Introduction to Ethics &

Business Ethics
Module 1
 ETHICS

• It is a set of universally accepted moral principles & values that

govern the behavior of a person or group in terms of what is
right & wrong.
 Nature of ethics
 Normative Science
 Differs from morality
 Differs from religion
 Varies from Law
 Ethical behavior is not just doing whatever society accepts
 Personal

Dimensions
of Ethics

Professional Managerial
 Importance of Ethics

Satisfies basic human needs

Creates credibility

Unites the team

Improves decision making

Long term success

Secures the society

 Objective of Ethics

To establish norms for behavior

 To recommend how to / how not to behave

To evaluate moral /immoral behavior

To enable fair decision-making

To bring about public accountability

 Scope of Ethics

Meta ethics – Cognitive study of principles of ethics, their origin and meaning

Normative ethics – study of moral standards to determine right and wrong

Applied ethics – Study of special issues in various fields

 Normative Ethics

• 1. Deontological theory

• 2. Teleological theory

• - Egoism

• - Utilitarism

• - Altruism

3. Virtue ethics
 Types of Ethics

Transactional – Principle of equality, honesty & reciprocity.

Participatory – principle of decency & emancipation.

Recognition – Principle of recognition & beneficience.

 Personal v/s Business ethics
Personal ethics refers to the ethics that a person identifies with in respect to people
and situations that they deal with in everyday life. 

Business ethics describe what constitutes right & wrong or good & bad, in human
conduct in context of an organization.

Business ethics ensure that a certain basic level of trust exists between consumers
and various forms of market participants with businesses. 

Personal ethics has an influence on the business ethics.

Harmony should exist between personal and business ethics.

 Objective of Business Ethics

Establish standards of behavior Ensures legal compliance

Prevent business malpractices Community engagement

Improves customers’ confidence Enhances image of the company

Survival of business

Protect stakeholders’ interests

 Importance of business ethics

Unified image of the company Build brand equity

Reduce legal issues Higher employee morale and retention

Business relationships Better financing opportunities

Turnover Keep in sync with the changing global

Build reputation & goodwill expectations

 Principles of business ethics

Dignity ends

Honesty Goodwill

Openness Suffering(Prevention & Allevation)

Equitability or equity Maximise happiness, not wealth

Focus on people

Importance of pure means and

 Scope of business ethics

Ethics in Compliance Ethics in Information Technology

Ethics in Marketing Ethics in Production

Ethics in Human Resource Ethics and the Environment

Management

Ethics in Finance
 Ethical issues in Employment

Discrimination association

Sexual & racial harassment Working conditions

Employee privacy- physical, social, Fair wages

informational, psychological Child labour
Due process and lay offs

Employee participation and

 Ethical issues in Finance

Window dressing Executive compensation issues

Secret reserve False reimbursements

Evasion of taxes Bribery

Issues regarding related party Corruption, etc.

transactions

Insider trading
 3 C’s of Business ethics

Compliance Contributions Consequences

• Laws of land • Creating employment • Internal & external
• Moral principles • Benefit of activities to environment
• Customer & the surroundings • Social responsibility
communities • Core values towards the
expectation • Product quality stakeholders
• Policies of the company • Good public image
 Myths about business ethics
1. It alters people’s values
2. It is a discipline led by philosophers, theologians and academics
3. It’s nothing new but asserts to “do good”
4. It cannot be managed
5. It is same as social responsibility
6. Organisation with ethical employees need not pay attention towards business
ethics
7. It is about good guys preaching the bad guys
8. It is the new policeman on the block and a fad!!!
9. We comply with law, that means we are ethical
 Role of government in ensuring business
ethics
Permission to operate Employee protection
Legislating role Environmental protection
Supervisory role Taxation
Incentivizing role Investor protection
Ultimate responsibility lies with Encourage fair competition
the business
Contract enforcement
Consumer protection
 Regulatory authorities
Companies Act,2013
LLP Act, 2008
Ministry of Finance
Ministry of Commerce & Industry
RBI
IRDA
TRAI
SEBI, 1992
RTI Act, 2005
 Ways to promote Ethical Conduct

Staff training

Reward ethical behavior

Lead by example – Top Down Approach

Maintain work-life balance

 Enforcing ethical behavior at workplace
Post clear guidelines
Outline potential punishments
Enact a rewards system
Ensure privacy for whistleblowers
Create an ethics panel
Create the position of ethics compliance officer
Punish workers as necessary
Think of yourself and your firm as a part of the society
Ethics in Marketing, Finance
and HRM
Module 2
Ethics in marketing
• Ethical marketing is less of a marketing strategy and more of a
philosophy that informs all marketing efforts.
• It seeks to promote honesty, fairness and responsibility in all
marketing activities, particularly advertising.
• It is not about having a hard and fast list of rules, but rather about a
general set of guidelines to assist companies as they evaluate new
marketing strategies.
Principles of ethical marketing
• Sharing common standard truth
• High personal ethics
• Abide by standards by the regulatory authorities
• Fair treatment for the consumers
• No compromise on consumers’ privacy
• Open discussion over the ethics and dilemmas.
Ethical issues in Marketing Mix

