INTRODUCTION TO TOPIC

BUSINESS ETHICS IN MODERN CONTEXT

Business ethics simply we mean that the application of ethics in business. Earlier it was the
opinion that a business cannot be ethical. This trend has been changed today. Today business
has found out that they are, responsible for social welfare, since they live and operate within a
social structure. In this present globalised economy; corporate social responsibility, corporate
governance, ethical behavior becomes the important key factors of the concern. The study
concentrates on how the modern businesses are accelerated by applying the code of conduct
in the environment of the business. The article discusses the survival of modern in the present
society. The results of this study would help the modern industries in achieving their targeted
result in a smooth way. The existing companies can improve their practices and new business
can comply with the results for better performance.

‘Ethics commonly means rule or principles that define right and wrong conduct. It may be
defined as: “Ethics is a fundamental trait which one adopts and follows as a guiding principle
of basic dharma in one’s life. It implies moral conduct and honorable behavior on the part of
an individual. Ethics in most of the cases runs parallel to law and shows due consideration to
others rights and interests in a civilized society. Compassion on the other hand may induce a
person to give more than what ethics might demand” Recently, there has been an increasing
awareness and more importantly interest in the field of Business Ethics. This trend was
appreciated in the present stage of globalization. Ethics in business can be considered as
system of moral principles dealing with right and wrong. Ethics is basically an area dealing
with moral judgement regarding voluntary human conduct. Moral judgment requires moral
standards by which to judge human conduct. Moral standards are also related to moral
obligations, or the duty to do what we consider to be ‘right’ and ‘proper’. The main objective
of ethics is to define the highest good of man and set a standard for the same. In doing so,
Ethics has to deal with several inter-related and complex problems which are psychological,
legal, commercial, philosophical, sociological and political in nature.

OBJECTIVES OF BUSINESS ETHICS IN MODERN CONTEXT:-

 Business ethics teaches us the ethical rules and principles that are relevant for
business.
 Business ethics is concerned with the application of ethical standard and values to
business.
 Business ethics teaches the manager as to how to run the business on ethical lines.
 The rule of Business ethics enable a business firm identify the area which are not
practicing ethical principle and can prescribe the necessary ethical code.
 Business ethics can help a firm to make a business decision and strategy which are
morally fair and consistent.
 NEEDS AND IMPORTANCE OF BUSINESS ETHICS:-

 Stop business malpractices : Some unscrupulous businessmen do business

malpractices by indulging in unfair trade practices like black-marketing, artificial high
pricing, adulteration, cheating in weights and measures, selling of duplicate and
harmful products, hoarding, etc. These business malpractices are harmful to the
consumers. Business ethics help to stop these business malpractices.
 Improve customers' confidence : Business ethics are needed to improve the customers'
confidence about the quality, quantity, price, etc. of the products. The customers have
more trust and confidence in the businessmen who follow ethical rules. They feel that
such businessmen will not cheat them.
 Survival of business : Business ethics are mandatory for the survival of business. The
businessmen who do not follow it will have short-term success, but they will fail in
the long run. This is because they can cheat a consumer only once. After that, the
consumer will not buy goods from that businessman. He will also tell others not to
buy from that businessman. So this will defame his image and provoke a negative
publicity. This will result in failure of the business. Therefore, if the businessmen do
not follow ethical rules, he will fail in the market. So, it is always better to follow
appropriate code of conduct to survive in the market.
 Safeguarding consumers' rights : The consumer has many rights such as right to
health and safety, right to be informed, right to choose, right to be heard, right to
redress, etc. But many businessmen do not respect and protect these rights. Business
ethics are must to safeguard these rights of the consumers.
 Protecting employees and shareholders : Business ethics are required to protect the
interest of employees, shareholders, competitors, dealers, suppliers, etc. It protects
them from exploitation through unfair trade practices.
 Develops good relations : Business ethics are important to develop good and friendly
relations between business and society. This will result in a regular supply of good
quality goods and services at low prices to the society. It will also result in profits for
the businesses thereby resulting in growth of economy.
 Creates good image : Business ethics create a good image for the business and
businessmen. If the businessmen follow all ethical rules, then they will be fully
accepted and not criticised by the society. The society will always support those
businessmen who follow this necessary code of conduct.
 Smooth functioning : If the business follows all the business ethics, then the
employees, shareholders, consumers, dealers and suppliers will all be happy. So they
will give full cooperation to the business. This will result in smooth functioning of the
business. So, the business will grow, expand and diversify easily and quickly. It will
have more sales and more profits.
 Consumer movement : Business ethics are gaining importance because of the growth
of the consumer movement. Today, the consumers are aware of their rights. Now they
 are more organised and hence cannot be cheated easily. They take actions against
those businessmen who indulge in bad business practices. They boycott poor quality,
harmful, high-priced and counterfeit (duplicate) goods. Therefore, the only way to
survive in business is to be honest and fair.
 Consumer satisfaction : Today, the consumer is the king of the market. Any business
simply cannot survive without the consumers. Therefore, the main aim or objective of
business is consumer satisfaction. If the consumer is not satisfied, then there will be
no sales and thus no profits too. Consumer will be satisfied only if the business
follows all the business ethics, and hence are highly needed.
 Importance of labour : Labour, i.e. employees or workers play a very crucial role in
the success of a business. Therefore, business must use business ethics while dealing
with the employees. The business must give them proper wages and salaries and
provide them with better working conditions. There must be good relations between
employer and employees. The employees must also be given proper welfare facilities.
 Healthy competition : The business must use business ethics while dealing with the
competitors. They must have healthy competition with the competitors. They must not
do cut-throat competition. Similarly, they must give equal opportunities to small-scale
business. They must avoid monopoly. This is because a monopoly is harmful to the
consumers.

