BUSINESS ETHICS

• The study of ethics has become an important ingredient of the syllabus of management schools in
recent years. This is because of ethical issues that have come to the forefront as a result of many
well-known failures of corporates. The fraudulent activities of these corporates have resulted in the
defrauding of stockholders, consumers, employees, creditors and governments to varying degrees.
It has therefore become important that students of B-schools as future managers of business
should imbibe ethical values. Ethics reflects a society’s notions about the rightness or wrongness of
an act. Ethics also involves the evaluation and application of certain moral values that a society or
culture has come to accept as its norms. It is generally described as a set of principles or moral
conduct. Business ethics, therefore, is a sum total of principles and code of conduct businessmen
are expected to follow in their dealings with their fellowmen such as stockholders, employees,
customers, creditors, and comply with to enact the laws of the land and to protect all these
stakeholders.
• The word ‘ethics’ is derived from the Greek word ethikos meaning custom or character. The Concise
Oxford English Dictionary defines ethics as the treating of moral questions. But this definition is
imprecise and leaves a number of loose ends. Whose morals? Which moral questions? Business
ethics covers diverse areas ranging from labour practices, free and fair trade, health concerns,
euthanasia to animal welfare, environmental concerns, to genetic modification, to human cloning.
Perhaps the definition provided by the Chambers Dictionary comes closest to providing a workable
definition: ‘Ethics is a code of behaviour considered correct.’ What the society considers correct
may have been arrived by the crystallization of consumer pressure on corporations and
governments and regulatory forces. It is the science of morals describing a set of rules of behaviour.
Business ethics itself is an offshoot of applied ethics. The study of business ethics essentially deals
with understanding what is right and morally good in business.
• Ethics is a branch of philosophy and is considered a normative science because it is concerned with
the norms of human conduct, as distinguished from formal sciences such as mathematics and logic,
physical sciences such as chemistry and physics, and empirical sciences such as economics and
psychology. As a science, ethics must follow the same rigours of logical reasoning as other sciences.
Ethics, as a science, involves systemizing, defending and recommending concepts of right and
wrong behaviour.
• The principles of ethical reasoning are useful tools for sorting out the good and bad components
within complex human interactions. For this reason, the study of ethics has been at the heart of
intellectual thought since the time of early Greek philosophers, and its ongoing contribution to the
advancement of knowledge and science makes ethics a relevant, if not vital, aspect of management
theory.
PRINCIPLES OF PERSONAL ETHICS
• Personal values are the conception of what an individual or a group regards as desirable. Personal
ethics refer to the application of these values in everything one does. Personal ethics might also be
called morality, since they reflect general expectations of any person in any society, acting in any
capacity. These are the principles we try to instil in our children, and expect of one another without
needing to articulate the expectation or formalize it in any way. The principles of personal ethics
are:
1. Concern and respect for the autonomy of others.
2. Honesty and the willingness to comply with the law of the land.
3. Fairness and the ability not to take undue advantage of others.
4. Benevolence and preventing harm to any creature.
• People are motivated to be ethical for the following reasons:
1. Most people want to maintain a clear conscience and would like to act ethically under normal
circumstances.
2. It is natural for people to ensure that their actions do not cause any injury, whether physical or
mental, to others.
3. People are obliged to obey the laws of the land.
4. Social and material well-being depends on one’s ethical behaviour in society.
PRINCIPLES OF PROFESSIONAL ETHICS
• A profession is a vocation or calling, especially one that involves a specific branch of advanced learning or a branch of
science, for example, the profession of a doctor, advocate, professor, scientist or a business manager. A professional
is one who is engaged in a specified activity as one’s paid occupation like a salaried business manager who is paid for
his specific skill in managing the affairs of the business enterprise he is engaged in.

• There are certain basic principles people are expected to follow in their professional career. These are the following:

• impartiality: objectivity;

• openness: full disclosure;

• confidentiality: trust;

• due diligence/duty of care;

• fidelity to professional responsibilities; and

• avoiding potential or apparent conflict of interest.

