Unit – 1

Introduction
 Topics

1. Definition & nature of business ethics

2. Characteristics of business ethics
3. Ethical theories
4. Causes of unethical behavior
5. Work ethics
6. Code of conduct
7. Public good.
 1. Definition & Nature

 Ethics derived from “Ethos” – character or customs or

accepted behaviors
 Oxford dictionary “Ethics – the moral principle that
governs a person’s behavior or how an activity is
conducted”
 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
 Contd

 Using ethical standards a person or a group of persons or

an organization regulate their behavior to distinguish
between what is right and what is wrong as perceived
by others
 Not natural science but creation of human mind
 Not absolute and open to the influence of time, place &
situation
 Eg: Kings, leaders – food testing
 Business Ethics
 Business ethics is a form of applied ethics – application of
moral or ethical norms to business
 Refers to the code of conduct which businessmen are
expected to follow while dealing with others
 Comprises the principles & standards that guide
behavior in the conduct of business
 Business – maximize profit against the need of stake
holders
 Maintaining balance requires trade offs where ethics
plays an important role
 Scope of Business Ethics

1. Ethics in Compliance – about obeying to rules &

regulations
2. Ethics in Finance – accounting, insider trading, securities
fraud, bribery, kickbacks, overbilling, facilitation
payments, fake reimbursements, etc
Characteristics of Business Ethics

i. A discipline
ii. Ancient concept
iii. Personal Dignity
iv. Related to human aspect
v. Study of goals and means
vi. Different from social responsibility
vii. Greater than law
Causes of Unethical Behavior
What is unethical behavior?

 Any behavior prohibited by law is unethical

 Can be defined as one that is not morally honorable or
that is prohibited by law
 Unethical Behaviour
1. False communications
2. Collusion
3. Gifts & kickbacks
4. Conflict of interest
5. Unethical practices in healthcare
6. Insider trading
7. Discrimination & harassment
8. Wrong doing
Causes of Unethical Behaviour
 Pressure to meet unrealistic business objectives &
deadlines
 Desire to further one’s career
 To protect one’s livelihood
 Job pressure
 Ignorance about unethical behavior
 Corporate competitive advantage
 Lack of consistent leadership
 Kinds of Unethical Behavior in
business
 Theft
 Vendor relationships
 Bending the rules
 Environmental issues
 Wages & working conditions
Work Ethics
 Introduction

 Work ethics – based on hard work and diligence

 Also a belief in the moral benefit of work & its
ability to enhance character
 Ethical workers – grow faster
Characteristics of Work Ethics

 Reliability
 Dedication
 Productivity
 Cooperation
 Character
Code of Conduct
 Introduction
 contains standards of business conduct that
guide actions
 Includes:
1. Company values
2. Avoidance of conflict of interest
3. Accurate & timely disclosure of reports
4. Compliance of laws, rules & regulations
5. Maintaining confidentiality
 Continued

6. Maintaining fair deals

7. Standards of business conduct for company’s
customer, suppliers, communities
8. Prohibition of senior management from taking
corporate opportunities for their family
Example
Public Good
 Introduction

 The benefit or well being of public

 Every organization deems to maintain its public
good
 Public good is directly associated with the
organization’s image
 Importance

 Attracting & retaining talent

 Investor loyalty
 Customer satisfaction
 Regulators
Ethical Theories
 Introduction

 Based on ethical principles

 Each emphasize different aspects of ethical dilemma and
lead to correct resolution
 People choose ethical theory based on experiences
 Deontology Theory

 States that “People should adhere to their obligations &

duties when analyzing ethical dilemma”
 Means that a person will follow his/her obligations to
another individual or society because upholding one’s
duty is considered ethically correct
 Deontologist will keep his promises to his friend as well as
follow the law
 Contd

 Will produce consistent decisions as they are based on duties

 Provides the basis for special duties & obligations to specific
people
 Eg: family – brother protecting sister
 Also praises those who exceed duties and obligations –
“supererogation”
 Eg: Train hijack – one person scarifies for all
 Contd

Weaknesses:
 No rationale or logic in deciding individual’s
duties
 A person’s duty is conflicting in situations – meeting
vs speeding
 Does not work in conflicting obligations
 Utilitarianism

 Based on the ability to predict the consequences of an

action
 Choice that yields the greatest benefit to most people is
ethically correct
 Utilitarian can compare solutions and choose & determine
which is more beneficial
 Provides a logical and rationale argument for each decision
 Contd

 Two types:
1. Act utilitarianism
2. Rule utilitarianism
 Act – person performs the act that benefits most
people regardless of personal feelings & society
 Rule – considers law and fairness
 Rule utilitarian – benefits most people in fair & by
law
 Contd

 Values justice & beneficence at the same time

 Both rule & act are flawed
 Future cannot be predicted absolutely
 Uncertainty can lead to unexpected results & in turn lead
to unethical outcomes – eg fire to warm
 Comparing outcomes of money & intangible gains are
impossible
 Contd

 Does not allow supererogation

 An individuals rights maybe infringed for the
benefit of a larger people – act utilitarianism
 Possibility of conflicting rules in rule utilitarianism
 Rights Theory

 Rights set forth by society are protected & given highest

priority
 Considered ethically correct because large population
endorses them
 Eg: car borrowing scenario
 Major complication – one must decipher the characteristics
of rights in society
 Society decides what is rights to the citizen
 Contd

 Therefore works in conjunction with another ethical theory

that explains the goals of the society
 Eg: Religious freedom in America vs Nazi
 Casuist Theory

 Compares current ethical dilemmas with similar

ethical situations
 Allows to determine the severity of the situation
& create best possible solutions
 Drawback – no set example for situations
 Assumes similar results for every situations
 Virtue Theory

 Judges a person by his character rather than by

action that deviates from normal
 Takes into account person’s morals, reputation,
motivation
 Eg: Plagiarism
 Weakness – does not consider person’s change
in moral character
 Other Ethical Theories

1. Stockholder theory
2. Stakeholder theory
3. Social contract theory
End of Unit - I