Business Ethics

-refers to standards of moral conduct, behavior

and judgment in business. It involves making the
moral and right decisions while engaging in such
business activities as manufacturing and selling a
product and providing a service to customers.
-an area of corporate responsibility where
businesses are legally bound and socially
obligated to conduct business in an ethical
manner.
-is based on the personal values and standards of
each person engaged in business.
 PURPOSES OF BUSINESS
ETHICS
• MAIN PURPOSE
The main purpose of business ethics is to help
business and would-be business to determine
what business practices are right and what are
wrong.
 • SPECIAL PURPOSE
There are other purposes which are corollary to
the main purpose. These purposes include the
following:
1. To make businessmen realize that they cannot
employ double standards to the actions of other
people and to their own actions.
2. To show businessmen that common practices
which they have thought to be right because they
see other businessmen doing it, are really wrong.
3. To serve as a standard or ideal upon which
business conduct should be based.
 SCOPE OF BUSINESS ETHICS
It covers all conduct, behavior and judgment in
business. This includes the slightest deviation
from what is right to illegal and dishonest acts
that are punishable by law. It involves making the
right choices while engaging in such business
activities as manufacturing and selling a product
or selling and rendering a service.
IMPACT OF BUSINESS ETHICS
• ECONOMIC IMPACT
A business has an economic impact on society
through the wages it pays to its employees, the
materials that it buys from their suppliers and the
prices it charges its customers. It would have a
positive social impact on its employees if they
are paid fair living wages and benefits. It will
have a positive effect on its suppliers that they
paid fairly and on time for their supplies. The
effect on its customers is positive if the business
gives them good value for the price they pay for
the products and services.
 • SOCIAL IMPACT
The social impact of corporate governance
contributes to the ethical climate of society. If
businesses offer bribes to secure work or other
benefits, engage in accounting fraud or breach
regulatory and legal limitations on their
operations, the ethics of society suffer. In
addition to a deteriorating ethical environment,
such as corruption may unfairly raise the price of
goods for consumers or the quality of the
product or service compromised.
 • ENVIRONMENTAL IMPACT

Businesses that implement good environmental

policies to use energy more efficiently, reduce
waste and in general lighten their environmental
footprint can reduce their internal costs and
promote a positive image of their company. The
environmental initiatives of a business leader
often force competitors to take similar action for
an increased beneficial effect on the
environment.
• IMPACT ON BUSINESS MANAGERS
The concepts and principles for the ethical
conduct in business are relegated to the
managers of the business enterprise. Thus,
although the manager is expected to act in the
best interest of the business, he cannot be
expected to act in a manner that is contrary to
the law or to his conscience.

In particular, a manager should:

• acknowledge that his role is to serve the
business enterprise and the community;
• avoid all abuse of executive power for
personal gain, advantage or prestige;
• reveal the fact to his superior whenever his
personal business of financial interests
conflict with those of the company;
• be actively concerned with the difficulties
and problems of subordinates, treat them
fairly and by example, lead them effectively,
assuring to all the right of reasonable access
and appeal to superiors;
• recognize that his subordinates have a right
to information on matter affecting them, and
make provision for its prompt communication
unless such communication is likely to
undermine the security and efficiency of the
business;
 • fully evaluate the likely effects on employees
and the community of the business plans for
the future before taking a final decision and
• cooperate with his colleagues and not
attempt to secure personal advantage at their
expense.
ADVANTAGES:
• Increase Employees Morale
• Boost Reputation
• Attract Customer
• Generate Goodwill
• Improve Brand Recognition
• New Finance Resources
 4 PILLARS OF ETHICAL STRATEGY

• Protection of Human Rights

• Appropriate Labor Standard
• Environment
• Working Against Corruption
Common Unethical Practices of
Business Establishments
Unethical problems in business ethics occur in
many forms and types. The most common of
these unethical practices of business
establishments are misrepresentation and over-
persuasion.