WHAT IS BUSINESS ETHICS?

• Ethics is a conception of right and wrong behaviour, defining for us when our actions are moral and
when they are immoral. Business ethics, on the other hand, is the application of general ethical
ideas to business behaviour. Ethical business behaviour is expected by the public, it facilitates and
promotes good to society, improves profitability, fosters business relations and employee
productivity, reduces criminal penalties from public authorities and regulators, protects business
against unscrupulous employees and competitors, protects employees from harmful actions by
their employer, and allows people in business to act consistently with their personal ethical beliefs.
• Ethical problems occur in business for many reasons, including the selfishness of a few, competitive
pressures on profits, the clash of personal values and business goals, and cross-cultural
contradictions in global business operations. Ethical issues, such as bribery and corruption, are
evident throughout the world, and many national governments and international agencies are
actively attempting to minimize such actions through economic sanctions and international codes
of ethical behaviour. Although laws and ethics are closely related, they are not the same: ethical
principles tend to be broader than legal principles. Illegal behaviour by business and its employees
imposes great costs on business itself and the society at large.
• To be precise, ‘Business ethics is the art and discipline of applying ethical principles to examine and
solve complex moral dilemmas’. Business ethics proves that business has been and can be and
ethical and still make profits. Until the last decade, business ethics was thought of as being a
contradiction in terms. But things have changed; today more and more interest is being shown to
the application of ethical practices in business dealings and the ethical implications of business.
‘Business ethics is that set of principles or reasons which should govern the conduct of business
whether at the individual or collective level.’
• Ethical solutions to business problems may have more than one right answer or sometimes no right
answer at all. Thus logical and ethical reasoning are tested in that particular business situation. ‘A
business or company is considered to be ethical only if it tries to reach a trade-off between its
economic objectives and its social obligations, such as obligations to the society where it exists and
operates; to its people for whom it pursues economic goals; to the environment, from where it
takes its resources; and the like.’
• Ethical solutions to business problems may have more than one right answer or sometimes no right
answer at all. Thus logical and ethical reasoning are tested in that particular business situation. ‘A
business or company is considered to be ethical only if it tries to reach a trade-off between its
economic objectives and its social obligations, such as obligations to the society where it exists and
operates; to its people for whom it pursues economic goals; to the environment, from where it
takes its resources; and the like.’
• Business ethics is based on the principle of integrity and fairness and concentrates on the benefits
to the stakeholders, both internal and external. Stakeholders include those individuals and groups
without which the organization does not have an existence. It includes shareholders, creditors,
employees, customers, dealers, vendors, government and the society.
WHAT IS NOT BUSINESS ETHICS?

• It is also equally important to clarify what is not ethics.

