INTRODUCTION OF BUINESS ETHICS

Business ethics (also known as Corporate Ethics) is a form of applied

ethics or professional ethics, that examines ethical principles and moral or ethical problems that
can arise in a business environment. It applies to all aspects of business conduct and is relevant
to the conduct of individuals and entire organizations. These ethics originate from individuals,
organizational statements or the legal system. These norms, values, ethical, and unethical
practices are the principles that guide a business.
Business ethics refers to contemporary organizational standards, principles, sets of values and
norms that govern the actions and behavior of an individual in the business organization.
Business ethics have two dimensions, normative business ethics or descriptive business ethics.
As a corporate practice and a career specialization, the field is primarily normative. Academics
attempting to understand business behavior employ descriptive methods. The range and quantity
of business ethical issues reflects the interaction of profit-maximizing behavior with non-
economic concerns.
Interest in business ethics accelerated dramatically during the 1980s and 1990s, both within
major corporations and within academia. For example, most major corporations today promote
their commitment to non-economic values under headings such as ethics codes and social
responsibility charters.
Adam Smith said in 1776, "People of the same trade seldom meet together, even for merriment
and diversion, but the conversation ends in a conspiracy against the public, or in some
contrivance to raise prices." Governments use laws and regulations to point business behavior in
what they perceive to be beneficial directions. Ethics implicitly regulates areas and details of
behavior that lie beyond governmental control. The emergence of large corporations with limited
relationships and sensitivity to the communities in which they operate accelerated the
development of formal ethics regimes.
Maintaining an ethical status is the responsibility of the manager of the business. According to a
1990 article in the Journal of Business Ethics "Managing ethical behavior is one of the most
pervasive and complex problems facing business organizations today."
MEANING OF BUINESS ETHICS
Business ethics studies appropriate business policies and practices regarding potentially
controversial subjects, including corporate governance, insider trading, bribery, discrimination,
corporate social responsibility, fiduciary responsibilities, and much more. The law often guides
business ethics, but at other times business ethics provide a basic guideline that businesses can
follow to gain public approval.

Business ethics ensure that a certain basic level of trust exists between consumers and various
forms of market participants with businesses. For example, a portfolio manager must give the
same consideration to the portfolios of family members and small individual investors as they do
to wealthier clients. These kinds of practices ensure the public receives fair treatment.

The concept of business ethics began in the 1960s as corporations became more aware of a rising
consumer-based society that showed concerns regarding the environment, social causes, and
corporate responsibility. The increased focus on "social issues" was a hallmark of the decade.

Principles of Business Ethics

It's essential to understand the underlying principles that drive desired ethical behavior and how a
lack of these moral principles contributes to the downfall of many otherwise intelligent, talented
people and the businesses they represent.

There are generally 12 business ethics principles:

● Leadership: The conscious effort to adopt, integrate, and emulate the other 11 principles
to guide decisions and behavior in all aspects of professional and personal life.
● Accountability: and others responsible for their actions. Commitment to following
ethical practices and ensuring others follow ethics guidelines.
● Integrity: Incorporates other principles—honesty, trustworthiness, and reliability.
Someone with integrity consistently does the right thing and strives to hold themselves to
a higher standard.
● Respect for others: To foster ethical behavior and environments in the workplace,
respecting others is a critical component. Everyone deserves dignity, privacy, equality,
opportunity, compassion, and empathy.
● Honesty: Truth in all matters is key to fostering an ethical climate. Partial truths,
omissions, and under or overstating don't help a business improve its performance. Bad
news should be communicated and received in the same manner as good news so that
solutions can be developed.
● Respect for laws: Ethical leadership should include enforcing all local, state, and federal
laws. If there is a legal grey area, leaders should err on the side of legality rather than
exploiting a gap.
● Responsibility: Promote ownership within an organization, allow employees to be
responsible for their work, and be accountable for yours.
● Transparency: Stakeholders are people with an interest in a business, such as
shareholders, employees, the community a firm operates in, and the family members of
 the employees. Without divulging trade secrets, companies should ensure information
about their financials, price changes, hiring and firing practices, wages and salaries, and
promotions are available to those interested in the business's success.
● Compassion: Employees, the community surrounding a business, business partners, and
customers should all be treated with concern for their well-being.
● Fairness: Everyone should have the same opportunities and be treated the same. If a
practice or behavior would make you feel uncomfortable or place personal or corporate
benefit in front of equality, common courtesy, and respect, it is likely not fair.
● Loyalty: Leadership should demonstrate confidentially and commitment to their
employees and the company. Inspiring loyalty in employees and management ensures
that they are committed to best practices.
● Environmental concern: In a world where resources are limited, ecosystems have been
damaged by past practices, and the climate is changing, it is of utmost importance to be
aware of and concerned about the environmental impacts a business has. All employees
should be encouraged to discover and report solutions for practices that can add to
damages already done.
DEFINATION OF BUSINESS ETHICS

“Business ethics studies how to deal with corporate governance, whistle blowing , corporate
culture and corporate social responsibility. It emphasizes standard principals prescribed by
governing bodies non-complains with business ethics leads to unnecessary legal action.”