MISPRESENTATION
-may be classified into two types: direct
misrepresentation and indirect misrepresentation.
• Deceptive Branding

-is the practice of making false statements

on the label of a product or making its
container similar to a well-known product for
the purpose of deceiving the customer as to
the quality and/or quantity of a product
being sold.
DIRECT MISPRESENTATION

-characterized by actively misrepresenting about

the product or customers. This includes:

• Deceptive Branding
-takes many forms and is of many types. One
type is the practice of placing the product in
containers of exaggerated sizes and
misleading shapes to give a false impression
of its actual contents.
• False or Misleading Advertising
Advertising serves a useful purpose if it
conveys the right information. It is the
principal means by which people are
informed about the availability, nature and
uses of old and new products. However,
advertising does not always tell the "whole
truth and nothing but the truth" if it greatly
exaggerates the virtues of a product and tells
only half of the truth or else sings praises to
its non existent virtues. If advertising does
not provide a useful service anymore to the
customers, it can become the agent of
misrepresentation.
• Adulteration
-is the unethical practice of debasing a pure
or genuine commodity by imitating or
counterfeiting it, by adding something to
increase its bulk or volume, or by
substituting an inferior product for a superior
one for the purpose of profit or gain.

• Weight understatement or short weighing

-the mechanism of the weighing scale is
tampered with or something is unobtrusively
attached to it so that the scale registers
more than the actual weight.
• Measurement understatement or short
measurement
-this unethical practice is found in selling
situations where the price of the product
depends on its length such as selling cloth or
textiles, electric cords or wires or on its
volume such as selling rice by the sack.

• Quantity understatement or Short

numbering
-this unethical practice, the seller gives the
customer less than the number asked for or
paid for.
INDIRECT MISPRESENTATION
-is characterized by omitting adverse or
unfavorable information about the product or
service. Among the most common practices are
as follows:
• Caveat emptor
-is a practice very common among salesmen.
Translated, caveat emptor means "let the
buyer beware". Under this concept, the seller
is not obligated to reveal any defect in the
product or service he is selling. It is
responsibility of the customer to determine
for himself the defects of the product.
• Deliberate Withholding of Information
-no business transaction is fair where one of
the parties does not exactly know what he is
giving away or receiving in return.

• Passive Deception
Direct misrepresentation gives business a
bad name while indirect misrepresentation or
passive deception is not as obvious, it
nonetheless contributes to the impression
that businessmen are liars and are out to
make a fast buck.
• Over-Persuasion

Persuasion is the process of appealing to the

emotions of a prospective customer and
urging him to buy an item of merchandise he
needs. Persuasion is legitimate and necessary
in the selling of goods if it is done in the
interest of a buyer such as persuading him to
get a hospitalization insurance policy
UNETHICAL CORPORATE PRACTICES
a. Board of Directors
• Plain Graft
• Interlocking Directorship
• Insider Trading
• Negligence of Duty
b. Executive Officers and lower level manager
• Claiming a vacation trip to be a business
trip
• Having employees do work unrelated to
the business
• Loose or ineffective controls
 4. Unfair labor practices
5. Making false claims about losses to free
themselves from paying the compensation and
benefits provided by law
6. Making employees sign documents showing
that they are receiving fully what they are
entitled to under the law when in fact they are
only receiving a fraction of what they are
supposed to get.
7. Sexual harassment
c. Employees
• Conflicts of Interest
• Dishonesty
Ethical Dilemma
-is a situation a person faces in which a decision
must be made about the appropriate behavior.
Six-step approach to resolve ethical delimma
• Obtain the relevant facts.
• Identify the ethical issues from the facts.
• Determine who is affected by the outcome of
the dilemma and how each person or group
is affected.
• Identify the alternatives available to the
person who must resolve the dilemma.
• Identify the likely consequences of each
alternative.
• Decide the appropriate action.
CORRUPTION is the abuse of private and public
office for personal gain. It includes acts of
bribery, embezzlement, nepotism, kickbacks and
state capture. This is often associated with and
reinforced by other illegal practices such as bid
rigging, fraud, or money laundering, extortion.

Simply defined, CORRUPTION is receiving,

asking for or giving any gratification to induce a
person to do a favour for private gain. This act
covers not only public corruption involving
misuse of public power by elected politician or
appointed civil servant but also private corruption
between individuals and businesses.
CORRUPTION is the misuse of entrusted power
(by heritage, education, marriage, election,
appointment) for private gain. It covers not only
the politician and the public servant but also the
CEO, CFO and but other employees of a
company.

It involves wrong doing on the part of an

authority or powerful party through means that
are illegitimate, immoral or incompatible with
ethical standards. Corruption often results from
patronage and is associated with bribery.
CORRUPTION is an improbity or decay in the
decision-making process in which a decision-
maker consents to deviate or demands deviation
from the criterion which should rule his or her
decision-making, in exchange for a reward or for
the promise or expectation of a reward, while
these motives influencing his or her decision-
making cannot be part of the justification of the
decision."

