Business Ethics

Unit IV
Content
1. Business Ethics its meaning and definition
2. Relevance of Ethics in Business organizations
3. Theories of Ethics (Teleological, Deontological)
4. Code of Ethics
Business Ethics : Meaning & Definition
• Business Ethics is a form of Applied Ethics. It originates from
individuals, organizational statements or from the legal
system. It can be said to be the attitude, culture and manner
of doing business by the business community. It is a
framework of contemporary organizational standards,
principles, sets of values and norms that govern the actions
and behavior of an individual in the business organization.
• According to Andrew Crane, “Business ethics is the study of
business situations, activities, and decisions where issues of
right and wrong are addressed.”
Contd.
Business Ethics is a branch of ethics which prescribes
standards of how the business is to be carried out. It lays
down guidelines for the company’s response and
accountability to its various stakeholders. It gives a deeper
understanding of what is good and bad, what is moral and
immoral or what actions are right or wrong in the operations
of a business with respect to its customers, employees,
investors, society and all other stakeholders – in order to
protect them from harm and damages to their interests.
Features of Business Ethics
1. Code of conduct: Business ethics is the code of conduct which
businessmen should follow while conducting their normal business
activities.
2. Based on moral and social values: Business ethics is based on well-
accepted moral/principal values. It suggests moral of conduct for
businessmen. They include self control, service to society and fair
treatment to social groups and not to harm/ exploit others.
3. Provides basic framework: Business ethics provides the framework
within which business is to be conducted. It suggests legal, social,
moral, economic and cultural limits within which business has to be
operated. It suggests what is good and what is bad in business.
Features…. Contd.
4. Needs willing acceptance for enforcement: Business ethics cannot be
enforced by law or by force. It must be accepted as self-discipline by
businessmen. It should come from within the businessmen.
5. Education and guidance required for introduction: Businessman should
be given proper education, guidance and training in order to motivate
them to follow ethical business practices.
6. Not against profit making: Business Ethics is not against fair profit
making. However, it is against profiteering by cheating and exploiting
consumers, employees or investors. It supports expansion of business
activities but by fair means and not through illegal activities or corrupt
practices
IMPORTANCE OF ETHICS IN BUSINESS
1. Decision Making: It is our means of deciding a course of action.
Without it our actions would be random and aimless.
2. Standardizing Behavior of Employees: Business Ethics is about
standard of behavior in workplace, with partners, colleagues,
customers etc. Many companies have standard code of ethics which
everyone in the organization has to follow.
3. Greater Customer Satisfaction: Customer will be satisfied only if the
business follows all the business ethics. Business ethics is needed to
make business activities fair to consumers. It checks business
malpractices and offers protection to consumers
Importance…..Contd.
4. More Responsible Behavior: Business ethics is needed in order to make
businessmen conscious as regards their duties and responsibilities towards
consumer and other social group.
5. Improved Confidence of Stakeholders: Business ethics is needed in
order to improve the confidence of consumers as regards quality, price,
reliability etc. of goods and services Introduction to Business Ethics
supplied. It also helps in retaining confidence of stakeholders like financial
institutions, shareholders, buyers, suppliers etc.
6. Protecting Rights: Business ethics is needed for the protection of rights
of consumers at the business level such as right to health & safety, right to
be informed, right to choose, right to be heard etc.
Importance…..Contd.

