Professional Documents
Culture Documents
Unit 2
Unit 2
1Business Ethics
2.2 Individual/ Personal Ethics
2.3 Professional Ethics
2.4 Ethical Behaviour
2.5 Social Audit
Introduction
B) Definitions:
1)Oxford Dictionary :
"Business ethics means science of moral, moral principles, rules of conduct, whole field of moral
conduct".
2)Dr. C. B. Memoria :
"Businessman's integrity so far as his conduct or behaviour is concerned in all fields of
business as well as towards the society and other business are business ethics".
3)Peter Drucker :
"Business ethics is plain, everyday honesty".
2.1Business Ethics
C) Nature of Business Ethics :
2.1Business Ethics
C) Nature of Business Ethics :
Business ethics is concerned with the behaviour of a businessman in doing a business.
Unethical practices are creating problems to businessman and business units.
1)Code of Conduct :
Business ethics is a code of conduct. It tells what to do and what not to do for the welfare of
the society. All businessmen must follow this code of conduct.
7)Relative Term :
Business ethics is a relative term. That is, it changes from one business to another. It also
changes from one country to another. What is considered as good in one country may be
taboo in another country.
8)New Concept :
Business ethics is a newer concept. It is strictly followed only in developed countries. It is not
followed properly in poor and developing countries.
2.1Business Ethics
D) Principles of Business Ethics :
2.1Business Ethics
D) Principles of Business Ethics :
Business Ethics or Ethical standards are the principles, practices and philosophies that guide
the business people in the day today business decisions.
1)Sacredness of Means and Ends :
The first and most important principles of business ethics emphasize that the means and
techniques adopted to serve the business ends must be sacred and pure. It means that a
good end cannot be attained with wrong means, even if it is beneficial to the society.
3)Principle of Proportionality :
This principle suggests that one should make proper judgment before doing anything so that
others do not suffer from any loss or risk of evils by the conducts business.
7) Equivalent Price :
The people are entitled to get goods equivalent to the value of money that he will pay.
8) Universal Value :
According to this principle the conduct of business should be done on the basis of universal
values.
9)Human Dignity :
As per this principle, man should not be treated as a factor of production and human dignity
should be maintained.
10)Non Violence :
If businessman hurts the interests and rights of the society and exploits the consumer by
overlooking their interests this is equivalent to violence and unethical act.
2.1Business Ethics
E) Elements of Business Ethics :
2.1Business Ethics
E) Elements of Business Ethics :
The code of ethics is the set of behavioral rules employees should follow to ensure the
company's values are reflected in all business dealings. The basic elements of business
ethics are as follows:
1) Values :
Business values typically are expressed in terms of how the company performs its day-to-
day interactions with suppliers, employees and customers. A primary objective of the code of
ethics is to define what the company is about and make it clear that the company is based
on honesty and fairness.
2) Principles :
Principles are used to further support the business values by including operational credos
employees should follow. Customer satisfaction, business profitability and continuous
improvement are key factors in documenting business principles.
3) Management Support :
Manager support of the values and principles may be documented in the code of ethics.
Open door policies for reporting ethics violations can be included in the code, along with a
process to anonymously report any code of ethics issues. To reflect how seriously
management considers the code, some businesses display the code of ethics with
management signatures in prominent areas, such as the break room, where employees will
see it on a daily basis.
2.1Business Ethics
E) Elements of Business Ethics :
4) Personal Responsibility :
Another component is a statement regarding each employee's personal responsibility to
uphold the code of ethics. This may contain information regarding both the legal and moral
consequences if an employee violates the code. The requirement to report any violators is
normally a component of the ethics code's personal responsibility. This is meant to show that
it is not sufficient to merely adhere to the values and principles but to help ensure every
employee supports the code of ethics by reporting violators.
5) Compliance :
Any laws or regulations may be referenced as rules to adhere to as part of daily business
interactions. The Sarbanes-Oxley Act--which was enacted as a direct result of the Enron
case, in which executives falsified financial records to overstate the company's worth--details
what financial reporting a company must do. Compliance to all financial reporting and any
licensing requirements such as ISO 9000 by the International Organization for
Standardization can be documented, along with the expectation that all licenses will be
maintained and legal regulations met.