SCOPE OF BUSINESS ETHICS IN MODERN CONTEXT

Ethical problems and phenomena arise across all the functional areas of companies and at all
levels within the company.

1. Ethics in Compliance
Compliance is about obeying and adhering to rules and authority. The motivation for being
compliant could be to do the right thing out of the fear of being caught rather than a desire to
be abiding by the law. An ethical climate in an organization ensures that compliance with law
is fuelled by a desire to abide by the laws. Organizations that value high ethics comply with
the laws not only in letter but go beyond what is stipulated or expected of them.

2. Ethics in Finance
The ethical issues in finance that companies and employees are confronted with include:

 In accounting – window dressing, misleading financial analysis.

 Related party transactions not at arm’s length
 Insider trading, securities fraud leading to manipulation of the financial markets.
 Executive compensation.
 Bribery, kickbacks, over billing of expenses, facilitation payments.
 Fake reimbursements
 3. Ethics in Human Resources
Human resource management (HRM) plays a decisive role in introducing and implementing
ethics. Ethics should be a pivotal issue for HR specialists. The ethics of human resource
management (HRM) covers those ethical issues arising around the employer-employee
relationship, such as the rights and duties owed between employer and employee.

The issues of ethics faced by HRM include:

 Discrimination issues i.e. discrimination on the bases of age, gender, race, religion,
disabilities, weight etc.
 Sexual harassment.
 Affirmative Action.
 Issues surrounding the representation of employees and the democratization of the
workplace, trade ization.
 Issues affecting the privacy of the employee: workplace surveillance, drug testing.
 Issues affecting the privacy of the employer: whistle-blowing.
 Issues relating to the fairness of the employment contract and the balance of power
between employer and employee.
 Occupational safety and health.
Companies tend to shift economic risks onto the shoulders of their employees. The boom of
performance-related pay systems and flexible employment contracts are indicators of these
newly established forms of shifting risk.

4. Ethics in Marketing
Marketing ethics is the area of applied ethics which deals with the moral principles behind
the operation and regulation of marketing. The ethical issues confronted in this area include:

 Pricing: price fixing, price discrimination, price skimming.

 Anti-competitive practices like manipulation of supply, exclusive dealing arrangements,
tying arrangements etc.
 Misleading advertisements
 Content of advertisements.
 Children and marketing.
 Black markets, grey markets.

