand
and open more branches and make names because there are so many organisations that
are competing with one another so most organisation want to offer the best customers
service to all its customers and offer good customers satisfaction to all its customers all
time because of strive market competition.

Approaches

1. Teleological approach:

Also known as consequentiality approach, it determines the moral conduct on the basis

of the consequences of an activity. Whether an action is right or wrong would depend

upon the judgement about the consequences of such an action. The idea is to judge the

action moral if it delivers more good than harm to society. For example, with this

approach, lying to save one’s life would be ethically acceptable.

Some of the philosophers supporting this view are nineteenth century philosophers

John Stuart Mill and Jeremy Bentham. They proposed that ethics and morality of an act

should be judged on the basis of their ultimate utility.

An act would be considered moral if it produced more satisfaction than dissatisfaction

for society. It must be understood that this satisfaction or happiness should be for the

society in general and not to the people committing the act or the people who are

directly involved in the act.

For example, not paying the money to someone whom you owe may make you happy

but it disrupts the social system of fairness and equity thus making the society as a

whole unhappy. Accordingly, this would not be considered as a Similarly, a party who

breaks a contract may be happy because it is beneficial to it, but it would damage the

society’s legal framework for conducting business in an orderly fashion. Hence, it would

not be an ethical act.

2. Deonotological approach:

While a “teleologist” focuses on doing what will maximize societal welfare, a

“deonotologist” focuses an doing what is “right” based an his moral principles.

Accordingly, some actions would be considered wrong even if the consequences of these

actions were good. According to DeGeorge:

“The deonotological approach is built upon the premise that “duty” is the basic moral

category and that the duty is independent of the consequences. An action is right if it has

certain characteristics or is of a certain kind and wrong if it has other characteristics or

is of another kind”.

This approach has more of a religious undertone. The ethical code of conduct has been

dictated by the Holy Scriptures. The wrongs and rights have been defined by the word of

God. This gives the concept of ethics a fixed perception. Since the word of God is

considered as permanent and unchangeable, so then is the concept of ethics.

Holy Scriptures like those of the Bible, the Holy Quran, Bhagwad Gita and Guru Granth

Sahib are considered to be the words of God and hence must be accepted in their

entirety and without question. In similar thinking, though based upon rationality, rather

than religious command, Emmanuel Kant, an eighteenth century German philosopher

suggested morality as universally binding on all rational minds.

According to him, “Act as if the maxim of thy action were to become by thy will a

universal law of nature.” This mode of thinking asks whether the rationale for your

action is suitable to become a universal law or principle for everyone to follow. For

example, “not breaking a promise” would be a good principle for everyone to follow.

This means that morality would be considered unconditional and applicable to all

people at all times and in all cases.

This approach suggests that moral judgments be made on the determination of intrinsic

good or evil in an act which should be self evident. For example, the Ten

Commandments would be considered as one of the guidelines to determine what is

intrinsically good and what is intrinsically evil.

3. Emotive approach:

This approach is proposed by A.J. Ayer. He suggests that morals and ethics are just the

personal viewpoints and “moral judgements are meaningless expressions of emotions.”

The concept of morality is personal in nature and only reflects a person’s emotions.

This means that if a person feels good about an act, then in his view, it is a moral act.

For example, using loopholes to cheat on income tax may be immoral from societal

point of view, but the person filing the income tax returns sees nothing wrong with it.
Similarly, not joining the army in time of war may be unethical and unpatriotic from the

point of view of the society and the country, but the person concerned may consider war

as immoral in itself. According to this approach, the whole idea about morality hinges

on the personal view point.

An extension of Emotive theory puts focus an the integrity of the person. While the

person is looking for his own “long term” benefit, he must have a “virtue ethics

perspective” which primarily considers the person’s character, motivations and

intentions.

Character, motivations and intentions must be consistent with the principles accepted

by society as ethical. The advantage of this approach is that it allows the ethical decision

maker to rely on relevant community standards, “without going through the complex

process of trying to decide what is right in every situation using deontological or

teleological approaches.”

4. Moral-rights approach:

This approach views behaviour as respecting and protecting fundamental human rights,

equal treatment under law and so on. Some of these rights are set forth in documents

such as Bill of Rights in America and U.N. Declaration of Human Rights. From ethical

point of view, people expect that their health and safety is not endangered by unsafe

products.

They have a right not to be intentionally deceived on matters which should be truthfully

disclosed to them. Citizens have a fundamental right to privacy and violation of such

privacy would not be morally justifiable.

Individuals have the right to object and reject directives that violate their moral or

religious beliefs. For example, Sikhs are allowed to wear turbans instead of putting on a

hat as required by Royal Canadian Police, because of their religious beliefs.

5. Justice approach:

The justice view of moral behaviour is based on the belief that ethical decisions do not

discriminate people on the basis of any types of preferences, but treat all people fairly,

equitably and impartially, according to established guiding rules and standards. All

mankind is created equal and discriminating against any one on the basis of race,

gender, religion, nationality or any such criteria would be considered unethical.

From organizational point of view, all policies and rules should be fairly administered.

For example, a senior executive and an assembly worker should get the same treatment

for the same issue, such as a charge of sexual harassment.

What is a Code of Ethics

A code of ethics is a guide of principles designed to help professionals conduct business
honestly and with integrity. A code of ethics document may outline the mission and
values of the business or organization, how professionals are supposed to approach
problems, the ethical principles based on the organization's core values and the
standards to which the professional is held. A code of ethics, also referred to as an
"ethical code," may encompass areas such as business ethics, a code of professional
practice and an employee code of conduct.
Both businesses and trade organizations typically have some sort of code of ethics that
their employees or members are supposed to follow. Breaking the code of ethics can
result in termination or dismissal from the organization. A code of ethics is important
because it clearly lays out the rules for behavior and provides the groundwork for a
preemptive warning.
Regardless of size, businesses count on their management staff to set a standard of
ethical conduct for other employees to follow. When administrators adhere to the code
of ethics, it sends a message that universal compliance is expected of every employee.