• ETHICS IS DIFFERENT FROM RELIGION
• Though all religions preach high ethical/moral standards generally, they do not address all the types
of problems people confront today. For instance, cyber crimes and environment-related issues are
totally new in the context of most religions. Moreover, many persons today do not subscribe to
religious beliefs and have turned agnostics. But ethics applies to all people, irrespective of their
religious affiliations.
• ETHICS IS NOT SYNONYMOUS WITH LAW
• Generally, a good legal system may incorporate many moral/ethical standards. However, there are
several instances where law deviates from what is ethical. Legal systems may vary from society to
society depending upon its social, religious and cultural beliefs. For instance, the United States law
forbids companies from paying bribes either domestically or overseas; however, in other parts of
the world, bribery is an accepted way of doing business. Similar contradictions may be seen in child
labour, employee safety, work hours, wages, discrimination, and environmental protection laws.
Law can be corrupted and debased by dictators and made to cater to serve interests of narrow
groups. Sometimes, law could be unreasonable and even stupid, as for instance, it is illegal in Israel
for a hen to lay an egg on a Friday or Saturday. It is also slow to respond to ethical needs of the
society. People are often sceptical about the objectives of any legal system and comment ‘Law is an
Ass’, while few people question ethical standards.
• ETHICAL STANDARDS ARE DIFFERENT FROM CULTURAL TRAITS
• The English adage ‘When in Rome, do as the Romans do’ leads to an unethical cultural behaviour.
Some cultures may be ethical, but many of them are not. They may be quite oblivious to ethical
concerns. For instance, our system of castes reflects an unethical streak inasmuch as it tends to
take for granted that some people are superior to others in God’s creation.
• ETHICS IS DIFFERENT FROM FEELINGS
• Our ethical choices are based on our feelings. Most of us feel bad when we indulge in something
wrong. But many, especially hardened criminals, may feel good even when they do something bad.
Most people when they do something wrong for the first time, may feel bad, but if they find it to be
beneficial or if it brings them pleasure, they may make it a habit without feeling any remorse.
• ETHICS IS NOT A SCIENCE IN THE STRICTEST SENSE OF THE TERM
• We draw data from the sciences to enable us make ethical choices. But science is not prescriptive
and does not tell us what we ought to do in certain situations leading to ethical dilemmas. But
ethics being prescriptive offers reasons for how humans ought to act under such situations.
Moreover, just because something is scientifically or technologically possible, it may not be ethical
to do it; human cloning, for instance.
• ETHICS IS NOT JUST A COLLECTION OF VALUES
• Values are almost always oversimplifications, which rarely can be applied uniformly. Values tend to
be underdefined, situational by nature and subject to flawed human reasoning such that by
themselves they cannot assure true ethical conduct. Consider the sought-after value of employee
loyalty. Should employees be loyal to co-workers, supervisors, customers, or investors? Since it may
be impossible to be absolutely loyal to all the four simultaneously, in what order should these
loyalties occur? Employers who demand employee loyalty rarely can answer this question
completely or satisfactorily.
• The ultimate aim of ethics is to develop a body of moral standards that we feel are reasonable to
hold—standards that we have thought about carefully and have decided are justified standards for
us to accept and apply to the choices that fill our lives.

• Then what Ethics is? Ethics has two things. First, ethics refers to well-founded standards of right and
wrong that prescribe what humans ought to do, usually in terms of rights, obligations, benefits to
society, fairness, or specific virtues. Ethics, for example, refers to those standards that impose the
reasonable obligations to refrain from rape, stealing, murder, assault, slander, and fraud. Ethical
standards also include those that enjoin virtues of honesty, compassion, and loyalty. Ethical
standards include standards relating to rights, such as the right to life, the right to freedom from
injury, and the right to privacy. Such standards are adequate standards of ethics because they are
supported by consistent and well-founded reasons.
• Secondly, ethics refers to the study and development of one's ethical standards. As mentioned
above, feelings, laws, and social norms can deviate from what is ethical. So, it is necessary to
constantly examine one's standards to ensure that they are reasonable and well-founded. Ethics
also means, then, the continuous effort of studying our own moral beliefs and our moral conduct,
and striving to ensure that we, and the institutions we help to shape, live up to standards that are
reasonable and solidly-based.
ETHICS HAS FOLLOWING FEATURES:

1. Ethics is a conception of right or wrong conduct. Ethics tells us when our behaviour is moral and
when it is immoral. It deals with the fundamental human relationship, how we think and behave
towards others and how we want them to think and behave towards us.

2. Ethics relates to the formalised principles derived from social values. It deals with the moral
choices that we make in the course of performing our duties with regard to the other members of
society. Hence, it is relevant in the context of a society only.

3. Ethical principles are universal in nature. They prescribe obligations and virtues for everybody in a
society. They are important not only in business and politics but in every human endeavour.
4. There exist no sharp boundaries between ethical and non-ethical. Therefore, people often
face ethical dilemmas wherein a clear-cut choice becomes very difficult.

