ETHICS 1 Avoid Profiteering − Dishonest business actions such as hoarding,
black-marketing, selling banned or harmful goods to earn exorbitant
ETHICS AND BUSINESS
Ethics is a topic of social science that is connected with
moral values and social values. 'Business Ethics' can be called as
a study of proper business policies and performs regarding possibly
controversial issues, such as corporate governance, insider trading,
bribery, discrimination, corporate social responsibility, and
fiduciary responsibilities.
Businesses must stand by some simple principles. It should
offer quality goods and services at sensible prices to consumers. It
must also evade adulteration, misleading advertisements, and other
unfair malpractices.
A business must also implement other duties such as
allocating fair wages, providing good working situations, not
abusing the workers, encouraging competition, etc.
BUSINESS ETHICS – DEFINITION
There are numerous meanings of business ethics, but the ones given
by Andrew Crane and Raymond C. Baumhart are considered the
most appropriate ones.
 According to Crane, "Business ethics is the study of business
situations, activities, and decisions where issues of right
and wrong are addressed."
 Baumhart defines, "The ethics of business is the ethics of
responsibility. The business man must promise that he will
not harm knowingly."
FEATURES OF BUSINESS ETHICS
There are eight major types of business ethics
Code of Conduct − Business ethics is really a form of codes of
conduct. It lets us know what to do and what not to do. Businesses
must follow this code of conduct.
Based on Moral and Social Values − Business ethics is a topic
that is based on moral and social values. It proposals some moral
and social principles (rules) for conducting a business.
Protection to Social Groups − Business ethics defend numerous
social groups counting consumers, employees, small
businesspersons, government, shareholders, creditors, etc.
Offers a Basic Framework − Business ethics is the basic
framework for doing business correctly. It constructs the social,
cultural, legal, economic, and other limits in which a business must
operate.
Voluntary − Business ethics is intended to be voluntary. It should
be self-practiced and must not be enforced by law.
Requires Education & Guidance − Businessmen should get good
education and leadership about business ethics. Trade Relations and
Chambers of Commerce should be active enough in this matter.
Relative Term − Business ethics is a qualified term. It alters from
one business to another and from one country to another.
New Concept − Business ethics is a comparatively newer concept.
Established countries have more experience to business ethics,
while poor and developing countries are moderately backward in
applying the principles of business ethics.
PRINCIPLES OF BUSINESS ETHICS
The principles of business ethics are connected to social groups that
include of consumers, employees, investors, and the local
community. The important rules or principles of business ethics are
as follows −
Avoid Exploitation of Consumers − Do not fraud and abuse
consumer with measures such as artificial price rise and adulteration.
profits must be avoided.
Encourage Healthy Competition − A well reasonable atmosphere
that offers certain profits to the consumers must be encouraged.
Accuracy − Correctness in weighing, packaging and quality of
providing goods to the consumers has to be followed.
Pay Taxes Regularly − Taxes and other duties to the government
must be fairly and frequently paid.
Get the Accounts Audited − Good business records, accounts must
be achieved. All official persons and authorities should have
admission to these details.
Fair Treatment to Employees − Fair wages or salaries, facilities
and incentives must be delivered to the employees.
Keep the Investors Informed − The shareholders and investors
must know about the financial and other important choices of the
company.
Avoid Injustice and Discrimination − Evade all types of
unfairness and prejudice to employees. Judgment based on gender,
race, religion, language, nationality, etc. should be avoided.
No Bribe and Corruption − Do not give expensive gifts,
commissions and payoffs to people having influence.
Discourage Secret Agreement − Making secret agreements with
other business people to influence production, distribution,
pricing etc. are unethical.
Service before Profit − Accept the principle of "service first and
profit next."
Practice Fair Business − Businesses should be fair, humane,
efficient and dynamic to offer certain benefits to consumers.
Avoid Monopoly − No private monopolies and concentration of
economic power should be practiced.
Fulfill Customers’ Expectations − Adjust your business activities
as per the demands, needs and expectations of the customers.
Respect Consumers Rights − Honor the basic rights of the
consumers.
Accept Social Responsibilities − Honor responsibilities towards
the society.
Satisfy Consumers’ Wants − Satisfy the wants of the consumers
as the main objective of the business is to satisfy the consumer’s
wants. All business operations must have this aim.
Service Motive − Service and consumer's satisfaction should get
more attention than profit-maximization.
Optimum Utilization of Resources − Ensure optimum utilization
of resources to remove poverty and to increase the standard of
living of people.
Intentions of Business − Use permitted legal and sacred means to
do business. Avoid Illegal, unscrupulous and evil means.
NATURE OF BUSINESS
 Business is as old as a human Civilization.
 Business is an activity that is part and parcel of human society.
 Business also is complex enterprises that involve major
activities like purchasing, manufacturing, marketing,
advertising, selling and accounting.
 Business deal with suppliers, customers, workers, employees
and even competitors.
  Business is a good human activity however, it is the selfish
motive and personal interest of scrupulous businessmen that
make business bad and, in some instances, unproductive.