Compliance-Based Code of Ethics

For all businesses, laws regulate issues such as hiring and safety standards. Compliance-
based codes of ethics not only set guidelines for conduct, but also determine penalties
for violations.
In some industries, including banking, specific laws govern business conduct. These
industries formulate compliance-based codes of ethics to enforce laws and regulations.
Employees usually undergo formal training to learn the rules of conduct. Because
noncompliance can create legal issues for the company as a whole, individual workers
within a firm may face penalties for failing to follow guidelines.
To ensure that the aims and principles of the code of ethics are followed, some
companies appoint a compliance officer. This individual is tasked with keeping up to
date on changes in regulation codes and monitoring employee conduct to encourage
conformity.
This type of code of ethics is based on clear-cut rules and well-defined consequences
rather than individual monitoring of personal behavior. Therefore, despite strict
adherence to the law, some compliance-based codes of conduct do not promote a
climate of moral responsibility within the company.

Value-Based Code of Ethics

A value-based code of ethics addresses a company's core value system. It may outline
standards of responsible conduct as they relate to the larger public good and the
environment. Value-based ethical codes may require a greater degree of self-regulation
than compliance-based codes.
Some codes of conduct contain language that addresses both compliance and values. For
example, a grocery store chain might create a code of conduct that espouses the
company's commitment to health and safety regulations above financial gain. That
grocery chain might also include a statement about refusing to contract with suppliers
that feed hormones to livestock or raise animals in inhumane living conditions.

Code of Ethics Among Professionals

Financial advisers registered with the Securities and Exchange Commission or a state
regulator are bound by a code of ethics known as fiduciary duty. This is a legal
requirement and also a code of loyalty that requires them to act in the best interest of
their clients.
Certified Public Accountants, who are not typically considered to be a fiduciary to their
clients, still are expected to follow similar ethical standards, such as integrity,
objectivity, truthfulness and avoidance of conflicts of interest, according the
the American Institute of Certified Public Accountants (AICPA).

VALUES
1. HONESTY. Ethical executives are honest and truthful in all their dealings and they
do not deliberately mislead or deceive others by misrepresentations, overstatements,
partial truths, selective omissions, or any other means.

2. INTEGRITY. Ethical executives demonstrate personal integrity and the courage of

their convictions by doing what they think is right even when there is great pressure to
do otherwise; they are principled, honorable and upright; they will fight for their beliefs.
They will not sacrifice principle for expediency, be hypocritical, or unscrupulous.

3. PROMISE-KEEPING & TRUSTWORTHINESS. Ethical executives are worthy of

trust. They are candid and forthcoming in supplying relevant information and
correcting misapprehensions of fact, and they make every reasonable effort to fulfill the
letter and spirit of their promises and commitments. They do not interpret agreements
in an unreasonably technical or legalistic manner in order to rationalize non-compliance
or create justifications for escaping their commitments.

4. LOYALTY. Ethical executives are worthy of trust, demonstrate fidelity and loyalty to
persons and institutions by friendship in adversity, support and devotion to duty; they
do not use or disclose information learned in confidence for personal advantage. They
safeguard the ability to make independent professional judgments by scrupulously
avoiding undue influences and conflicts of interest. They are loyal to their companies
and colleagues and if they decide to accept other employment, they provide reasonable
notice, respect the proprietary information of their former employer, and refuse to
engage in any activities that take undue advantage of their previous positions.

5. FAIRNESS. Ethical executives and fair and just in all dealings; they do not exercise
power arbitrarily, and do not use overreaching nor indecent means to gain or maintain
any advantage nor take undue advantage of another’s mistakes or difficulties. Fair
persons manifest a commitment to justice, the equal treatment of individuals, tolerance
for and acceptance of diversity, the they are open-minded; they are willing to admit they
are wrong and, where appropriate, change their positions and beliefs.

6. CONCERN FOR OTHERS. Ethical executives are caring, compassionate,

benevolent and kind; they like the Golden Rule, help those in need, and seek to
accomplish their business objectives in a manner that causes the least harm and the
greatest positive good.

7. RESPECT FOR OTHERS. Ethical executives demonstrate respect for the human
dignity, autonomy, privacy, rights, and interests of all those who have a stake in their
decisions; they are courteous and treat all people with equal respect and dignity
regardless of sex, race or national origin.

8. LAW ABIDING. Ethical executives abide by laws, rules and regulations relating to
their business activities.
9. COMMITMENT TO EXCELLENCE. Ethical executives pursue excellence in
performing their duties, are well informed and prepared, and constantly endeavor to
increase their proficiency in all areas of responsibility.

10. LEADERSHIP. Ethical executives are conscious of the responsibilities and

opportunities of their position of leadership and seek to be positive ethical role models
by their own conduct and by helping to create an environment in which principled
reasoning and ethical decision making are highly prized.

11. REPUTATION AND MORALE. Ethical executives seek to protect and build the
company’s good reputation and the morale of its employees by engaging in no conduct
that might undermine respect and by taking whatever actions are necessary to correct or
prevent inappropriate conduct of others.

12. ACCOUNTABILITY. Ethical executives acknowledge and accept personal

accountability for the ethical quality of their decisions and omissions to themselves,
their colleagues, their companies, and their communities.