Business Ethics and Corporate Governance

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Module-1
Introduction to Business Ethics
 Books
Sr. No Author/s Name of the Publisher Edition &
Book Year of
Publicatio
n
T-01 A.C. Fernando Business Ethics Pearson 2nd
and Corporate edition,
Governance 2012
T-02 S.K. Mandal Ethics in Mc Graw Hill 2nd
Business and edition,
Corporate 2012
Governance.
 Reference Books
S. Author/s Name of the Publisher Edition
No. Book
•
R-01 Murthy, CSV Business Ethics Himalaya Ist edition,
and Corporate Publishing 2017
Governance

R-02 Daniel Business Ethics: Oxford Uni. 2010

Albuquerque Principles and Press
practice

R-03 Ferrell, Fraedrich, Business Ethics Cengage 11th

Ferrell Learning edition,2017

R-04 Rupani, Riya Business Ethics Himalaya 4th edition,

and Corporate Publishing 2015
Governance
 Evaluation
Weightage

A Continuous Evaluation Component 30% (C.E.C.)

(Assignments/Presentations)

B Internal Assessment 20% (I.A)

C End-Semester Examination 50% (External

Assessment)
 INTRODUCTION TO Business ETHICS
• Meaning, Nature and Sources of ethics
• Features of Unfair Business Practices
• Ethical Theories
• Values: Meaning & Types
• Teaching from Scriptures like Gita, Quran,
Bible w.r.t. Indian Value Systems in Business
MEANING & CLASSIFICATION OF ETHICS

• The word ethics is derived from the Greek

word Ethikos *meaning custom or character.
• Ethics is a code of behaviour considered
correct.
 DEFINITIONS
• Manual G. Velasquez “ethics is a study of moral
standards whose explicitly purpose is to
determine as far as possible whether a given
moral standard (or moral judgement based on
that standard) is more or less correct.”
• Most of dictionaries define ethics as the science
of ‘morals in human conduct’, moral philosophy,
moral principles, rules of conduct etc.
• The American Heritage Dictionary defines
ethics in a more focused manner as “the study
of the general nature of morals and of specific
moral choice; moral philosophy; and the rules
or standards governing the conduct of the
members of a profession. ”
 CLASSIFICATION OF ETHICS
Ethics can be classified into three categories:
1. Personal,
2. Professional and
3. Business Ethics
 PERSONAL ETHICS
Refers to the set of moral values that form the
character and conduct of a person. Principles of
personal ethics are:
a) Concern and respect for the autonomy of others.
b) Honesty and willingness to comply with the law.
c) Fairness and ability not to take undue advantage
of others.
d) Benevolence* and preventing harm to any
creature.
 PROFESSIONAL ETHICS
A profession is a vocation or calling, especially
one that involves a specific branch of
advanced learning or a branch of science, for
example, the profession of a doctor, advocate,
professor, scientist or a business manager.
• A profession is one who is engaged in a
specified activity as one’s paid occupation like
a salaried business manager who is paid for his
specific skill in managing the affairs of the
business enterprise he is engaged in.
Basic principles people are expected to follow in
their professional career such as:
• Impartiality
• Objectivity
• Openness
• Transparency
• Confidentiality
• Trust
• Due diligence
• Duty of care
• Fidelity
 BUSINESS ETHICS
Refers to the application of general ethical ideas to
business behaviour.
• It facilitates and promotes good to the society
• improves profitability,
• fosters business relations and employee productivity,
• reduces criminal penalties from public authorities and
• allows people in business to act consistently with
their personal ethical beliefs.
IMPORTANCE OF BUSINESS ETHICS:
Ethical behaviour is necessary to gain trust.
Basically trust is three dimensional i.e,
1. Trust in supplier relationships,
2. Trust in employee relationships and
3. Trust in customer relationships.
Trust leads to predictability and efficiency of
business.
SOURCES OF ETHICS
CHARACTERISTICS OF BUSINESS ETHICS
1. Business ethics are based on social values, as the
generally accepted norms of good or bad and ‘right’
and ‘wrong’ practices.
2. It is based on the social customs, traditions,
standards, and attributes.
3. Business ethics may determine the ways and means
for better and optimum business performance.
4. Business ethics provide basic guidelines and
parameters towards most appropriate perfections in
business scenario.
5. Business ethics is concerned basically the study of
human behavior and conducts.
6. Business ethics is a philosophy to determine the
standards and norms to make mutual interactions
and behavior between individual and group in
organization.
7. Business ethics offers to establish the norms and
directional approaches for making an appropriate
code of conducts in business.
8. Business ethics are based on the concepts, thoughts
and standards as contributed as well as generated by
Indian ethos.
9. Business ethics may be an ‘Art’ as well as ‘Science’
also.
10. Business ethics basically inspire the values,
standards and norms of professionalism in business
for the well-being of customers.
11. Business ethics is to motivate and is consistently
related with the concept of service motives for the
customers’ view point.
12. Business ethics shows the better and perspective
ways and means for most excellences in
customization.
13. Business ethics aims to emphasize more on social
responsibility of business towards society.
 NATURE OF BUSINESS ETHICS