• Issues in market research • Perpetuating social stereotypes

• Product policy issues • Surrogate advertising

• Targeting Vulnerable Customers • Subliminal advertising

• Predatory pricing & price-fixing • False and misleading advertising

Unethical marketing practices in India
• Distortion of facts that tend to for unlawful acts
mislead or confuse customers • Lack of transparency
• Exploiting the vulnerable to • Harming the environment
manipulate them emotionally
• Invasion of privacy
• Making false, exaggerated claims
• Using women as sex symbols in
• Greed to make excessive profits advertising
• Falsification of documents to • Stereotyping
show increased profits
• Avoiding penalty or compensation
Unethical marketing practices seen in India
• Duplicate goods
• Medical profession
• Piracy market
• Child labour
• Food adulteration
Ethical dilemma in marketing

• How far can you go in stealth marketing?

• Can you sell customer information?

• Should you recall a flawed product?

• What’s appropriate in comparison marketing?

Green Marketing
• It refers to the process of selling products/services based on their
environmental benefits.
• The concept of green marketing deals with protection of ecological
environment.
• It is an attempt to protect consumer welfare and environment(the
nature) through production, consumption and disposal of eco-friendly
products.
Green Marketing

It is concerned mainly with three aspects:

- Promotion of production of pure/quality products

- Fair and just dealing with customers and society

- Protection of ecological environment

Impacts of green marketing

• Reduction in use of plastic

• Increased demand for organic products
• Increased use of bio-fertilizers
• Increased use of herbal medicines
• Strict provisions to protect forests, rivers, lakes and seas from
pollution
• Efforts to recycle wastes of consumer and industrial products
 Scope of HRM ethics
• Discrimination issues
• Suppression of democratization in the workplace
• Basic human rights, civil and employment fights
• Safety in the workplace
• Privacy
• Justifiable treatment to employees
• Respect, fairness and honesty-based process in workplace
• Performance appraisal
 Role of HR in promoting ethics
• Improve recruitment and selection tests
• Conduct ethical training
• Ensuring that there are no pitfalls in performance appraisal
• Rewards and disciplinary system
• Facilitating and improving two-way communication
• Avoiding any type of discrimination
• Equal opportunities to be given to all employees
• Steps to ensure employee safety
• Ethics compliance officer
• Maintaining work-life balance
Unethical practices in HRM
• Creating split in union leaders
• Biased attitude in selection, transfer, promotion, etc.
• Offshoring and exploiting cheap labour markets
• Child labour
• Reneging on company pension agreements
• Physical violence
• Coercion
• Longer and inflexible working hours
• Putting on more stress on employee for increasing the productivity
 Other unethical practices in HRM
Employees Government

• False claim of personal details • Announcing vacancies and not

• Producing false certificates hiring anyone

• Lack of transparency and reliability

• Taking decisions as per their
own convenience • Selection committees are
excessively cautious about the
reservation quotas
Importance of workplace ethics in HRM
• Legal considerations • Better decision making
• Company regulations & • Betterment of society
public image • Positive work environment
• Employee loyalty
• Productivity & teamwork
• Protection of assets
• Promoting ethics
Importance of employee code of conduct
• To define boundaries
• To create safe environment
• To help employees’ growth and development
• To build a reputable business, sustainable in the longrun
• To act as a legal tool
Ethical leadership and its benefits

Ethical leadership is a form of leadership in which individuals demonstrate

conduct for the common good that is acceptable and appropriate in every area
of their life. 
Benefits:
• Models behavior
• Builds trust
• Bring credibility and respect
• Leads to collaboration
• Creates good climate
• Builds self-respect
Components of ethical leadership

• Organization and general good before self interest and ego

• Encourage discussion on ethics
• Institutionalize ways to ask questions to the authorities
• Maintain humor
• Treat everyone with fairness, dignity & respect
• Collaborate
• Open communication
• Taking leadership responsibility seriously
• Re-examine the ethics and leadership
Ethical leadership 4-V model
• Values
• Vision
• Voice
• Virtue/ B Div 8.2
Essentials of Ethics in Finance

• Principle of Integrity

• Principle of Objectivity

• Principle of Confidentiality

• Principle of Professional competence and due care

• Principle of Professional behavior /A div 9.2

Ethics of a financial manager

• Stand against the Legal issues

• Do not get involved in the balancing act

• Be the whistle blowers, if needed.