5. The concepts of equity and justice are implicit in ethics. Fair and equitable treatment to all is
its primary aim.

6. Ethics and legality of action do not necessarily coincide. What a society interprets as ethical
or unethical ends up expressed in laws. The legality of actions and decisions does not
necessarily make them ethical. For example, not helping an injured person in a road accident
may be unethical but not illegal.
EVOLUTION OF ETHICS OVER THE YEARS
• If we trace the history of ethics in business, we would realize that ethics had been a part of
theological discussions prior to 1960. Before the 1970s, there were a few writers like Raymond
Baumhart who dealt with ethics and business. Ethical issues were mostly discussed as part of social
issues. Men of religion and theologians continued writing and teaching on ethics in business.
Professors in B-schools wrote and continued to talk about corporate social responsibility (CSR), the
handmaid of ethics. However, the catalyst that led to the field of business ethics was the entry of
several ‘philosophers, who brought ethical theory and philosophical analysis to bear on a variety of
issues.’ Norman Bowie dates the genesis of business ethics as November 1974, with the first
conference on the subject held at the University of Kansas. In 1979, three anthologies on business
ethics appeared. They were (i) Ethical Theory and Business by Tom Beauchamp and Norman Bowie;
(ii) Ethical Issues in Business: A Philosophical Approach by Thomas Donaldson and Patricia
Werhane; and (iii) Moral Issues in Business by Vincent Berry. In 1982, Richard De George brought
out Business Ethics, while Manuel G. Velasquez published his Business Ethics: Concepts and Cases.
• All these books created a lot of interest on the subject and business ethics courses were offered in
several management schools. The emergence of business ethics, however, was not restricted to
textbooks and courses in B-schools. By 1975, business ethics became institutionalized at many
levels through writings and conferences. By the 1980s, the subject was taught in several universities
in the United States and Europe. There were also, by this time, many journals of business ethics,
apart from centres and societies established to promote ethical practices.
• By the year 1990, business ethics as a management discipline was well-established. ‘Although the
academicians from the start had sought to develop contacts with the business community, the
history of the development of business ethics as a movement in business, though related to the
academic developments, can be seen to have a history of its own.’
• Parallel to these academic pursuits, around the time from the 1960s to the 1980s, the Consumers’
Association in Britain multiplied its membership and campaigned hard on issues such as consumer
rights, quality, safety, price, customer service and environmental concerns. The late 1980s and early
1990s saw increased concern for the environment and by 1989 environment was the issue of
greatest concern in Britain. In 1988, more than 50 per cent of the people in West Germany called
themselves green consumers, that is, those who preferred to select one product over another for
environment-friendly reasons. The United States followed with 45 per cent, Australia with 27 per
cent, Great Britain with 14 per cent, which within one year shot up to 42 per cent.
• During the 1960s, there was a rise of social issues in business and many business practices came
under social scrutiny during this period. President John F Kennedy’s Consumer Bill of Rights
reflected a new era of consumerism. During the 1970s, professors teaching business began to write
about business ethics and philosophers began to involve themselves in the theoretical evolution of
the subject. Businessmen became more concerned with their public image and addressed ethics
more directly. From this historical development, we can see that business ethics as a field of study
and research is a fairly nascent subject.
THE CONCEPT OF BUSINESS ETHICS