• 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.
• Based on moral and social values:
– BE is based on moral and social values. It contains moral
and social principles for doing business. This includes self-
control, consumer protection and welfare, service to
society, fair treatment to social groups, not to exploit
others etc.
• Gives protection to social groups:
– It gives protection of different social groups such as
consumers, employees, small businessmen, government,
shareholders, creditors etc.
• Provides basic framework:
– BE provides a basic framework for doing business. It gives
social cultural, economic, legal and other limits of
business.
• Voluntary:
– Businessmen should accept business ethics on their
own..i.e self discipline
• Requires education and guidance:
– Proper guidance by trade associations and chambers of
commerce
 DETERMINANTS OF BUSINESS ETHICS
1. Family, School and Religion:
 greatly influence the formation of ethical
values (such as truthfulness, honesty,
sincerity, tolerance, etc.) at an early age.
2. Peers, Colleagues and Superiors:
• Colleagues in an organization shape the value system
of an individual. He adopts the attitudes, beliefs and
values of the group to which he belongs. Likewise,
most people yield to pressure from superiors in doing
things that many consider unethical otherwise.
Determinant # 3. Experiences in Life:
• Experiences in life teach many lessons. These
could be bitter or sweet, depending on the
ability of a person to reach goals
Determinant # 4. Values and Morals:
• People who value ma­terial possessions in life
may not have strong ethical standards
regarding behaviors that lead to accumulation
of personal wealth. On the other hand, people
who place a premium on quality of life will
probably have strong ethics while competing
with others for var­ious things in life.
Determinant # 5. Threatening Situations:
• An employee threatened with losing a permanent job may
resort to unethical acts to save his job.
• To meet pre-determined targets, many Bank managers
sanction loans to individuals with practically no
creditworthiness.
Situations like these, force people to change their ethics and
respond in an unexpected manner.
Determinant # 6. Organisational Demands:
• There is growing research evidence to show that managers at
top, middle and first level have compromised their personal
princi­ples to meet an organisational demand. Corporate goals
are paramount and ex­ert considerable pressure on executives
to change their ethical views.
Determinant # 7. Legislation:
• Laws are generally passed in response to social
demands. Factors, such as low ethical standards,
corruption in public life, absence of social respon­
sibility, exploitation, sexual harassment, etc., often
force people to demand leg­islative protection.
Determinant # 8. Government Rules and Regulations:
• Government regulation regarding prod­uct safety,
working condition, statutory warnings (on cigarettes
and other harm­ful products), etc., are all supported
by laws. These offer guidelines to managers in
determining what are the acceptable standards and
practices.
Determinant # 9. Industry and Company Ethical
Codes of Behaviour:
• Many times specific guidelines are provided to
managers by the company’s ethical codes of
behav­iour.
Determinant # 10. Social Pressures:
• Social forces and pres­sures have considerable
influence on ethics in business. actions by
different groups in society may, in fact, force
management to alter certain de­cisions by
taking a broader view of the environment and
the needs of society.
 Unfair Business practices
The term “unfair trade practice” describes the use of deceptive, fraudulent, or
unethical methods to gain business advantage or to cause injury to a consumer.
Unfair trade practices are considered unlawful under the Consumer Protection
Act.