5. Ethics of Production
This area of business ethics deals with the duties of a company to ensure that products and
production processes do not cause harm. Some of the more acute dilemmas in this area arise
out of the fact that there is usually a degree of danger in any product or production process
and it is difficult to define a degree of permissibility, or the degree of permissibility may
depend on the changing state of preventative technologies or changing social perceptions of
acceptable risk.

 Defective, addictive and inherently dangerous products and

 Ethical relations between the company and the environment include pollution,
environmental ethics, and carbon emissions trading.
 Ethical problems arising out of new technologies for eg. Genetically modified food
 Product testing ethics.
The most systematic approach to fostering ethical behaviour is to build corporate cultures that
link ethical standards and business practices.

ive results. Besides, there are also a number of factors, which significantly influence the
managers to take ethical decisions. Some of them are:

FACTORS INFLUENCING BUSINESS ETHICS IN MODERN CONTEXT

 Personal Code of Ethics: A man’s personal code of ethics that is what one considers
moral is the foremost responsible factor influencing his behavior.

 Legislation: It is already stated that the Government will intervene and enact laws
only when the businessmen become too unethical and selfish and totally ignore their
responsibility to the society. No society can tolerate such misbehavior continuously. It
will certainly exert pressure on the Government and the Government consequently
has no other alternative to prohibit such unhealthy behavior of the businessmen.

 Government Rules and Regulations: Laws support Government regulations

regarding the working conditions, product safety, statutory warning etc. These
provide some guidelines to the business managers in determining what are acceptable
or recognized standards and practices.

 Ethical Code of the Company: When a company grows larger, its standard of ethical
conduct tends to rise. Any unethical behavior or conduct on the part of the company
shall endanger its established reputation, public image and goodwill. Hence, most
companies are very cautious in this respect. They issue specific guidelines to their
subordinates regarding the dealings of the company.
 Social Pressures: Social forces and pressures have considerable influence on ethics
in business. If a company supplies sub-standard products and get involved in
unethical conducts, the consumers will become indifferent towards the company.
Such refusals shall exert a pressure on the company to act honestly and adhere strictly
to the business ethics. Sometimes, the society itself may turn against a company.

 Ethical Climate of the Industry: Modern industry today is working in a more and
more competitive atmosphere. Hence only those firms, which strictly adhere to the
ethical code, can retain its position unaffected in its line of business. When other
firms, in the same industry are strictly adhering to the ethical standards, the firm in
question should also perform up to the level of others. If the company’s performance
is below than other companies, in the same industry, it cannot survive in the field in
the long run.

features of business ethics

 Code of conduct : Business ethics is a code of conduct. It tells what to do and what
not to do for the welfare of the society. All businessmen must follow this code of
conduct.
 Based on moral and social values : Business ethics is based on moral and social
values. It contains moral and social principles (rules) for doing business. This includes
self-control, consumer protection and welfare, service to society, fair treatment to
social groups, not to exploit others, etc.
 Gives protection to social groups : Business ethics give protection to different social
groups such as consumers, employees, small businessmen, government, shareholders,
creditors, etc.
 Provides basic framework : Business ethics provide a basic framework for doing
business. It gives the social cultural, economic, legal and other limits of business.
Business must be conducted within these limits.
 Voluntary : Business ethics must be voluntary. The businessmen must accept
business ethics on their own. Business ethics must be like self-discipline. It must not
be enforced by law.
 Requires education and guidance : Businessmen must be given proper education
and guidance before introducing business ethics. The businessmen must be motivated
to use business ethics. They must be informed about the advantages of using business
ethics. Trade Associations and Chambers of Commerce must also play an active role
in this matter.
  Relative Term : Business ethics is a relative term. That is, it changes from one
business to another. It also changes from one country to another. What is considered
as good in one country may be taboo in another country.
 New concept : Business ethics is a newer concept. It is strictly followed only in
developed countries. It is not followed properly in poor and developing countries.

BENEFIT OF IMPLIMENTING BUSINESS ETHICS

More and more companies recognize the link between business ethics and financial
performance. Companies displaying a “clear commitment to ethical conduct” consistently
outperform companies that do not display ethical conduct.

