BUSINESS ETHICS

BUSINESS FOR PROFIT

 Business ethics does not come within the confines
of ethics
 People find mechanisms to generate the highest
possible returns when conducting business
 No one holds it against a worker for demanding
higher wages or a landlord for increasing the rent
 Their actions are not considered illegal or unethical
 Profits are just the wages for invested capital and
entrepreneurship
 Hence these should be left alone outside the
boundaries of ethics
 Business is for profit; and the just reward for doing
business lies in the excess returns received on the
investment
BUSINESS WITH ETHICS
 Business world is an important part of
society, as it is concerned with the livelihoods
of people
 Business activity too is subjected to the code
of conduct without any exception
 People expect businessmen to possess the
same rationality as any other citizen
 Therefore there is no separate business ethics
for businessmen, as ethics applies to all the
activities of people
 Consequently we have to keep business
within the bounds of ethics
CHARACTER OF BUSINESS
 Business in a society reflects its character
 Transparency international in its corruption
perception index, gives Finland, Denmark and
New Zealand the first place with 9.4 points
 India is way down at 72 with just 3.5 points on a
scale of 10
 We may gloat over out cultural heritage and
religious and ethical glories of the past, but we
stand exposed before the world as a corrupt
society
 Corruption prevails in all walks of life, whether it
is political, social or economic
 If we have to improve our business, we have to
improve our business behaviour
PROFESSIONAL EHTICS
 Business ethics comes under practical ethics and
is applied to a particular activity
 There is a professional code of conduct for any
business and it keeps evolving
 Business should be practiced strictly under its
own professional code of conduct
 The character of a true professional remains
undivided, whether at personal or professional
front
 Professional bear the following marked
characteristics
i. Competency of educational qualification
ii. Professional skills
iii. Compensation
NATURE OF ETHICS AS MORAL VALUE
 Value-free Ethics
 Business may seem to be an ethically neutral and
value-free activity
 The only value business is concerned with is
monetary value, it is not in the interest of the
business to mix ethical values
 Business should be kept free from other social
relationships and obligations
 The only successful relationship that exists in a
business is that of a vendor and a customer
 For a businessman every factor in the business is
measured in terms of money
 e.g. a baker bakes and distributes bread not because
he possesses the virtue of charity, but because he
want to gratify his self-interest, which is to earn his
livelihood
 An employer rewards an employee for his
productivity, ethics is the last thing on the employer’s
mind when distributing his bounty
NATURE OF ETHICS AS MORAL VALUE
 Human Relations
 The more we negate the union of ethical values to
business, the greater is the affirmation that it is
not a value-free enterprise
 It is very silly and unreasonable to affirm that
the relationship between a vendor and a
customer is not a human relationship
 Every business relationship is indeed a type of
human relationship
 Also it is not ethically wrong to have self-interest
involved in business
 It becomes unethical when such an activity is an
outright exploitation of one’s personal interests
NATURE OF ETHICS AS MORAL VALUE
 Concept of Value-free ethics
 Concept of ‘value-free’ business is quite appealing
for businessmen
 It appears as though it may be pursued devoid of
all rules
 However, while studying ethics it is found that it
is purely a study of values and not value-free
ethics
 One cannot remove values from ethics
NATURE OF ETHICS AS MORAL VALUE
 Ethics as a Principle
 Social evolution has developed definite principles of
civic behaviour, which has attained the status of
principles
 Principle is something that drives and proceeds a
particular cause e.g. the physical world functions
strictly according to the laws of physics
 Similarly it is expected that people submit their
behaviour both in thoughts and actions to certain
principles
 All actions are valid as long as it reflects the principle
 All moral actions are directed towards their object i.e.
the good, which is the principle of all happiness
 This is not only the sole purpose of our existence but
our co-existence with others as well
NATURE OF ETHICS AS MORAL VALUE