• False advertising (xyz brand juice can cure cancer)

• False representation (diamond Vs cubic zirconia)
• Misrepresentation (car's number of miles)
• Endorsements and authorisations (Eg. Celebrities)
• Unreliable claims (health and weight loss)
• Creative Accounting (Eg.: Satyam Computer)
• Gifts or prizes
• Manipulated media (Edited image, audio or video etc. / Deepfake v.)
• Pressure selling (Eg. Credit cards/ Insurance etc.)
• Adulteration
• Unfair contract terms etc.
 Unethical Business Practices by
some Renowned companies
Toyota Ignored safety (1937)
Apple Uses Slave Labor (1976)
Philip Morris advertised to kids (1900)
Walmart lacks compassion (1962)
 Toyota
• In 2010, Toyota ignored information about safety and delayed
investigating possible recalls.
• In 2009, they learned about sticking pedals and faulty brakes;
instead of addressing the issue, they added side airbags.
 Apple
• Apple relies on child slave labor that is working in dangerous
conditions, for ten hours each day while being exposed to
cancerous vapors.
• The conditions at the manufacturing plant Foxconn are bad
enough that they had to install "anti-suicide nets."
• Apple has reduced some of their work with Foxconn, but they
still rely primarily on them. Apple also used Irish tax
loopholes to avoid some taxes.
 Walmart
• Wal-mart is well-known for their unethical business
practices concerning employees.
• They consistently place profits before the health of
their employees.
 Philip Morris
• The tobacco giant Philip Morris has been
considered unethical for years as a great deal
of advertising from them targets kids.
• They continue to try to create the image of
smokers being cool and are considered the
biggest reason for young smokers.
 Ethical Theories
• Four broad categories of ethical theories are
as under:-
• Deontological (Kantianism/ means/ science of
duty) (Gr. Deon = duty/obligation)
• Teleological (Utilitarianism/ Gr. Telos= ends/
consequences)
• Rights approach (Greatest good)
• Virtues (oldest)
• Deontology is an ethical theory that uses rules to
distinguish right from wrong. Deontology is often
associated with philosopher Immanuel Kant. Kant
believed that ethical actions follow universal moral
laws, such as “Don't lie. Don't steal. Don't cheat.”
• Teleological/Utilitarianism is a theory(Jeremy
Bentham) of morality that advocates actions that
foster happiness or pleasure and oppose actions
that cause unhappiness or harm. When directed
toward making social, economic, or political
decisions, a utilitarian philosophy would aim for
the betterment of society as a whole.
• In the rights ethical theory the rights set forth
by a society are protected and given the highest
priority. Rights are considered to be ethically
correct and valid since a large or ruling
population endorses them. Individuals may also
bestow rights upon others if they have the
ability and resources to do so.
• Virtue Theory is an ethical framework that
says that we ought to focus not on what rules to
follow, but on what kinds of people (or
organizations) we should be, and what kinds of
ethical exemplars we ought to imitate.
Values
 VALUES
Values: The beliefs people have, especially about what
is right and wrong and what is most important in life,
that control their behaviour.
• Represents basic convictions that a specific mode of
conduct or end-state of existence is personally or socially
preferable to an opposite converse mode of conduct or
end-state of existence.
• When we rank values in terms of intensity, we obtain that
person’s value system.
• Such as freedom, pleasure, self-respect, honesty,
obedience and equality.
Terminal vs instrumental values:
• Terminal/ Intrinsic values
– refer to the desired end-states. These are the goals a
person would like to achieve during his or her lifetime.
• Instrumental values
– refers to preferred modes of behaviour, or means of
achieving the terminal values. Eg: prosperity, health
and well being, world peace etc.
• Eg.: Money is an instrumental value, while
satisfaction of life’s need to be an intrinsic value.
Types of Values
 Difference between Values and Ethics
Values Ethics

Values are personal in nature ( A Ethics are generalized value

belief in providing customer system (eg. Avoiding
satisfaction and being a good discrimination in recruitment and
paymaster) adopting fair business practices.)