• Business ethics is one of the important branches of applied ethics. Business ethics is the application
of general ethical ideas to business. ” Business ethics refers to the moral principles and standards
and a code of conduct that businessmen are expected to follow while dealing with others. Business
essentially is a means of society to use scarce resources to produce in an efficient manner those
goods and services which society wants and is willing to pay for. Businesses must balance their
desire to maximize profits against the needs of stakeholders. The significant issues in business
ethics include ethical management of enterprise in relation to its stakeholders in particular and
natural environment in general.
According to Carter McNamara,
“Business ethics is generally coming to know what is right or wrong in the
workplace and doing what is right- this is in regard to effects of
products/services and its relationship with stakeholders”.
Ethics is necessary (and important) in business due to several reasons, some of which are given
below:
1. There is a kind of social contract between the society and business by which the society expects
the business to work in its interest. Society creates and accepts business enterprises; hence it
expects them to work in a manner which is not detrimental to its well being and interests.
Technological advancements have to be made but their impact on the environment and
mankind has to be kept in mind.
2. Ethical conduct is in the long-term interests of businessmen. A business enterprise that is honest
and fair to its customers, employees, and other stakeholders earns their trust and good will. It
ultimately results in customer satisfaction, healthy competition, industrial growth and high
earnings. Businesses must balance their desire to maximise profits against the requirements of
stakeholders. Maintaining this balance often requires tradeoffs. To address this unique aspect of
business, rules are articulated to guide it to earn profits without harming individuals or society
as a whole. While referring to business activity profile, Mahatma Gandhi once mentioned that all
business entrepreneurs should ask themselves the question whether the activities, they are
contemplating would be of some use to the common man. This statement emphasizes the
importance of nobility of business purpose.
3. Ethical business behaviour is not only about good business but about good citizenship as well.
Morally conscious businessmen have created names and built great business empires. They
serve customers with good quality products at fair prices, treat their employees with great
respect, reward their shareholders with good returns and pay their taxes honestly.
4. Ethical policies and practices enable a business enterprise to build goodwill for itself. A business
organisation that adheres to a code of conduct gains a competitive advantage and builds long
term value. On the other hand, unethical practices lead to the ultimate downfall of big
organisations too.

5. Business can prosper only when a society is stable and peaceful. Unethical practices at times
create distrust, disorder and turmoil in society.
• Business ethics refers to a ‘code of conduct’ which businessmen are expected to follow while
dealing with others. ‘Code of conduct’ is a set of principles and expectations that are considered
binding on any person who is member of a particular group. The alternative names for code of
conduct are ‘code of ethics’ and ‘code of practice’.

• The coverage of business ethics is very wide as it deals with norms relating to a company and its
employees, suppliers, customers and neighbors, its fiduciary responsibility to its shareholders. It
reflects the philosophy of business, one of whose aims is to determine the fundamental purposes
of a company.
• Business ethics stands for the saneness or purity of purpose that is upheld through carefully designed
actual practices of business enterprises. It is an embodiment of conscious concern towards execution
of business processes in tune with the nobility of the purpose.

• While referring to business activities, Mahatma Gandhi once mentioned that all business organisations
have a social responsibility which has nothing to do with its ordinary economic activity. For instance, if
there is a natural calamity in an area adjoining a business organisation, the society would expect the
business organisation to participate in the relief work. Such a social responsibility arises out of ethical
considerations and not out of profit-making considerations. Therefore, the responsibility towards
society is a moral obligation arising out of business ethics, which in turn is steeped in the philosophy of
business.
• Business ethics are rules of business conduct by which propriety (appropriate or desirable behavior)
of business activities may be just. Now the question arises, what are the business practices that are
always considered unethical?

1. Misleading advertising
2. Misleading labeling
3. Harm to the environment
4. Insider trading
5. Dumping flawed product on foreign market
6. Padding expense account

• When people do not act ethically government is forced to pass laws regulating their action which
usually increases their costs, the brand image is lost and finally the production problem starts.
NATURE OF BUSINESS ETHICS

• Ethics refers to a system of moral principles- a sense of right and wrong, and goodness and badness
of action and the motives and consequences of these actions. As applied to business firms, ethics is
the study of good and evil, right and wrong, just and unjust actions of businesspeople.
• Business ethics does not differ from generally accepted norms of good and bad practices. If
dishonesty is considered to be unethical and immoral in the society, then any businessperson who
is dishonest with his or her employees, customers, shareholders or competitors is an unethical and
immoral person. If protecting others from harm is considered to be ethical, then a company which
recalls a defective or harmful product from market is an ethical company.
• However, two theories are pertinent when one talks about the nature of ethics.

1. The theory of moral unity: It essentially advocates the principle that business actions should be
judged by the general ethical standard of the society. There exists only one set of ethical
standards which applies to business and non-business situation.