1. Attracting and retaining talent

People aspire to join organizations that have high ethical values. Companies are able to
attract the best talent and an ethical company that is dedicated to taking care of its employees
will be rewarded with employees being equally dedicated in taking care of the organization.
The ethical climate matter to the employees. Ethical Organizations create an environment that
is trustworthy, making employees willing to rely, take decisions and act on the decisions and
actions of the co-employees. In such a work environment, employees can expect to be treated
with respect and consideration for their colleagues and superiors. It cultivates strong
teamwork and Productivity and support employee growth.

2. Investor Loyalty
Investors are concerned about ethics, social responsibility and reputation of the company in
which they invest. Investors are becoming more and more aware that an ethical climate
provides a foundation for efficiency, productivity and profits. Relationship with any
stakeholder, including investors, based on dependability, trust and commitment results in
sustained loyalty.

3. Customer satisfaction
Customer satisfaction is a vital factor in successful business strategy. Repeat purchases/orders
and enduring relationship of mutual respect is essential for the success of the company. The
name of a company should evoke trust and respect among customers for enduring success.
This is achieved by a company that adopts ethical practices. When a company because of its
belief in high ethics is perceived as such, any crisis or mishaps along the way is tolerated by
the customers as a minor aberration. Such companies are also guided by their ethics to
survive a critical situation. Preferred values are identified ensuring that organizational
behaviours are aligned with those values. An organization with a strong ethical environment
places its customers’ interests as foremost. Ethical conduct towards customers builds a strong
competitive position. It promotes a strong public image.

4. Regulators
Regulators eye companies functioning ethically as responsible citizens. The regulator need
not always monitor the functioning of the ethically sound company. The company earns
profits and reputational gains if it acts within the confines of business ethics. To summaries,
companies that are responsive to employees’ needs have lower turnover in staff.
 Shareholders invest their money into a company and expect a certain level of return from
that money in the form of dividends and/or capital growth.
 Customers pay for goods, give their loyalty and enhance a company’s reputation in return
for goods or services that meet their needs.
 Employees provide their time, skills and energy in return for salary, bonus, career
progression, and learning.

ETHICS & PRINCIPLES OF NESTLE

 Consumers
1. Nutrition, Health and Wellness: Their core aim is to enhance the quality of
consumers’ lives every day, everywhere by offering tastier and healthier food and
beverage choices and encouraging a healthy lifestyle. They express this via corporate
proposition Good Food, Good Life.
2. Quality assurance and product safety: Everywhere in the world, the Nestlé name
represents a promise to the consumer that the product is safe and of high standard.
3. Consumer communication: They are committed to responsible, reliable consumer
communication that empowers consumers to exercise their right to informed choice
and promotes healthier diets. They respect consumer privacy. Human rights and
labour practices
 Human rights and labour practices
4. Human rights in our business activities: They fully support the United Nations Global
Compact’s (UNGC) guiding principles on human rights and labour and aim to provide
an example of good human rights and labour practices throughout the business
activities.
 Their people
5. Leadership and personal responsibility: Their success is based on their people. We
treat each other with respect and dignity and expect everyone to promote a sense of
personal responsibility. They recruit competent and motivated people who respect
their values, provide equal opportunities for their development and advancement,
protect their privacy and do not tolerate any form of harassment or discrimination.
6. Safety and health at work: They are committed to preventing accidents, injuries and
illness related to work, and to protect employees, contractors and others involved
along the value chain.
 Suppliers and customers
7. Supplier and customer relations: They require their suppliers, agents, subcontractors
and their employees to demonstrate honesty, integrity and fairness, and to adhere to
their non-negotiable standards. In the same way, they are committed to their own
customers.
8. Agriculture and rural development: They contribute to improvements in agricultural
production, the social and economic status of farmers, rural communities and in
production systems to make them more environmentally sustainable
 The environment
9. Environmental sustainability: They commit their selves to environmentally
sustainable business practices. At all stages of the product life cycle they strive to use
natural resources efficiently, favour the use of sustainably-managed renewable
resources, and target zero waste.
10. Water: They are committed to the sustainable use of water and continuous
improvement in water management. They recognise that the world faces a growing
water challenge and that responsible management of the world’s resources by all
water users is an absolute necessity.