Values however, offer It provides general guidelines

alternatives to choose from eg: within which management can
philanthropy as a business policy operate.
is optional
 Moral Values
• Morals are those judgments of do's and don'ts that are instilled in a person

from childhood onwards by the society.

• Morals are the social, cultural and religious beliefs or values of an individual

or group which tells us what is right or wrong. They are the rules and

standards made by the society or culture which is to be followed by us while

deciding what is right.

• Values are considered subjective and vary across people and cultures.

(individualized)

• A person who knows the difference between right and wrong and chooses

right is moral.
 Importance of Values

1 2 3
Values lay the Individuals enter
foundation for the organizations with
understanding of notions of what is Values generally
attitudes and right and wrong influence
motivation because with which they attitudes and
they influence our interpret behaviors behavior.
perceptions. or outcomes
Values from the Scriptures
 Values Taught by Ramayana

1) Sibling Bonding

2) Differentiating between Good

and Evil

3) The importance of Promise

and Commitment

4) Affection and Reverence for

Parents

5) Be warned of Bad Advice

6) Defending the Weak

 SIBLING BONDING

i. The love among the brothers: Rama, Lakshman,

Bharat and Shatrughna.

ii. Decision of Lakshman to give up luxuries and

live with elder brother for 14 years, full of
hardship in a forest.

iii. When Surpanakha was insulted by Lakshman, her

brothers Khaara and Dooshan had rushed to
avenge her.
DIFFERENTIATING BETWEEN GOOD AND EVIL
i. Bharat, who was awarded the honour of ruling the
mighty kingdom of Ayodhya. Bharat could have
just ruled by becoming the king and thereby
enjoying the absolute power and luxury that came
with it, but his sense of justice would not permit
him to do what most others would greedily do.

ii. Instead, upon learning that his mother Kaikeyi had

unjustly managed to get Rama banished from
Ayodhya, he immediately went into the forest to
look for Rama and offer him his rightful position
as the ruler of Ayodhya.
 IMPORTANCE OF PROMISE
• Dashranth fulfilling two boons of Kaikeyi of
first exile to Rama and second Bharat to be
crowned as King instead.

• Dashtranth pleaded Rama not to leave, Rama

reminded his father the value of a promise
given and left Ayodhya to keep his father’s
word.
 BE WARNED OF BAD ADVICE

i. Manthara, the evil one, not only poisoned

Kaikeyi’s mind into demanding those two
appalling boons, but also ruined her life.
She not only lost her beloved husband but
also her son Bharat, for whom she had
asked for those very boons.

ii. It teaches to be vigilant in order to avoid

being misled.
 Values from Ramayana
• Sibling Bonding
• Differentiating between Good and Bad
• Keeping the promise and commitment
• Affection and reverence for parents
• Be Aware of Bad advice
Values from Bhagvat Gita
 Values from Mahabharata
Characters Value

Karna Generosity

Arjun Courage

Abhimanyu and Ghatotkach Commitment

Karna - Duryodhana Friendship

Yudhistra Patience

Bhima Obedience

Pandavas Unity
 Values from Islam
1) Goodness in All
2) Patience till Death
3) Avoiding Profane Talk
4) Unity
5) Being Trust Worthy
 Five Pillars of Islam

•Profession of Faith (shahada). The belief that "There is no

god but God, and Muhammad is the Messenger of God" is
central to Islam. ...
•Prayer (salat). Muslims pray facing Mecca five times a day:
at dawn, noon, mid-afternoon, sunset, and after dark. ...
•Alms (zakat). ...
•Fasting (sawm). ...
•Pilgrimage (hajj).

•…………….

•बिस्मिल्लाह अल रहमान अल रहीम’ = 786 letters in Urdu language

 Values from Bible
1) Worship only God
2) Be Humble
3) Be Honest
4) Do not Hold Grudge
5) Be Generous
6) Practice What you Preach