Ethics in Taxation
• Ethics in taxation relates to the extent of compliance of tax laws.
• As a part of good governance, it is natural for companies to try and
minimize their tax liability through effective tax planning by staying
within the parameters provided by law.
• Tax avoidance on the other hand is a device which takes advantage
of the loopholes in the tax to reduce/avoid or transfer one’s tax
burden.
• Tax evasion is, on the extreme end, avoiding tax liability by
dishonest means like concealment of income, falsification of
accounts etc.
Tax Avoidance
• Tax avoidance basically means making use of the loopholes in the tax law to
one’s own advantage to reduce the tax burden.
• Although tax avoidance is 100% legal it is not advisable as the taxpayer has
defeated the intention of the law maker used this to his own advantage.
• Although both tax planning and tax avoidance are legal ways to reduce
tax , there is only a thin line of difference between tax planning and
tax avoidance.
• In tax planning the tax payer is doing what the government wants him to do
where as in tax avoidance, a tax payer is doing something which the
government did not expect the tax payer to do.
Tax Evasion
• Failing to pay the due
• Smuggling
• Submitting false tax returns
• Inaccurate financial statements
• Using fake documents to claim exemption
• Not reporting income
• Bribery
• Storing wealth outside the country
Ethical Responsibilities of Tax Practitioner
• Best opinion
• Shall not assure on the returns
• Clients’ responsibility towards return filing
• Opinion in writing
• Desist from false /misleading statement
• In case any error observed in previous returns advise to revise the
returns.
Corporate crime
• Corporate crime is defined as, “the conduct of corporation or
employees acting on behalf of a corporation, which is prescribed and
punishable by law.”
• It is also known as white collar crime or organizational crime since
the individuals commit crimes for the benefit of the organization.
White collar crime
• White-collar crime, crime committed by persons who, often by virtue
of their occupations, exploit social, economic, or technological power
for personal or corporate gain and are non-violent in nature.
• Fraud – computer, bankruptcy, healthcare, telemarketing, credit card,
insurance, government, financial, etc.
• Theft – embezzlement, blackmail, etc.
• Violation of statutory law – environmental law, insider trading, tax
evasion, bribery, money laundering, etc.
Organized crime

• It is a crime that may be violent or non-violent in nature, committed

by a group of individuals, local, national or international, that engage
in criminal activities for profit.

• These networks can be formed in three ways; within family, through a

business and through a ‘gang’.
Types of organized crime
• Drug abuse & trafficking
• Smuggling
• Money laundering & hawala
• Terrorism
• Contract killings
• Kidnapping for ransom
• Illegal immigration
• Prostitution
Role of SEBI in ensuring Corporate
Governance
• Audit committee
• Financial literacy of committee
members
• Disclosure of accounting treatment
• Unqualified financial statements
• Related party transactions
• Risk management
• Training of board members
• Proceeds from IPO
• Code of conduct
• Nominee directors
• Non-Executive Directors compensation
• Subsidiary companies
• Evaluation of performance of Non-
Executive Directors
• Real time disclosures
Cadbury Committee Report, 1992
• That there be a clear division of responsibilities at the top, primarily
that the position of chairman of the board be separated from that of
chief executive, or that there be a strong independent element on
the board;
• That the majority of the board be comprised of outside directors;
• That remuneration committees for board members be made up in
the majority of non-executive directors; and
• That the board should appoint an audit committee including at least
three non-executive directors.
Corporate governance
Module 3
 meaning

• Corporate governance is the combination of rules, processes or laws by which

businesses are operated, regulated or controlled.

• The term encompasses the internal and external factors that affect the
interests of a company’s stakeholders, including shareholders, customers,
suppliers, government regulators and management.

• The board of directors is responsible for creating the framework for corporate

governance that best aligns business conduct with objectives.
 need
• Long term stability and growth
• Stakeholders’ interest
• Ensuring support of stakeholders
• Social responsibility
• Attain and retain employees
• Ethical conduct
• Reduces risks
• Globalization
• Reduces legal restrictions and government interferences
 principles

• Right of shareholders

• Equitable treatment of shareholders

• Stakeholders and CG

• Board responsibilities

• Disclosures and reporting

• Integrity and ethical behavior

 benefits

• Excellent management

• High level of transparency

• Stakeholder benefits

• Reputation and recognition

• Reduces wastage

• Reduce risks, mismanagement and corruption

• Economic benefit
 issues

• Duties of directors

• Composition and balance of the board

• Remuneration and reward of directors

• Reliability of financial reporting and external auditors

• Board’s responsibility for risk management and internal control

• Lack of transparency

• CSR and Business Ethics

 theories

• Agency theory

• Stewardship theory

• Stakeholder theory
Agency theory – Jensen an Meckling
Stewardship theory
Stakeholder theory – by Edward freeman
 Models of CG

• Anglo-American

• German

• Japanese
German model
jApanese model
 Emerging trends in cg
• Increasing expectations from BOD
• Focusing on skilled composition of the board
• Scrutiny of the company plans
• Focusing on ESG issues
• Increased need for nomination and remuneration committee to comply with rules
• Tokenism
• Successful integration of ESG and CSR issues, to attract ESG-focused investors
• Efficient risk management
• Increased director accountability
• Whistleblowers Protection Act, 2014
 Insider trading
• Insider trading is the buying or selling of a publicly traded company's stock by someone who
has non-public, material information about that stock

• Material nonpublic information is any information that could substantially impact an

investor's decision to buy or sell the security that has not been made available to the public.

