ETHICS

The term ethics is derived from the Greek word ethos which can mean custom, habit, character or
disposition. Ethics is a system of moral principles. They affect how people make decisions and lead their
lives. Ethics is concerned with what is good for individuals and society and is also described as moral
philosophy.

Ethics covers the following problems:

 how to live a good life

 our rights and responsibilities
 the language of right and wrong
 moral decisions - what is good and bad?

BUSINESS ETHICS:
Business ethics are a set of principles that determine what is right, wrong, and appropriate in the
workplace. A company’s business ethics influence conduct for every employee, including interpersonal
relationships within the company as well as business relationships with external customers. The purpose
of business ethics is to ensure a consistent moral attitude within the company, from executive-level
management to new hires. It makes sure everyone is respected and treated with fairness and honesty.

OR

In the business world, the organization’s culture sets standards for determining the difference between
good and bad decision making and behavior.

PRINCIPLES OF BUSINESS ETHICS:

These are five fundamentals most businesses value:

Trustworthiness

Trust is being dependable to clients, supervisors, and other employees. This means performing a task
you were assigned to or agreed to complete, practicing discretion on company information, and being
punctual to meetings and other work events.

Honesty

This principle includes telling the truth, being transparent, and taking ownership of your words, work
and actions. If you are part of a team project, you make sure all your team members receive credit for
their work. Should you make a mistake, own up to it as soon as possible and do what you can to make
things right.

OR
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.

Integrity

Both trustworthiness and honesty factor into integrity. If you are a person of integrity, you always try to
do the right thing in any given situation, even when it is not advantageous to you. You put the good of
your team and the company as a whole above your own desires.

Loyalty

This principle involves promoting a positive image of your employer and organization, especially to
clients, coworkers, family, and friends outside the company and on social media.

Respect

You should respect your seniors, team members’ individual opinions, even if they differ from yours.

OR

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.

LAW ABIDING.

Ethical executives abide by laws, rules and regulations relating to their business activities.

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.

Leadership

Any executive, if ethical, should be a leader to others. They should be able to handle the responsibilities.
They should be aware of the opportunities due to their position. The executives need to be a proper role
model for others.

OR

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.

Fairness

The executives need not be just fair in all the dealings, but they also should not exercise the wrong use
of their power. They should not try to use over each or other indecent manners to gain any sort of
advantage. Also, they should not take undue advantage of anything or other people’s mistakes.
Fair people are inclined more towards justice and ensure that the people are equally treated. They
should be tolerant, open-minded, willing to admit their own mistakes. The executives should also be
able to change their beliefs and positions based on the situation.

Importance of business ethics in the workplace

There are tangible and intangible benefits to being ethical in your workplace, including:

Improved employee retention

Strong business ethics often encourage managers to show appreciation for an employee’s hard work. As
a result, team members may be more loyal to the company and strive to be more productive.

Stronger collaboration

Team members who practice business ethics have respect for one another and work well together. This
camaraderie not only fosters a pleasant work environment but also helps with team collaboration and
productivity.

More effective leadership

When a manager follows business ethics, they’re more likely to treat employees well. As a result, teams
are more inclined to follow their lead. This minimizes discipline issues and teams’ trust in managers and
supervisors when tough decisions need to be made.

Increased professional value

When you have a positive attitude toward your work and those you work with, you can increase the
quality of your work. It also increases your value to your team and the company as a whole.

Corresponds to Basic Human Needs:

The basic need of every human being is that they want to be a part of the organization which they can
respect and be proud of, because they perceive it to be ethical. Everybody likes to be associated with an
organization which the society respects as an honest and socially responsible organization.

Credibility in the Public:

Ethical values of an organization create credibility in the public eye. People will like to buy the product of
a company if they believe that the company is honest and is offering value for money.

Credibility with the Employees:

When employees are convinced of the ethical values of the organization they are working for, they hold
the organization in high esteem. It creates common goals, values and language.

Better Decision Making:

Respect for ethics will force a management to take various economic, social and ethical aspects into
consideration while taking the decisions. Decision making will be better if the decisions are in the
interest of the public, employees and company’s own long term good.
Profitability:

Being ethical does not mean not making any profits. Every organization has a responsibility towards
itself also i.e., to earn profits. Ethical companies are bound to be successful and more profitable in the
long run though in the short run they can lose money.

Protection of Society:

Ethics can protect the society in a better way than even the legal system of the country. Where law fails,
ethics always succeed. The government cannot regulate all the activities that are harmful to the society.