2. The theory of amorality: It agrees that business can be amoral and related to a complete
hierarchical structure and actions of businesspeople need to be guided by general business
structure. Adam Smith agrees that “the invisible hand of the market assures that by pursuing his
own interest (a merchant) frequently promotes that of the society more effectively than when he
really intends to promote it”. In this way, capitalism provides moral justification to the pursuit of
profit through a behavior which is not purposefully ethical.

• However, the theory of amorality is not acceptable to everyone. Everyone agrees that business
actions should be subjected to the same ethical standard as applicable to the society in general.
SOURCES OF BUSINESS ETHICS

• Three repositories of ethical values influence managers in every society: religion, culture and law.
These repositories contain unique system of values that exert varying degrees of control over
managers.

• A common thread, the idea of mutual help, runs through all the value systems. Ethical values are
mechanism that controls behavior in business and in other walks of life. Ethical restraints are more
effective than are cruder controls such as police, lawsuits, etc.
RELIGION

• One of the oldest sources of ethical inspiration is religion .The world’s great religions are in
agreement on fundamental principles.
• The principle of reciprocity towards one’s fellow human beings is found in all major religions. The
great religions preach the necessity for an orderly social system and emphasis social responsibilities
in such a way as to contribute to the general welfare.
CULTURAL EXPERIENCE

• Culture refers to a set of values, rules and standards transmitted among generations and acted
upon to produce behaviors that fall within acceptable limits. These rules and standards always play
an important part in determining values, because individuals anchor their conduct in the culture of
the group.

• Civilization itself is a cumulative cultural experience in which people have passed through three
distinct phases of moral codification these phases correspond to the changes in the economic and
social arrangements. (Hunting and gathering stage, agricultural stage and industrial stage).
THE LEGAL SYSTEM

• Laws are rules of conduct, approved by legislatures that guide human behavior in any society. They
codify ethical expectations and change as new evil emerges. But laws cannot cover all ethical
expectation of the society.

• Law is reactive – new statute and enforcement always lags behind the opportunity for corporate
expediency. Whatever the law codifies, it is binding on businesses. The society expects businesses
to abide by the law. Obeying the law is presumed to be ethical behavior.
• Although the society expects businesses to be law abiding, seldom do the businesses adhere to
the rules. Law breaking in business is very common. Taxes are evaded, hundreds of employees die
because of occupational diseases, many perish because of industrial accidents, and millions others
receive disabling injuries on the job.
• The blame for these death and injuries had to be shared by careless employees and employers
who fail to adhere to occupational health and safety laws.
• Consumers suffer because of poor-quality and high-priced products supplied by businessman.
Businesses that degrade the environment by disregarding environmental protection laws cause
misery to the society.
FIVE MYTHS ABOUT BUSINESS ETHICS

• Not everyone agrees that ethics is a relevant subject for business education or dealings. Some
have argued that “business ethics” is an oxymoron, or a contradiction in terms. However,
certain myths persist about business ethics.

• A myth is “a belief given uncritical acceptance by the members of a group, especially in support of
existing or traditional practices and institutions.” Myths regarding the relationship between
business and ethics do not represent truth but popular and unexamined notions. Which, if any,
of the following myths have you accepted as unquestioned truth? Which do you reject? Do you
know anyone who holds any of these myths as true?
MYTH 1: ETHICS IS A PERSONAL, INDIVIDUAL
AFFAIR, NOT A PUBLIC OR DEBATABLE MATTER
• This myth holds that individual ethics is based on personal or religious beliefs, and that one
decides what is right and wrong in the privacy of one’s conscience. This myth is supported in
part by Milton Friedman, a well- known economist, who views “social responsibility,” as an
expression of business ethics, to be unsuitable for business professionals to address seriously or
professionally because they are not equipped or trained to do so.