7. Enhanced Corporate Image: Business ethics is needed in order to create

good image of businessmen in the society and also for avoiding public
criticism. Ethical business gets public support while unethical business is
criticized by all. Public will be ready to invest or lend money only if they are
convinced that the organization is following fair business practices.
8. Cordial Relationship and Support: Business ethics is needed in order to
develop cordial and friendly relations between business and society.
9. Long Term Survival and Growth: Organizations doing business ethically
will continue to survive & prosper for the long time. Hence, it is important
for the growth & development of the business in the long term.
10. Uniform Behavior Across Organization: Ethics in business are
important most of all because we pass them on to others. We have the
ability to show others the correct way to act and behave by remaining
ethical in the way we live.
Theory of Ethics
Ethical Theories are attempts to provide a clear,
unified account of what our ethical obligations are.
They are attempts, in other words, to tell a single
“story” about what we are obligated to do, without
referring directly to specific examples. It is common
in discussions of business ethics to appeal to one or
more ethical theories in an attempt to clarify what it
is right or wrong to do in particular situations.
Some Philosophical Ethical Theories
•Utilitarianism(or Teleological)-Says that the right thing to do in any
situation is whatever will “do the most good” (that is, produce the best
outcomes) taking into consideration the interests of all concerned parties.
(maximizing the good for max people)
•Kantianism (or Deontology)-Says that as a matter of respect—there are
certain absolute (or nearly absolute) rules that must be followed (for
example, the rule that we must respect people’s privacy, or respect other
people’s right to make decisions about their own lives).
•Social Contract Theory (or “contractarianism”)-Says that, in order to figure
out what ethical rules to follow, we ought to imagine what rules rational
beings would agree to in an “ideal” decision-making context.
Theories….Contd.
• Virtue Theory -Says that we ought to focus not on what rules
to follow, but on what kinds of people (or organizations!) we
want to be, and what kinds of ethical examples we ought to
follow
• Feminist Ethics -It is a complex set of interrelated perspectives
that emphasize interpersonal concerns such as caring,
interdependence, and the ethical requirements of particular
relationships. Such concerns are traditionally identified with
women, but Feminist Ethics should not be thought of as a
theory only for women.
Theories of Ethics
Deontological
The word deontological is derived from the Greek
word deon, meaning 'duty'. It is concerned
with right action - in other words, with doing the
right thing simply because it is the right thing to do.
Deontological theories focus on whether ethical
decisions are right or wrong, regardless of the
consequences or intentions of those ethical
decisions.
Teleological
The word teleological is derived from two Greek words: telos, which
means 'purpose' or 'goal'; and logos, which refers to 'science' or
'study'. It is concerned with being good - in other words, with being a
good person with good intentions. Therefore, in contrast to
deontological ethics, the teleological ethical traditions concentrate on
the purpose of - or the intention behind - human actions. The focus of
teleological ethical theories is on what the goal of a given decision is.
(example- Constructing a dam will need to displace 1000 people but it
will generate electricity, provide water for agriculture and gives
employment so will benefit 10000 people so if we see 9000 will get
benefitted)
Rules can be broken to gain max benefit
Code of Ethics
A code of ethics in business is a set of guiding principles intended to
ensure a business and its employees act with honesty and integrity in all
facets of its day-to-day operations and to only engage in acts that
promote a benefit to society.
• A code of ethics sets out an organization's ethical guidelines and best
practices to follow for honesty, integrity, and professionalism.
• For members of an organization, violating the code of ethics can result
in sanctions including termination.
• In some industries, including banking and finance, specific laws govern
business conduct. In others, a code of ethics may be voluntarily
adopted.
• The main types of codes of ethics include a compliance-based code of
ethics, a value-based code of ethics, and a code of ethics among
professionals.
Five Codes of Ethics
• Integrity: A professional should be straightforward and honest in all
professional and business relationships.
• Objectivity: A professional should not allow bias, conflict of interest or undue
influence of others.
• Professional competence: A professional should act diligently and in
accordance with applicable technical and professional standards when
providing professional services.
• Confidentiality: A professional should respect the confidentiality of
information acquired as a result of professional and business relationships and
should not disclose any such information to third parties without proper and
specific authority unless there is a legal or professional right or duty to
disclose.
• Professional behavior: A professional should comply with the relevant laws
and regulations and should avoid any action that discredits the profession.
Importance of a Code of Ethics

A code of ethics is important because it helps employees or organization

members make decisions that are in line with company values in the
absence of a clear rule or direct supervision. A code of ethics can
improve decision making at a business, and make it easier for
employees to be autonomous.