2.1Business Ethics
F) Scope of Business Ethics : 3) Internal Policy :
1) Society : The third level is related to internal policy. This
The decisions taken by the organisations includes the relationship between the organisation
affect society on large scale. It is the duty of and employees. If the working conditions of
the organisation to satisfy the needs of employees are not good the ethics are low.
society. If it is not done the basic human Organisations should look after the welfare and
rights are violated. safety provisions for the workers.
2) Stakeholders : 4) Individuals :
The decisions of an organisation affect the The fourth level refers to individuals. It gives the
groups of people such as suppliers, guideline to treat one another within the
customers, shareholders, bondholders, etc. corporation. It is in respect of individual's duties
towards his company, boss, colleagues and
subordinates.
2.1Business Ethics
G) Importance of Business Ethics :
1) Helps to Understand Society :
The power and influence of business in society is greater than ever before. Business ethics
helps us to understand why this is happening, what its implications might be, and how the
situation might be addressed.
A)Professional Ethics :
Professional ethics concerns the moral problems that arise because of the specialist
knowledge that professionals get. It also shows how the use of this skill should be governed
when providing a service to the public. The professional should carry additional moral
responsibilities than those held by the population in general and in society.
4) Corporate Culture :
The corporate culture varies from company and time to time. It all depends on the nature of
leader; the competition should be healthy, based on fair rules. A good corporate culture
should take care of the interests of all the stockholders. It should take care of the customers
and employees.
5) Environment :
Business ethics is also divided by the type of environment in which a business organisation
is situated. There are two aspects of environment namely external and internal. Internal
environment refers to all aspects like vision, mission, power structure and other related
matters
2.1Business Ethics
J) Areas of Business Ethics :
2.1Business Ethics
J) Areas of Business Ethics :
3) Production :
Ethics in production is a subset of business ethic that is meant to ensure that the production
function or activities are not damaging to the consumer or the society. Like other ethics there
is a certain code of conduct or standards to be followed, however ensuring that the ethics are
complied with is often difficult.
2.1Business Ethics
J) Areas of Business Ethics :
D) Information Technology :
Scientific advances allow businesses to use technology to reach goals more easily and more
completely than ever before. In some areas, however, such applications of technology start
infringing on the rights of individuals and may be unethical.
1) Privacy :
Individual privacy is one area that has been identified clearly as a base for unethical business
behavior through the application of technologies.
2) Security :
Companies monitor employees and visitors and collect much additional information in the
name of security. Ethical issues arise from the continuous monitoring of employee activity and
the recording of security camera images.
3) Communication :
Where it used to be difficult to monitor telephone conversations due to the nature of the analog
signal, companies and governments can easily monitor digital, text-based communication,
such as email. Computers can scan the text of millions of messages for words that are of
interest to investigators and identify the sender
4) Content :
With new technologies allowing the easy creation and distribution of images and videos, both
individual employees and companies need guidelines as to what is acceptable. Without such
guidelines, some of this content will be offensive to some of the company staff and to some
members of the public.
2.2 Individual/ Personal
Ethics
Individual ethics is determined by a combination of family influences, peer
influences, life experiences personal values and morals and several situational
factors.
Ethical standards are laid down by parents in a family and children just adopt
them. It is the duty of the elders to ensure that the younger ones conform to the
family standards.
A man is known by the company he keeps. Individual ethics is greatly affected by
the ethical standards of the persons with whom the person interacts every day.
A man while growing encounters several positive and negative events affecting
his moral values.
A person who is punished for his negative conduct will think of giving it up.
Personal values and morals greatly affect the ethical standards of an individual.
It is very important to examine in this connection whether a person gives greater
importance to accumulation of wealth or healthy growth of his family.
2.2 Individual/ Personal
Ethics
A) Business Ethics and Personal Ethics :
Though personal ethics has an influence on business ethics, at times, actions that are in
accordance with business ethics might fall short of meeting personal ethics. i.e. an
incident/activity, which is deemed ethical in terms of business, would not fall into the area of
personal ethics.
2) Responsibility :
Ethics implies some degree of responsibility. Individuals and businesses must uphold the ethics
that they claim to adhere to or they will suffer the consequences. Business, professionals and
individuals are all liable for their actions, both ethical and unethical. A lapse in ethics has three
different levels: negligence, gross negligence and deliberate wrongdoing.