Developing moral judgements:

Factors influencing Business Ethics

Business leaders today are well aware of the ethical issues and hence they want to improve the ethical
standards of the business. there are a number of factors, which significantly influence the managers to
take ethical decisions.

Formal and informal policies and rules:

Informal rules have an intimate relationship with formal laws, policies and standards. Formal rules often
exist, and are most effective, when they codify informal norms that are already widely accepted.
Norms for acceptable behavior:

Social norms, or mores, are the unwritten rules of behavior that are considered acceptable in a group or
society. Norms function to provide order and predictability in society. On the whole, people want
approval, they want to belong, and those who do not follow the norms will suffer disapproval or may
even be outcast from the group. This is how we keep society functioning, not just with direct rules but
also expectations. When people know what is expected of them, they tend to comply.

Financial reward system:

financial rewards are monetary incentives that an employee earns as a result of good performance.
These rewards are aligned with organizational goals. When an employee helps an organization in the
achievement of its goals, a reward often follows. All financial rewards are extrinsic.

Hiring practices:

A fair selection process consists of judging people on their ability to do the job not on the basis of one’s
race, color, sex, age, national origin, religion, genetic information, disability, or EEO activity

Applications of legal behavior:

Legal behavior follows the dictates of laws, which are written down and interpreted by the courts. In
decision making, determining the legality of a course of action is facilitated by the existence of statutes,
regulations, and codes. Unlike ethical considerations, there are established penalties for behaving in a
way that conflicts with the law.

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.

Identify the six-step approach to achieve a long-term

improvement of business ethics.
Smith (2015) has suggested that the six-step approach to achieve long term improvement of business
ethics must be in place to ensure the compliance of any business with business ethical standards.
Following is an overview of the six-step approach.

Top Management support:

Before ethical codes can be in practice, they have to be supported and accepted by the top
management. Without their approval and believe in the ethical standards, they would be hard to
implement at all. The support of the top management must be unconditional in this regard. If there are
ifs and buts by the top management, the lower staff will always remain in confusion about following of
these ethical codes and they would be regularly violating these codes of ethics.

Expectation begins at the top.

Employees must understand that expectations for ethical behavior begin at the top and that senior
management expects all employees to act accordingly.

Ethics embedded in training.

Managers are the bridge between the top management and the employees. Top management needs to
train their managers to understand the implications of the ethical decision making and applying the
ethical standards in the organization. Without this, the employees may not be able to properly
understand the ethical codes as the managers may themselves be not able to guide them.

Ethics office setups.

There are two sets of ethical codes, first is universal set of ethical codes and second is the set of ethical
codes developed by the organizations themselves. Before ethical codes can be applied, there must be a
statement of the ethical codes in a documented form that would act as a guide in the corporate
business ethics of the organization. This ethical code statement may be a combination of the universal
codes of ethics and the home developed ethical codes.

External stakeholder’s communication:

An organization may have outsiders such as suppliers, subcontractors, distributors, and customers must
be told about the ethics program. Pressure to put aside ethical considerations often comes from the
outside, and it helps employees resist such pressure when everyone knows what the ethical standards
are.

There must be enforcement:

The ethics code must be enforced with timely action if any rules are broken. Ethical codes should not be
left to the choice of different stakeholders. There must be a mechanism to enforce the application of the
ethical code of conduct. This mechanism may consist of reward and punishment for breach and
fulfillment of the ethical codes.

Business ethics and the changing environment:

Businesses and governments operate in changing technological, legal, economic, social, and political
environments with competing stakeholders and power claims.

Stakeholders are individuals, companies, groups, and nations that cause and respond to external issues,
opportunities, and threats. Disruptive technologies, increased working hours, increased personal and
professional stress create pressure on stakeholders.

Understand that how perspectives and methods can help individuals and companies better understand
how to make more socially responsible decisions, we take a brief look at the broader environmental
forces that affect industries, organizations, and individuals.

Environmental Forces and Stakeholders

Organizations and individuals are embedded in and interact with multiple changing local, national, and
international environments, as the above discussion illustrates. These environments are increasingly
merging into a global system of dynamically interrelated interactions among businesses and economies.
We must “think globally before acting locally” in many situations.

The economic environment continues to evolve into a more global context of trade, markets, and
resource flows. Large and small U.S. companies are expanding businesses and products overseas. Stock
and bond market volatility and interdependencies across international regions are unprecedented,
including the Europe a market and the future of the euro, which is challenged by some defaulting
economies. The rise of China and India presents new trade opportunities and business practices, if
human rights problems can be solved in those countries.