• Although it is true that individuals must make moral choices in life, including business affairs, it
is also true that individuals do not operate in a vacuum. Individual ethical choices are most
often influenced by discussions, conversations, and debates, and made in group contexts.
• Individuals often rely on organizations and groups for meaning, direction, and purpose.
Moreover, individuals are integral parts of organizational cultures, which have standards to
govern what is acceptable. Therefore, to argue that ethics related to business issues is mainly a
matter of personal or individual choice is to underestimate the role organizations play in
shaping and influencing members’ attitudes and behaviors.

• Studies indicate that organizations that act in socially irresponsible ways often pay penalties
for unethical behavior. In fact, the results of the studies advocate integrating ethics into the
strategic management process because it is both the right and the profitable thing to do.
 MYTH 2: BUSINESS AND ETHICS DO NOT MIX

• This myth holds that business practices are basically amoral (not necessarily immoral)
because businesses operate in a free market. This myth also asserts that management is
based on scientific, rather than religious or ethical, principles.

• The ethicist Richard DeGeorge has noted that the belief that business is amoral is a myth
because it ignores the business involvement of all of us. Business is a human activity, not
simply a scientific one, and, as such, can be evaluated from a moral perspective. If everyone
in business acted amorally or immorally, as a pseudoscientific notion of business would
suggest, businesses would collapse. Employees would openly steal from employers;
employers would recklessly fire employees at will; contractors would arrogantly violate
obligations; and chaos would prevail.
MYTH 3: ETHICS IN BUSINESS IS RELATIVE

• In this myth, no right or wrong way of believing or acting exists. Right and wrong are in the eyes of
the beholder.

• The claim that ethics is not based solely on absolutes has some truth to it. However, to argue that
all ethics is relative contradicts everyday experience. For example, the view that because a person
or society believes something to be right makes it problematic when examined. Many societies
believed in and practiced slavery; however, in contemporary individuals’ experiences, slavery is
morally wrong. When individuals and firms do business in societies that promote slavery, does that
mean that the individuals and firms must also condone and practice slavery?
• The question that can be asked regarding this myth is: Relative to whom or what? and why? The
logic of this ethic, which answers that question with “Relative to me, myself, and my interests”
as a maxim, does not promote community. Also, if ethical relativism were carried to its logical
extreme, no one could disagree with anyone about moral issues because each person’s values
would be true for him or her. Ultimately, this logic would state that no right or wrong exists
apart from an individual’s or society’s principles. How could interactions be completed if ethical
relativism was carried to its limit?
MYTH 4: GOOD BUSINESS MEANS GOOD ETHICS

• This myth can translate to “Executives and firms that maintain a good corporate image,
practice fair and equitable dealings with customers and employees, and earn profits by
legitimate, legal means are de facto ethical.” Such firms, therefore, would not have to be
concerned explicitly with ethics in the workplace. Just do a hard, fair day’s work, and that has
its own moral goodness and rewards.

• The faulty reasoning underlying this logic obscures the fact that ethics does not always provide
solutions to technical business problems. Moreover, no correlation exists between “goodness”
and material success.
• The point is that ethics is not something added to business operations; ethics is a necessary part
of operations. A more accurate, logical statement from business experience would suggest that
“good ethics means good business.” This is more in line with observations from successful
companies that are ethical first and also profitable.

• Finally, the following questions need to be asked: What happens, then, if what should be
ethically done is not the best thing for business? What happens when good ethics is not good
business? The ethical thing to do may not always be in the best interests of the firm. We should
promote business ethics, not because good ethics is good business, but because we are morally
required to adopt the moral point of view in all our dealings with other people— and business
is no exception. In business, as in all other human endeavors, we must be prepared to pay the
costs of ethical behavior. The costs may sometimes seem high, but that is the risk we take in
valuing and preserving our integrity.
MYTH 5: INFORMATION AND COMPUTING ARE
AMORAL
• This myth holds that information and computing are neither moral nor immoral— they are
amoral. They are in a “gray zone,” a questionable area regarding ethics. Information and
computing have positive dimensions, such as empowerment and enlightenment through the
ubiquitous exposure to information, increased efficiency, and quick access to online global
communities. It is also true that information and computing have a dark side: information about
individuals can be used as “a form of control, power, and manipulation.”