• This form of insider trading is illegal and comes with stern penalties including both potential
fines and jail time.

• Insider trading can be legal as long as it conforms to the rules set forth by the SEC(Securities
Exchange Commission).
Conduct of insider trading

• Members of the organisations buying a security

• Professionals engaging in business of the company

• Family and friends of insiders

• Corporate spies
 CSR
MODULE 4
• Corporate social responsibility (CSR) is a self-regulating
business model that helps a company be socially
accountable—to itself, its stakeholders, and the public.

• CSR is about operating a business in a manner that

meets or exceeds the ethical, legal, commercial and
public expectations that society has of business.

MEANING
Types of CSR/ carroll’s pyramid of csr
1. Conduct and govern themselves with ethics, transparency &
accountability
2. Provide sustainable goods or services
3. Promote employees’ wellbeing
4. Respect interests of and be responsive towards all stakeholders
5. Respect & promote human rights
6. Respect, protect and make efforts to restore environment
7. Responsibly engage in influencing public and regulatory policy
8. Support inclusive growth and equitable development
9. Engage in providing valuable service to the customers/consumers
Principles of csr
 Responsibility

Accountability

Sustainability

Social contract

Aspect of Csr
• Lack of awareness of general public in CSR activities
• Need to build local capacities
• Issues of transparency
• Non-availability of well organized non-governmental
organizations
• Visibility factor
• Narrow perception towards CSR initiatives
• Lack of consensus on implementing CSR issues

Issues in CSR
• License to operate
• Attract and retain employees
• Communities as suppliers
• Enhance corporate image
• Attract and retain investors
• Encourage personal and professional growth
• Competitive advantage for the firm
• Enhanced relationship with government and other stakeholders

implication of CSR
• Corruption
• Employment practices
• Human rights
• Environmental pollution
• Relation with the Consumers
• Industrial espionage
Ethical Issues In International
• Moral obligations Business
Practices
• 2% of Avg. net profit of 3 financial years on CSR.(Net worth = Rs. 500 cr. / turnover of Rs.
1000 cr. / net profit of Rs. 5 cr.)
• Contribution to political parties not to be included in CSR activities
• Net worth/turnover/net profit to be calculated on the basis of P&L A/c
• Profits from overseas branch not to be included
• Activities undertaken should fulfill the CSR obligations
• Preference to be given to local areas and the areas around where the company operates
• CSR committee to be constituted
• CSR activities can be undertaken through a trust or society
• Collaboration with other companies for joint undertaking of CSR activities
• Building CSR capabilities of the personnel with not more than 5% of the total CSR
expenditure

Recent guidelines In CSR

Society’s Changing Expectations Of Business
With Respect To Globalisation
• Global expectation, local need
• Higher degree of scientific & social responsibility expected
• Business is expected to adopt a commonly accepted framework of values across
geographies
• Society expects business to collaborate with communities
• Moving ahead of DCPS towards transformative CSR – CSR 2.0
• Judging on basis of innovation
• Self-selection of ethical consumers
• Cross-sector partnerships
• Comply with global best practice principles
• Demonstration of full life cycle of the products
• Set up of a credible CSR rating agency
• Corporate transparency
• Diversified scope for CSR

Future of CSR
corporate citizenship
• Corporate citizenship refers to the set of activities or responsibilities of an
organization that help them make a positive contribution to society in general.
• Corporate citizenship also refers to standards that an organization puts in place to
meet corporate social responsibility. 
• Elementary stage: This is the basic stage where an organization begins to carry out certain projects
tailored to corporate social responsibility. The elementary stage starts with compliance to the ISO
standards and other occupational health safety standards.
• Engagement stage: This is the phase in which the company develops conscious policies that
mandate the involvement of its employees in activities that contribute positively to the community's
• Innovative Stage: At this stage, a company devises creative means to implement corporate social
responsibility. This is in a way to make them recognized and stand out among others.
• Integrated Stage: This is when a company has fully blended with activities and processes involved in
corporate social responsibility.
• Transforming stage: This is the stage an organization has fully grasp what corporate citizenship
entails, the standards and processes involved.

Stages to attain corporate citizenship