The technological environment, the advent of electronic communication, online social

networking, and near- constant connectivity to the Internet, all of which are changing economies,
industries, companies, and jobs. Online technologies facilitate changing corporate “best practices.”
Company supply chains are also becoming virtually and globally integrated online. Although speed,
scope, economy of scale, and efficiency are transforming transactions through information technology,
privacy and surveillance issues continue to emerge.

The government and legal environments continue to create regulatory laws and procedures
to protect consumers and restrict unfair corporate practices. The Dodd- Frank Act of 2010 established
the Consumer Financial Protection Bureau, whose mission is to protect consumers by carrying out
federal consumer financial laws, educating consumers, and hearing complaints from the public, and
more recently that Bureau has been functioning to help citizens with credit card abuses in particular.

Legal questions and issues affect all of these environmental dimensions and every stakeholder
and investor. How much power should the government? have to administer laws to protect citizens and
ensure that business transactions are fair? Also, who protects the consumer in a free- market system?
These issues, which are exemplified in the file- sharing controversy as summarized in this chapter’s
opening case, question the nature and limits of consumer and corporate laws in a free- market
economy.

The demographic and social environment continues to change as national boundaries

experience the effects of globalization and the workforce becomes more diverse. Employers and
employees are faced with aging and very young populations; minorities becoming majorities;
generational differences; and the effects of downsizing and outsourcing on morale, productivity, and
security.

Politically Electronic democracy is changing the way individuals and groups think and act on political
issues. The fall of communist regimes and the rise of global terrorism are also changing trading and
business partners.
Relationship between Business & Ethics
The relationship between business and Ethics has long been debated. There are three extreme views,
known as the Unitarian View and the Separatist View

The Unitarian View:

This view is of the opinion that business is only a subset or sub-structure of the moral structure of the
society. According to this view, business and morality cannot be separated and business must play by
the rules of morality and ethics of the community which guides the activities of the community.

This view was emphasized more by the Church in the European countries and the Church prescribed
that business must exist only to do good for the society, and it had no other role to play apart from
serving society and ushering in social welfare.

The Separatist View:

Adam smith and Milton Friedman Dramatically opposite to the Unitarian View, classical economists like
Adam Smith and Milton Friedman asserted that the only goal of business should be profit maximization;
and that ethics and morality plays no part in business conduct.

The Integration View:

This View was proposed by Talcott Parsons, wherein he sought to integrate ethical behavior and
business in a new area called Business Ethics. This View states that business is an economic entity and it
has the right and the need to make profits, but it must also discharge its obligations to the society where
it exists and operates. This View states that society consists of a number of subsystems, and business
and morality are just two of these subsystems.

Business and Ethics overlap and hence many business decisions are guided by moral considerations. In
fact, business itself is considered to constitute of ethics, as it does so much good to so many people and
specially to the society it serves.

Or

Relationship between business and ethics Ethical relationships concerning your company's interaction
with customers can have a direct impact on the success of your company. Ethical customer relationships
should include honesty with customers, delivering a good product or service and backing the product or
service. A company policy that encourages positive relationships with customers can help position your
company as a trusted one. While unethical behavior, such as making false claims, may gain you
immediate customers, this same behavior will lose those customers for you in the long run.

8 Ways to Develop More Effective Ethics Training For Employees

While you could loosely define ethical behavior as knowing the difference between right and wrong, in
the workplace it’s not quite so simple. Now more than ever, ethics trainings for employees needs to
cover a variety of topics. Here are eight ways to develop more effective ethics trainings.

What Is the Purpose of Ethics Training?

What does it mean to have an ethical workplace? An ethical workplace has well-established codes of
professional and personal conduct that not only stay in compliance with all regulations and laws that
govern your business, but also moral codes of conduct that include honesty, diversity, compassion, and
good citizenship. Both of these aspects provide two main functions for your business.

1. Protects Your Company’s Bottom Line

Unethical behavior impacts profits when multi-million-dollar fines are levied on unethical corporations.

This same behavior can cost the company in terms of lower stock prices, fewer customers, and inability
to do business with those who don’t trust you.

2. Makes Your Company A Great Place to Work

On the other hand, employee ethics training makes a company a great place to work. Consider
Patagonia [1], with their mission statement: “Build the best product, cause no unnecessary harm, use
business to inspire and implement solutions to the environmental crisis.”

3. Stand for Something (Or Watch Employees Fall For Anything)

If you are a new company or are new to the idea of articulating your company’s ethics, it can be valuable
to have a company-wide conversation that gets to the heart of your company culture. It’s hard to offer
ethics training for employees when you are not clear what your company stands for.