 Business ethics as Professional Code

 Business ethics is not a pure science but a
professional practice
 Society expects businessmen to abide by the
principles of a civil society, just as it expects
professionals from other areas as medicine,
bureaucracy, politics and sports to do so
 Thus instead of value-free business ethics, we
have a value-loaded or value-based business
practice
LAW VERSUS ETHICS
 Adequacy of Law
 There is a compelling argument that the law can
regulate human behaviour, that the law is sufficient to
regulate any professional discipline, and that ethics is
not necessary
 Law of the land is for citizens and the rights of every
citizens are enshrined in the constitution of the country
 These laws have evolved through the legislative process
of the representatives of the people and these
regulations are used for running institutions in a civil
society
 In addition there are special provisions made for the
business community through acts that govern all
business transactions – whether of individual
proprietors or of companies under business law or
corporate law
 These laws are exhaustive and may be applied precisely
in case of disputes
LAW VERSUS ETHICS
 Ethics as the principle cause of law
 Proposition that law is sufficient and ethics is
unnecessary is equivalent to saying that cause is
immaterial, but effect is everything
 Just as every other human pursuit originates and
grows within the bounds of a society, business also
originates and grows in a society
 Ethics is that civil fabric that holds society together
for a common good, that is, to achieve the common
good
 The common good is to be achieved through the
pursuits or vocation that each and every individual in
a society follows
 The achievement of each and every member of a
society adds to the greater good of the community
 Ethics acts as an agent of approval and disapproval of
the activities of its members
LAW VERSUS ETHICS
 Business bashing
 The purpose of business ethics is assumed to
chastise(criticise for doing something wrong)
those who are doing business
 So in the name of ethics cumbersome (slow and
complicated) laws and regulations have been
enacted by the legislature and government
machinery, codes by the corporations,
recommendations by non government agencies
etc.
 These regulations and several other norms now
contribute to the burdens of the businessmen
CONCLUSIONS
 It is important to know the place a business and
its management hold in the society
 As it is part of the society and everyone has a
stake in it, it cannot be allowed to do its own will,
but it must do the will of the community where it
originates and grows
 Second, business ethics guides its practice, as
people expect it to be done
 The objective of managerial decisions is to
promote business and add to the shareholders
value without compromising the interests of any
stakeholders in and of society
 Practice of good business ethics makes the
businessman a thorough professional
CONCLUSIONS

 Third, law is meant for those who trespass on the

rights of others, the purpose of law is to protect
the good from the bad
 The greater the sense of ethical sensibility in a
society, the greater is the likelihood of
achievement of the common good
 Society makes laws through its legislative organs
to suit definite regulatory needs, and when the
laws become obsolete they are repealed
 However, the ethical principle, the good, remains
unchanged and the values of justice, equality,
prudence etc. that follow from it also remain
unchanged
REASONS FOR STUDYING BUSINESS ETHICS
 Business ethics is not simply an extension of an
individual’s own personal ethics
 An individual’s personal values and moral
philosophies are only one factor in the ethical decision
making process
 Moral rules can be applied in various life situations
and so in business, but the concern is about the
application of these ethical rules and principle’s in
business context
 Professionals in any field, including business, must
deal with individual’s moral dilemmas, because they
affect a person’s ability to function on the job
 Normally a business does not establish rules or
policies on personal ethical issues, e.g. use of alcohol
outside workplace, still if such preferences of a person
influences his job performance, then the issue of
individual ethics come into play and how it impacts
the business decisions
 Just being a good person and having sound
personal ethics may not be sufficient to handle
the ethical issues that arise in a business
 It is important to understand the relationship
between legal and ethical decisions
 Abstract virtues like truthfulness, honesty,
fairness and openness are often assumed to be
self-evident and accepted by all employees,
business-strategy decisions are much more
complex and call for detailed discussion
 E.g. issues like antitrust, deceptive advertising
and violations of Foreign Corrupt practices Act,
here high level of personal moral development
may not prevent an individual from violating the
law in a complicated organizational context,
where even experienced lawyers debate the exact
meaning of the law
 At times there is a wrong assumption that ethics
training is for people whose personal moral
development is unacceptable, but that is not the
case
 Because organization’s are culturally diverse and
personal values must be respected, ensuring
collective agreement on organizational ethics
(that is codes reasonably capable of preventing
misconduct) is vital as any other effort an
organization’s management may undertake
TO CONCLUDE

 Studying business ethics will help you to begin to

identify ethical issues when they arise and
recognise the approaches available for resolving
them
 You will also learn about the ethical decision-
making process and about ways to promote
ethical behaviour in your organization
 By studying business ethics, you may begin to
understand how to cope with conflicts between
your personal values and those of the
organization where you work