According to Crane, "Business ethics is the study of business situations, activities, and
decisions where issues of right and wrong are addressed." 
CHAPTER 2 LITERATURE OF REVIEW
OBJECTIVE OF STUDY
SCOPE OF STUDY
RESEARCH METHODLOGY
FEATURES OF BUSINESS ETHICS

(i) A Discipline:

Business ethics are the guiding principles of business function. It is the knowledge through
which human behaviour is learnt in a business situation.

(ii) Ancient Concept:
Business ethics is an ancient concept. It has it origin with the development of human civilization.

(iii) Personal Dignity:
The principles of ethics develop the personal dignity. Many of the problems of ethics arise due to
not giving dignity to individual. All the business decisions should be aimed by giving dignity to
the customers, employees, distributors, shareholders and creditors, etc. otherwise they develop in
immorality in the business conducts.

(iv) Related to Human Aspect:

Business ethics studies those activities, decisions and behavior which are concerned with human
aspect. It is the function of the business ethics to notify those decisions to customers, owners of
business, government, society, competitors and others on good or bad, proper or improper
conduct of business.
Importance of Business Ethics:

1. Corresponds to Basic Human Needs:

The basic need of every human being is that they want to be a part of the organisation which they
can respect and be proud of, because they perceive it to be ethical. Everybody likes to be
associated with an organisation which the society respects as a honest and socially responsible
organisation. The HR managers have to fulfill this basic need of the employees as well as their
own basic need that they want to direct an ethical organisation. The basic needs of the employees
as well as the managers compel the organizations to be ethically oriented.

2. Credibility in the Public:

Ethical values of an organisation 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.
The public issues of such companies are bound to be a success. Because of this reason only the
cola companies are spending huge sums of money on the advertisements now-a-days to convince
the public that their products are safe and free from pesticides of any kind.

3. Credibility with the Employees:

When employees are convinced of the ethical values of the organisation they are working for,
they hold the organisation in high esteem. It creates common goals, values and language. The
HR manager will have credibility with the employees just because the organisation has
creditability in the eyes of the public. Perceived social uprightness and moral values can win the
employees more than any other incentive plans.

4. 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.

5. Profitability:
Being ethical does not mean not making any profits. Every organisation 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.

6. 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. A HR manager, who is ethically sound, can reach out to agitated
employees, more effecetively than the police
7. Study of Goals and Means::
Business ethics is the study of goals and means for the rational selection of sacred objects and
their fulfillment. It accepts the principles of “Pure goals inspire for pure means” and “Means
justifies the end”. It is essential that goals and means should be based on morals.

8. Different from Social Responsibility:

Social responsibility mainly relates to the policies and functions of an enterprise, whereas
business ethics to the conduct and behaviour of businessmen. But it is a fact that social
responsibility of business and its policies is influenced by the business ethics.

9. Greater than Law:

Although the law approves various social decisions, but the law is not greater than ethics. Law is
usually related to the minimum control of social customs whereas ethics gives importance to
individual and social welfare actions.
SOURCE OF BUSINESS ETHICS
In every society there are three sources of business ethics-Religion, Culture and Law. The HR
manager in every organisation, thus, has to be well versed with the unique system of values
developed by these three sources.

These sources are discussed as follows:

1. Religion:
Religion is the oldest source of Religion is the oldest source of ethical inspiration. There are
more than ethical inspirations. 1, 00,000 religions which exist across the whole world, but all of
them are in agreement on the fundamental principles. Every religion gives an expression of what
is wrong and right in business and other walks of life. The Principle of reciprocity towards one’s
fellow beings is found in all the religions. Great religions preach the necessity for an orderly
social system and emphasize upon social responsibility with an objective to contribute to the
general welfare. With these fundamentals, every religion creates its own code of conduct.

2. Culture:
Culture is the set of important understandings that members of a community share in common. It
consists of a basic set of values, ideas, perceptions, preferences, concept of morality, code of
conduct etc. which creates distinctiveness among human groups. When we talk about culture we
typically refer to the pattern of development reflected in a society’s pattern of knowledge,
ideology, values, laws, social norms and day to day rituals. Depending upon the pattern and stage
of development, culture differs from society to society. Moreover culture is passed from
generation to generation. Culture facilitates the generation of commitment to something larger
than one’s individual self interest.

Culture encourages the members of the organisation to give priority to organizational goals over
and above their personal interests. Culture also serves as a sense making and control mechanism
that guides and shapes the attitudes and behaviour of people. Managers have to run an industrial
enterprise on the cutting edge of cultural experience. The tension that their actions create makes
the business ethically more complex.

3. Law:
The legal system of any country, guide the human behaviour in the society. Whatever, ethics the
law defines are binding on the society. The society expects the business to abide by the law.
Although it is expected that every business should be law abiding, seldom do the businesses
adhere to the rules and regulations. Law breaking in business is common eg. Tax evasion,
hoarding, adulteration, poor quality & high priced products, environment pollution etc.
ETHICAL ISSUE IN HUMAN RESOURCE ( DIGRAM)
FOLLOWING ARE THE 7 ETHICAL ISSUE IN HR.