Start your employee ethics training by either developing a code of conduct for your company or making
sure employees are clear on the one that already exists. Do not assume that even your most senior
employees know what it is.

4. Identify the Different Types Of Ethical Training You Can Include

All quality training begins with a training needs analysis. In the case of ethics training for employees, you
might consider focusing on one or more of the following areas:

 Ethical conduct, both in and out of the office

 Customer privacy and data protection
 Company code of ethics
 Common ethical dilemmas
 Company culture
 Customer relations
 Regulatory and compliance training
 Diversity training

Keep in mind, too, that ethics training is not a “one and done” solution to a single concrete issue. The
goal of different types of ethics training is to teach employees to make good decisions that are
consistent with your company’s culture. This may need to be reinforced in a variety of situations over
time as your industry changes.

5. Train Employees Where They Are

You know what your employees need, and it’s not a monthly lecture on how to be a good person. You
hired them. Chances are good that your employees are already quality humans. So train those humans
in the way they want to be trained.

6. Get Your Leadership Involved

Let’s be honest. If your leadership isn’t 100% behind ethics trainings for employees, they may be
sending the message that ethics are not very important.

Ethical leaders are committed to working with ethical employees. Chances are good they have some
ideas about what they’d like to focus on. Get leadership involved and committed from the very
beginning.

7. Consider Incentives

New research suggests that incentives for employees work. Consider offering gift cards, afternoons off,
or other small bonuses for employees who go above and beyond and put their training into action.

8. Create Common Goals and Identity

Part of articulating your ethical company culture and getting leadership involved is the journey to
creating common goals and a unified company identity. Get really clear about who your company is and
what it stands for. It worked for Patagonia, and on the surface, they are just selling clothes.

9. Make It Fun

We get it. Employee trainings of any kind can be a bit of a slog, and employee pushback can be intense.
There are ways to make things more fun, though, even when it comes to serious discussions.

10. But, Take It Seriously

Sure, it’s easy to make fun of ethics training for employees – seems like everyone has a ready joke at
hand.

However, if your goal is for employees to represent your company with respect and consideration,
functioning as a team where everyone is appreciated, supported, and heard, you need to take this type
of training seriously. Give it the time, space, and resources it needs to be done well.

7 Myths About Ethics Which Will Hurt Your Business

1. It’s easy to be ethical. This myth ignores the complexity surrounding ethical decision making,
particularly within business organizations. Ethical decisions are seldom simple. For example,
people often do not automatically know that they are facing an ethical choice. Any given
individual may not recognize the moral scope of the issues involved.
2. Business ethics are more about religion than management or leadership. Behind this myth lies
the confused belief that ethics are a means of altering people’s values. The reality is different.
An ethical culture deals with managing values between the individual and the company, to best
handle the inevitable conflicts that crop up in every business.

3. Hire only ethical people, so further time on business ethics is not needed. This is usually an
excuse for not developing ethical policies and practices. These can be as simple as how to
handle customer over-payments, or more complex in how to handle the choices every employee
may face between conflicting customer and company interests.

4. Business ethics are best left to philosophers and academics. Deal with this myth by sharing
with colleagues some of the highly practical tools for making sense of the issue – such as ethics
audits, behavior codes, risk strategies, targeted training and leadership guidance. Business
ethics is a discipline that must be practiced every day by everyone.

5. Ethics can’t be managed. While codes of behavior do not guarantee an ethical culture, they do
clarify desired behavior and articulate for employees what is expected of them. Every business
has complex and diverse dilemmas which are not specifically covered in documented
procedures, so employees need clear values leadership for guidance.

6. We’ve never broken the law so we must be ethical. Many perfectly legal actions can still be
deeply unethical. As an example, companies often realize that faulty products are slipping out,
but they delay a recall, sighting that strictly legal requirements are being met. Unethical
behavior can even with something low key which initially goes unnoticed.

7. Unethical behavior in business is just due to a few ‘bad apples.’ In reality, most unethical
behavior in business happens because the environment tolerates it, usually through benign
neglect. When it comes to ethics, even good people tend to be followers, and if told to do
something, they will do it, without considering the ethical implications.

8. Business ethics and social responsibility is the same thing.

The social responsibility movement is one aspect of the overall discipline of business ethics.
Madsen and Shafritz refine the definition of business ethics to be: 1) an application of ethics to
the corporate community, 2) a way to determine responsibility in business dealings, 3) the
identification of important business and social issues, and 4) a critique of business