• The point here is to beware the dark side: the misuse of information, social media, and
computing. Ethical implications are present but veiled. Truth, accuracy, and privacy must be
protected and guarded: “Falsehood, inaccuracy, lying, deception, disinformation, misleading
information are all vices and enemies of the Information Age, for they undermine it. Fraud,
misrepresentation, and falsehood are inimical to all of them.”
• Logical problems occur in all five of the above myths. In many instances, the myths hold
simplistic and even unrealistic notions about ethics in business dealings. So, the question
arises why the discussion of myths? The purpose is to enable managers to obtain right
perspective of ethics.
IMPORTANCE OF BUSINESS ETHICS

• Running a business requires adequate consideration to a number of issues outside the

traditional scope of making money, of which ethics is most certainly one. As our business
grows and becomes more significant, we impact on the lives and circumstances of people in
ways we can only imagine - through bringing jobs, creating wealth and inspiring others to grow
their businesses. An important part of engaging in this process is understanding business ethics,
which if not up to mark can leave you with a bad reputation and can even ruin the business, not
to mention alienating employees, suppliers and the local community.
• Business Ethics is of immense importance across all areas of business. From the way in which
sales and marketing is handled through product development and customer service, and even
to some extent finance, ethics has a significant role to play in ensuring business success and
ultimately living up to the corporate social responsibility. Thus, adopting an ethics-specific
approach to doing business is critical towards ensuring a legitimate business model with long
term potential.
• Thus, the importance of business ethics can be illustrated as under:
1. Stop Business Malpractices: Some dishonest 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 helps to stop these
business malpractices.

2. Improve Customers' Confidence: Business ethics is needed to improve the customers'

confidence about the quality, quantity, and price 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.
3. Survival of Business: Business ethics is mandatory for the survival of the 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 the appropriate code of conduct to survive in the
market.

4. 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 is must to safeguard these
rights of the consumers.
5. Protecting Employees and Shareholders: Business ethics is required to protect the interest of
employees, shareholders, competitors, dealers, suppliers, etc. It protects them from
exploitation through unfair trade practices.

6. Develops Good Relations: Business ethics is 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 the growth of economy.
7. 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 criticized by
the society. The society will always support those businessmen who follow the necessary code
of conduct.

8. Smooth Functioning: If the business follows the necessary code of conduct, 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 and the
business will grow, expand and diversify easily and quickly.
9. Consumer Movement: Business ethics is gaining importance because of the growth of the
consumer movement. Today, the consumers are aware of their rights and they are more
organized so they 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.

10.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 is highly needed.
11. 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.

12.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.
CODE OF CONDUCT AND ETHICS FOR MANAGERS
• Having gone through the definitions of what is and what is not ethics, let us see now how ethics
and values should form the bases of the code of conduct that ought to govern the behaviour of
business managers. In the exercise of their duties and responsibilities, managers must observe the
following ethical values:
• Integrity: Integrity is the cornerstone of all values. A business manager should be morally upright. It
is this characteristic that distinguishes a professional manager from a mercenary.
• Impartiality: A manager should look at and treat all aspects of an issue in a fair and unprejudiced
manner.
• Responsiveness to the public interest: Though a manager is paid to serve the interests of the
stockholders of the company, public interest is no less important. In fact, managers should consider
it as of paramount importance, if they have to be successful in their tasks.
• Accountability: Accountability is one of the basic characteristics of a good business manager.
Business managers are responsible for all their actions and are accountable to all the
stakeholders—stockholders, creditors, employees, consumers, government and the society at large.
• Honesty: A cardinal ethical value that a manager should possess is this quality. Managers should be
fair, just and sincere both in character and behaviour. They should not indulge in cheating or
stealing and should be free of deceit and untruthfulness.
• Transparency: Good business managers should be transparent and set standards for others to
follow. They should be frank and open. Their actions should be easily discussed and understood by
others.
• What values are to individuals, ethics is to business.