2.2 Individual/ Personal
Ethics
A) Business Ethics and Personal Ethics :
3) Society's Expectations :
Both business and personal ethics are frequently based on their societies' ideals. Society
expects certain ethical actions from both organizations and individuals. Any person or group
breaking society's code is subject to scrutiny and certain consequences. Laws, religious
guidelines, peer expectations and industry standards all fall under the umbrella of societal
expectations, though different groups in the same category may have different expectations.
4) Communication :
The business ethics communicate with the code conduct to the employees but the personal
ethics can communicate with the family, friends, mentors, and religious leaders and so on.
The business ethics and the personal ethics can conflict with each other in the case of
decision making. The business ethics can form the product, organization and on but at the
same time the personal ethics can form the relationship with friends and so on. Hence the
business ethics and the personal ethics can overlap in many ways.
2.3 Professional Ethics
Professional ethics helps a professional choose what to do when faced with a problem at work that
raises a moral issue. One can certainly study what professionals do when faced with such
problems, and confine the enquiry to the description. Our concern here, however, is to assist with
making choices - an approach called prescriptive professional ethics.
2)Objectivity :
Not to allow conflict of interest, or undue influence or bias to override professional or business
judgment.
3)Competence :
To maintain the professional knowledge and skill required to ensure that a client or employer
receives a service that is based on current developments in practice, legislation, and valuation
techniques.
4)Confidentiality :
To respect the confidentiality of information acquired as a result of professional and business
relationships and not to disclose such information to third parties without proper and specific
authority (unless there is a legal or professional right or duty to disclose), nor to use information for
the personal advantage of the professional value or third parties.
5)Professional behaviour :
Act diligently and to produce work in a timely manner in accordance with
applicable legal requirements, technical and professional standards. To always act
in the public interest and to avoid any action that discredits the profession.
2.3 Professional Ethics
B) Professional Ethics for Corporate Citizens:
1) Corporate Reputation :
The news media are quick to expose unethical behavior in businesses. Individual mistakes can be
forgiven; providing they are acknowledged and corrective action is taken quickly. However, the
public is unforgiving when it comes to cover-ups, fraud and hypocrisy.
2) The Board :
Part of the role of a company's board of directors is to ensure that there is an ethical environment.
In particular, non-executive directors are required to exercise independent judgment and to
challenge conflicts of interest and lack of transparency.
3) The Staff :
Most companies have developed a set of corporate values and a code of business conduct, to
which they expect their staff to adhere. This creates an environment in which people will discuss
ethical issues and endeavor to behave ethically. An ethical company finds it easy to attract and
engage staff. Staffs who are dissatisfied with the conduct of their employer will be less engaged
and more likely to leave.
4) Customers :
Just as unethical behavior results in a bad reputation and low share price,
companies that are demonstrably ethical get rewards. Clients and customers want
to buy their products and services, and their turnover and profits increase.
2.4 Ethical Behaviour
A) Audit of Ethical Behavioral :
2.4 Ethical Behaviour
A) Audit of Ethical Behavioral :
1) Audit Independence :
Ethical behavior audit teams must be free from interference or impairment from any department or
management function. Conflicts of interest are avoided by ensuring individual auditors are not
assigned to evaluate the department the auditor reports to.
2) Written Code :
After the independence of the audit team is established, the next step is to ensure the organization
being audited has established a written code of conduct. The audit will evaluate whether or not the
code addresses all of the business practices of the organization and the standards of behavior
employees are expected to follow.
3) Leadership Commitment :
An ethics audit also determines if the organization's leadership has made a commitment to
enforcing ethical behavior from the top of the company down to the lowest levels of the
organization.
4) Technical Expertise :
Auditors should never represent themselves as having expertise they do not
possess. Auditors must be selected on the basis of proven technical expertise and
recognized certifications.
2.4 Ethical Behaviour
B) Advantages of Ethical Behaviour in Business
1) Build Customer Loyalty :
Consumers may let a company take advantage of them once, but if they believe they have been
treated unfairly, such as by being overcharged, they will not be repeat customers.
1) Honesty :
He believed a business could and should be conducted with complete honesty. Indeed, a business
that was run honestly would be more successful than one which was not. In business as well as
personal life he subscribed to the view : "Honesty is the best policy.“
2) Trusteeship :
In his theory of trusteeship, Gandhi perceived business as a form of service to the community.
Gandhian approach to business ethics relate to today as much as to his lifetime. Gandhian thought
need to go undergo interpretation because of development the business has undergone during last
50 year.