THE IMPORTANCE OF ETHICS IN BUSINESS
a. The study of Business Ethics paves the way for a common
ground in our understanding of the fundamental idea of what is
good and what is bad in our human conduct.
b. Ethics as a science does only evaluate the morality of human
conduct but also provides us with a common understanding of
the universal, objective, and irreversible moral principles that
should govern our human behaviour and guide our moral
decisions.
c. Business Ethics opens a novel way of resolving moral problems
and ethical dilemmas affecting business transactions and the
interactions of people in the corporate world.
d. The study of Business Ethics will also enhance the human and
interpersonal skills of managers so they can be more effective
in managing the human side of organization.
The Businessman’s Myth’s About Business Ethics
 Businessmen are not immoral, and it would be disastrous to
judge and conclude that business people commit unethical act
in doing business.
 Business, certainly is a good and productive human activity.
However, it is the businessman’s wrong perception about the
role that ethics plays in the world of business that affects the
moral judgment and decision making.
Here are some myths that businessmen have about Business
Ethics;
1. Ethics is a personal affair and not a public debatable matter
2. Ethics and business do not mix
3. Good business means good ethics
4. Business is a war
THE RELATIONSHIP BETWEEN ETHICS AND BUSINESS
Ethics play an important role in business. Without morality,
business will be a chaotic human activity. Ethics is not a study of
positive laws intended to govern and regulate the actions of people
doing business. The concern of ethics as a philosophical science is
to discover that there are unwritten laws, written in the hearts of
man that should govern our human conduct where positive law may
be absent, and in some cases are not clear.
The following arguments justify the significant role that ethics
plays in the world of business;
1. Business is an integral part of human society. Therefore, the
actions of individuals and institutions in business must be
subjected to moral rules and moral evaluation.
2. In business, as in any other human endeavor, “what is legal
may not necessarily be moral.” People tend to be confused
legality and morality. An action may be legal but not
necessarily moral.
3. Law is insufficient.
MORAL REASONING IN BUSINESS
The essence of studying Business Ethics is to provide the
manager as a decision maker with a framework for the resolution of
moral issues and problems affecting business activates and the
organization itself. Moral reasoning is a process in which ethical
issues and problems are benchmarked against a moral standard so
that a moral judgment is made possible.
Characteristics of a Good Moral Standard;
1. A good moral standard is one that looks as the issue as
something that is very serious.
2. A good standard must be grounded on good moral argument. A
good argument is an argument that always tells the truth. A
solid moral argument leaves the room for loopholes and
counter arguments.
3. A good moral standard should be objective not subjective. It
should be universally accepted and should apply to all.
4. A good standard, when violated, brings about feelings of guilt,
shame and remorse of conscience.
REQUIREMENTS FOR A GOOD MORAL JUDGMENT
1. A good moral judgment must be logical.
2. A good moral judgment must be based on facts and solid
evidence.
3. A good moral judgment must be based on sound and defensible
moral principle. A weak ethical principle is open to a lot of
criticisms.
THE MORALITY OF PROFIT MOTIVE
 People go into business for a number of reasons:
 Some go to business for personal satisfaction.
 In business to earn a livelihood.
 Others are in business because they want to serve the society
through the goods and services they offer to the customers.
 To make a profit. (Most common reason)
Businessmen consider profit as a form of anticipated reward or
a compensation for the efforts they spend, skills they apply and
returns for the capital they invested in putting up and organizing the
business.
The issue of profit motive is a subject matter that needs to be
carefully considered in the study of Business Ethics. Is profit
motive in business good or bad? Is it moral or immoral?
THE GOOD AND THE BAD SIDES OF PROFIT MOTIVE
A. The Good Side of Profit Motive;
 Profit motive motivates people to do something meaningful.
 Profit motive promotes ingenuity and cleverness in running
business.
 Profit motive makes people productive.
 Profit motive generates potential capital for the business.
B. The Bad Side of Profit Motive;
 Motive promotes rivalry among competitors.
 Profit motive makes people focus only on making money,
that is, to sell as many goods as possible without considering
whether or not these products satisfy the needs and wants of
consumers and end users.
 Profit motive turns the businessman from being a reflective
and a questioning person because he focuses his attention
only on the practical activity of making money.
 Profit motive promotes self-interest rather than the common
good.
C. Ethical Considerations of Profit Motive Business
1. Earning profit is a good and valid activity in business.
2. Making excessive profits is totally wrong. It leads to greed,
avarice, and manipulation of the customers.
3. Profit is not the “be-all and the end-all” of doing business.
Certainly, there are factors to be considered in business such
as, customer’s satisfaction, respect for the environment,
enhancement of the quality of life and the preservation of the
society.
4. The teachings of the Catholic Church do not totally condemn
profit as part of business activity. Pope Pius XI, does not
prohibit the producer from himself provided “one respects
the law of God, does not prejudice the right of others, and
work according to faith and right reason.”
THE CONCEPT OF MORAL RESPONSIBILITY
1. Moral Responsibility refers to holding to people morally
accountable for some past action or actions. This simply
means assigning to people blame or praise for particular
actions that they have performed.
2. Moral Responsibility also means care, welfare, or treatment
of others as derived from the specific social role that one
plays in the society.
3. Moral Responsibility likewise refers to one’s capacity for
making moral or rational decisions of his own.