Business Ethics

Dr. Shinu Vig

What is Ethics?

• The word ‘ethics’ is derived from the Greek word ethikos meaning
custom or character. The Concise Oxford
• English Dictionary defines ethics as the treating of moral questions.
• Ethics is a branch of philosophy.
• Business ethics is applied ethics that studies moral standards and
shows how these apply to the systems and organizations involved in
businesses.
PRINCIPLES OF PERSONAL ETHICS
• Personal values are the conception of what an individual or a group
regards as desirable. Personal ethics refer to the application of these
values in everything one does. Personal ethics might also be called
morality, since they reflect general expectations of any person in any
society, acting in any capacity.

• The principles of personal ethics are:

1. Concern and respect for the autonomy of others.
2. Honesty and the willingness to comply with the law of the land.
3. Fairness and the ability not to take undue advantage of others.
4. Benevolence and preventing harm to any creature.
PRINCIPLES OF PROFESSIONAL ETHICS

There are certain basic principles people are expected to follow in their
professional career. These are the following:
• impartiality: objectivity;
• openness: full disclosure;
• confidentiality: trust;
• due diligence/duty of care;
• fidelity to professional responsibilities; and
• avoiding potential or apparent conflict of interest.
BUSINESS ETHICS

• ‘Business ethics is the art and discipline of applying ethical principles

to examine and solve complex moral dilemmas’.
• It is the application of general ethical ideas to business behaviour.
• Business ethics is based on the principle of integrity and fairness and
concentrates on the benefits to the stakeholders, both internal and
external.
WHAT IS NOT BUSINESS ETHICS?

• ETHICS IS DIFFERENT FROM RELIGION

• ETHICS IS NOT SYNONYMOUS WITH LAW
• ETHICAL STANDARDS ARE DIFFERENT FROM CULTURAL TRAITS
• ETHICS IS DIFFERENT FROM FEELINGS
• ETHICS IS NOT JUST A COLLECTION OF VALUES
Theories
• Justice Theory
Justice approach is also known as fairness approach. Greek
philosophers have contributed to the idea that all equals should be
treated equally. Justice does not depend on consequences; it depends
on the principle of equality.

• Virtue theory
Virtue theory is more concerned with answering the question of how to
live a good life or how to be a good person. Virtue theory aims to offer
an account of the characteristics one must have to be considered
virtuous.
Theory of Egoism

Egoism is derived from the Latin word ‘ego’ meaning ‘I’. The theory of
egoism holds that the good is based on the pursuit of self-interest. This
model takes into account harms, benefits and rights for a person’s own
welfare. Under this model an action is morally correct if it increases
benefits for the individual in a way that does not intentionally hurt
others, and if these benefits are believed to counterbalance any
unintentional harms that ensue.
Theory of Relativism

• Theory of Relativism promotes the idea that some elements or aspects of

experience or culture are relative to, i.e., dependent on, other elements or
aspects. It holds that there are no absolute truths in ethics and that what is
morally right or wrong varies from person to person or from society to society.

• Utilitarian Approach
• Utilitarianism is an ethics of welfare. Business guided by utilitarian approach
focuses on behaviours and their results, not on the means of such actions.
• It can be described by the phrase, “the greatest good for the greatest number.”
• Utilitarianism prescribes that the moral worth of an action is solely determined by
its contribution to overall utility, that is, its contribution to the happiness and
satisfaction of the greatest member.
EHTICAL DILEMMA
• An ethical dilemma also referred as moral dilemma or ethical paradox.
• It is a situation in which choice has to be made between two equally
undesirable alternatives.
• Dilemma is a dilemma because there is a conflict between the choices.
Usually one action though morally right violates another ethical
standard.
• Dilemma may arise out of various sources like, Failure of personal
character, conflict of personal values and organization goals etc.
• A business dilemma exists when an organizational decision maker faces
a choice between two or more options that will have various impacts
on (i) the organization’s profitability and competitiveness; and (ii) its
stakeholders.
Structure of Ethical Dilemma
Ethical Dilemma in Business
Sources of Ethical Dilemma
• FAILURE OF PERSONAL CHARACTER
• CONFLICT OF PERSONAL VALUES AND ORGANIZATIONAL GOALS
• ORGANIZATIONAL GOALS VERSUS SOCIAL VALUES
• PERSONAL BELIEFS VERSUS ORGANIZATIONAL PRACTICES
• PRODUCTION AND SALE OF HAZARDOUS BUT POPULAR PRODUCTS
O TH ER ETH IC A L C HA LL EN GE S

There are other unethical practices that are too many to enumerate.
Some of the sample practices are:
• price fixing and profiteering due to monopoly, and often artificially
created scarcity;
• shifting unfair shares to the producer stakeholders and employees;
• discriminatory wage structure;
• using up scarce and irreplenishable industrial resources and raw
materials;
• shifting or locating business at the cost of society; and
• overworking women and children.
HOW TO RESOLVE AN ETHICAL PROBLEM?

• Is it a policy, a decision or an action?

• Is it ethical or unethical?

To resolve these questions that create a dilemma, ask three questions:

• Utility: Does its benefits exceed cost (shareholder)?
• Rights: Does it respect human rights (society)?
• Justice: Does it distribute benefits and burdens evenly (employees)?
Resolving a dilemma
• STEP 1: ANALYSE THE CONSEQUENCES
1. Who are the beneficiaries of your action?
2. Who are likely to be harmed by your action?
3. What is the nature of the ‘benefits’ and ‘harms’?
4. How long or how fleetingly are these benefits and harms likely to exist?

• STEP 2: ANALYSE THE ACTIONS

• STEP 3: MAKE A DECISION

RESOLVING ETHICAL DILEMMAS IN BUSINESS:

• Establishing corporate code of conducts for employees

• Employ highly skilled people in the top level of the corporation who
have standard ethical behavior.
• Rewarding employee who have good ethical conducts
• Follow personal code of ethics for employees.
• Effective and open communication with every employee.
• Avoid conflict creating situations
• Create an ethical working environment
CODE OF CONDUCT AND ETHICS FOR MANAGERS

• In the exercise of their duties and responsibilities, managers must

observe the following ethical values:
• Integrity
• Impartiality
• Responsiveness to the public interest
• Accountability
• Honesty
• Transparency