2.5 Social Audit
A) Meaning
Social Audit is a system which evaluates performing of the responsibilities of a business. It is the
rating system for the companies to see how well they measure their social responsibility. It is a
step forward taken by business to issue public documents for explaining their policies on social
issues.
B) Definitions:
1)Howard R. Bowen :
"It is defined as a commitment to systematic assessment of and reporting on some meaningful
definable domain of the company's activities that have social impact".
2)Gerald Vinten :
"A review to ensure that an organisation gives due consideration to its social responsibilities to
those both directly and indirectly affected by its decisions, and that a balance is achieved in its
corporate planning between these aspects and more traditional business related objectives"
2.5 Social Audit
c) Principles of Social Audit
The foremost principle of Social Audit is to achieve continuously improved performances Relation
to the chosen social objectives. Eight specific key principles have been identified from Social
Auditing practices around the world. They are :
2.5 Social Audit
c) Principles of Social Audit
1) Multi Perspective/Polyvocal :
Aims to reflect the views (voices) of all those people (stakeholders) involved with or affected by the
organization/department/programme.
2) Comprehensive :
Aims to (eventually) report on all aspects of the organizations work and performance.
3) Participatory :
Encourages participation of stakeholders and sharing of their value.
4) Multidirectional :
Stakeholders share and give feedback on multiple aspects.
5) Regular :
Aims to produce social accounts on a regular basis so that the concept and the practice become
embedded in the culture of the organization covering all the activities.
2.5 Social Audit
c) Principles of Social Audit
6) Comparative :
Provides a means, whereby, the organization can compare its own performance each year and
against appropriate external norms or benchmarks; and provide for comparisons with
organizations doing similar work and reporting in similar fashion.
7) Verification :
It ensures that the social accounts are audited by a suitably experienced person or agency with no
vested interest in the organization.
8) Disclosure :
It ensures that the audited accounts are disclosed to stakeholders and the wider community in the
interests of accountability and transparency.
2.5 Social Audit
c) Importance of Social Audit
1) Assessment of Social Contribution :
Social audit assesses the social performance of a business
enterprise. Only through social audit one can get a correct
picture of the contribution made by an enterprise to the society.
2) Equal opportunity :
A second relevant social issue which comes under social audit is the equity of treatment in
employment and a fair justice system in the organization.
4) Consumerism :
Business has a special obligation towards the consumer as the business exists to serve and satisfy
the needs of the consumers. It is the principal duty of business to make available to the consumer
items of daily needs in the right quantity at a right time, price and of the right quality.
5) Environmental Protection :
Growing water, air and environmental pollution by various industries in recent times has led to a
public outcry demanding 'environmental protection' at any cost.
2.5 Social Audit
E) Types of Social Audit
1) Social Process Audit :
It tries to measure the effectiveness of those activities
of the organization which are largely taken up to meet
certain social objectives. Corporate executives in this
case try to examine what they are doing and how they
are doing.
a) Environmental Audit :
In developed countries people protest violently if the companies try to pollute the environment and
the companies not only comply with regulations but also proactively explore opportunities to
recycle wastes into useful products.
2.5 Social Audit
E) Types of Social Audit
b) Energy Audit :
To conserve energy sources, energy audits are undertaken to investigate how energy is obtained,
consumed and preserved.
6) Comprehensive Audit :
It tries to measure, verify and evaluate the total performance of the organization including its social
responsibility activities. It focuses mainly on management systems rather than on the actions or
events which are not so important.
2.5 Social Audit
F) Advantages of Social Audit
1) Method of Measurement :
Social audit provides a recognized method for bringing social
point of view to the attention of management.
2) Impartial Appraisal :
As the appraisal of the individual corporations would be made
by an impartial outside agency, the assessment is reliable.
3) Improvement in Future :
The report of the social audit is made available to the company.
This would be useful for the organizations in the future. This in
turn benefits the society.
4) Social Standards :
Social audit creates recognized social standards. These standards are useful for the companies in
the society. Companies can activate themselves on the basis of these standards.
2.5 Social Audit
2) Collection of Data :
Data collection and their presentation are not possible in
such a way that it will reflect accurately the social involvement
of business.
3) Complications in Conversion :
Converting social action into quantitative terms complicates the
matter more. Thus, Social Audit is publication of social responsibilities
performed by the company. In fact if a company is ethical and wants to do something for the
society.