7 Ethical Issues Faced by Human Resource

1. Employment Issues:
HR professionals are likely to face maximum ethical dilemmas in the areas of hiring of
employees.

Major challenges in this area are:

a. Pressure to hire a friend or relative of a highly placed executive.

b. Faked credentials submitted by a job applicant.

c. Discovery that an employee who has been with the organisation for some time, is skilled and
has established a successful record, had lied about his educational credentials.

2. Cash and Incentive Plans:

Cash and incentive plans include issues like basic salaries, annual increments or incentives,
executive perquisites and long term incentive plan.

Basic Salaries:
HR managers have to justify a higher level of basic salaries or higher level of percentage
increase than the competitors to retain some employees. In some situations, where the increase is
larger than normal they have to elevate some positions to higher grades. Annual
increment/incentive Plans. This situation is particularly true in case of top management
executives. The fear of losing some outstanding executives, the HR managers is forced to give
higher incentives to them than what the individuals actually deserve.

Executive Perquisites:
In the name of executive perquisites, sometimes excesses are often committed, the ethical burden
of which falls on the HR managers. Sometimes the costs of these perquisites are out of
proportion to the value added. For example, the CEO of a loss making company buys a Mercedes
for his personal use or wants a swimming pool built at his residence.

Long term incentive Plans. Long term incentive plans are to be drawn by the HR managers in
consultation with the CEO and an external consultant. Ethical issues arise when the HR manager
is put to pressure to favour top executive interests over the interests of the other employees and
the investors.

3. Employees Discriminations:
A framework of laws and regulations has been evolved to avoid the practices of treatment of
employees on the basis of their caste, sex, religion, disability, age etc. No organisation can
openly practice any discriminatory policies, with regard to selection, training, development,
appraisal etc. A demanding ethical challenge arises when there is pressure on the HR manager to
protect the firm or an individual at the expense of someone belonging to the group which is
being discriminated against.

4. Performance Appraisal:
Ethics should be the basis of performance evaluation. Highly ethical performance appraisal
demands that there should be an honest assessment of the performance and steps should be taken
to improve the effectiveness of employees. However, HR managers, sometimes, face the
dilemma of assigning higher rates to employees who are not deserving them; based on some
unrelated factors eg. closeness to the top management. Some employees are, however, given low
rates, despite their excellent performance on the basis of factor like caste, religion or not being
loyal to the appraiser.

5. Privacy:
The private life of an employee which is not affecting his professional life should be free from
intrusive and unwarranted actions.

HR managers face three dilemmas in this aspect:

(i) The first dilemma relates to information technology. A firm’s need for information
particularly about employees while on job may be at odds with the employee’s privacy. Close
circuit cameras, tapping the phones, reading the computer files of employees etc. breach the
privacy of employees.

(ii) The second ethical dilemma relates to the AIDS testing. AIDS has become a public health
problem. HR managers are faced with two issues: Whether all the new employees should be
subject to AIDS test and what treatment should be melted out to an employee who is affected
with the disease. It is however generally understood that since AIDS cannot be contracted by
casual and normal workplace contract, employees with this illness should not be discriminated
against and they should be allowed to perform jobs for which they are qualified.

(iii) The third ethical dilemma relates to Whistle Blowing. Whistle blowing refers to a public
disclosure by former or current employees of any illegal, immoral or illegitimate practices
involving their employers. Generally, employees are not expected to speak against their
employers, because their first loyalty in towards the organisation for which they work. However,
if the situation is such that some act of the organisation can cause considerable harm to the
society, it may become obligatory to blow the Whistle. The HR manager is in the dilemma how
to solve this issue between the opponents and defenders of whistle blowing.

6. Safety and Health:

Industrial work is often hazardous to the safety and health of the employees. Legislations have
been created making it mandatory on the organisations and managers to compensate the victims
of occupational hazards. Ethical dilemmas of HR managers arise when the justice is denied to the
victims by the organisation.

7. Restructuring and layoffs:

Restructuring of the organisations often result in layoffs and retrenchments. This is not unethical,
if it is conducted in an atmosphere of fairness and equity and with the interests of the affected
employees in mind. If the restructuring company requires closing of the plant, the process by
which the plant is chosen, how the news is to be communicated and the time frame for
completing the layoffs is ethically important.
THE ETHICS OF HUMAN RESOURCE AND INDUSTRIAL RELATIONS:

"In the business and economic spheres, many of the most pressing ethical issues involve the
employment relationship, such as the rights of employees versus shareholders, employee privacy
and monitoring, whistleblowing, pay equity, discrimination, employee safety, anti-union
campaigns, and minimum labor standards. Since the field of human resources and industrial
relations is ultimately about people and quality of life, there is a pressing need to develop
applications of business ethics for the employment relationship in the context of research,
practice, and teaching. “From the Preface In recent years, by following media coverage of many
scandals of accounting and accountability, the public has gained a greater understanding of what
can happen when businesses do not adhere to ethical practices. It is now time for the human
resources and industrial relations communities to explore the application of ethics to the
employment relationship and to discover the importance of treating employees, not just numbers,
properly.