In general, CORRUPTION is a form of dishonesty

or criminal activity undertaken by a person an
organization entrusted with a position of
authority, often to acquire illicit benefit.
CORRUPTION may take place in any of the
following forms/ways:
• A company paying a bribe to win the public
contract to build the local highway, despite
proposing a sub-standard offer.
• A politician redirecting investments to his
hometown rather than to the region most in need.
• Public official embezzling funds for school
renovation to build his private villa. .
• A private company manager recruiting an ill-suited
friend for a high level position.
• Or, local officials demanding bribes from ordinary
citizens to get access to a new water pipe.
• A salesman bribing the purchasing manager of a
company to give ference to his products.
Why and how does a person become corrupt
Corruptions spread when there are opportunities,
when risk is minimal in comparison to benefits
obtained or when one is confronted with issues like

• Career advancement
• Earning of more income
• Financial problems caused by illness, loss of
property, etc.

Those engaged in corruption learn how to be

dishonest. The next corrupt actions become easier to
do unless one is firmly rooted on solid principles and
has been nurtured in an upright manner.
ILL EFFECT OF CORRUPTION
Economically,
• Corruptions add up to 10% of the total costs of
doing business in any part of the world and up to
25% of the cost of procurement programs in
developing countries.
• Corruption leads to waste or the inefficient use of
public resources.
• Corruption corrodes public trust, undermines the
rule of law, and ultimately delegitimizes the state.
• Africa's 700 million people under 30 are seeking
opportunities with dignity and if mismatch
between aspirations and fulfilment continues, this
could lead to apathy, discontent and turn them to
radical extremists and join terrorist groups
Other significant and serious repercussions of
corruption is:
• If allowed to take root in society, it can lead
to a breakdown in social order and lives are
affected when ordinary people are prevented
from receiving all the essential service that
they are entitled to.
• It creates unfair competition and increases
the cost of doing business.
• Corruption is cancer that spreads rapidly all
over the body.
 CHARACTERISTICS OF CORRUPTION

• Recipients and payers

• Extortion
• Lubricant of society
• An ethical delimma
• Poverty alleviation
• Culture
• Kindness among friends
Recipients and payers
Corruption is the abuse of entrusted power and elected
authority for private profit. Payers assuming that their
'gift' to a politician or public official, may in return
deliver profitable preferential treatment or delivery.
Anyone who wants to fight corruption should also fight
the 'high and mighty' that abuse their power and
authority.
Extortion
In every society it is known, either publicly or privately,
which public official is open to transactions with gifts
being made reciprocally. The gift on the part of the
official may then imply considering an application with
priority, or assigning a contract, scholarship or
employment. Some will never be approached with a
'proposition', as they do not keep cash for bribes
Lubricant of society
Many think that paying bribes is required to ensure
smoother operation of society. The payer of a bribe
secures a desired transaction which if evaluated on
purely commercial grounds should have been
assigned to someone else.
An ethical dilemma
The mere fact that both the payer and the recipient of
bribes want to keep their behavior secret, shows that
such behavior is generally considered to be improper.
Many consider corruption to be an ethical problem, a
behavioral problem, and refer to it as being 'sinful', a
'wrongdoing'.
Poverty alleviation
Low pay does not automatically imply that,
consequently, the person concerned is corrupt. Timely
payment of salaries is an important pre-condition to
prevent corrupt behavior. What is of much greater
importance for the prevention of corruption at a lower
level is the clearness and transparency of the rules.

Poverty alleviation
Gifts are inherent to human relations and therefore
present in all cultures. When you receive a gift from
them, it will also be open and visible to everyone. A gift
made in public will also impose a certain obligation
upon the recipient.
Kindness among friends
It is essential, whether you just want to be
'thoughtful', or whether your gift is presented with
a certain intention. Is it a sign of thoughtfulness
or is it hiding a particular purpose, an expected
'return' in the future? Whether attention' or
'intention', the difference is of great importance
for the relationship. Is it a 'friendly turn' or is it an
'investment'?
To have friends belongs to culture. However, can
you 'buy' a friend? Is real friendship not to be
based on honesty and transparency? To give
presents reciprocally is a sign of friendship. It
should not get lost in a misuse of power for
private gains.