ETHICS AND BUSINESS ETHICS

Business Ethics
o Business ethics refers to the set of moral values or standard or norms which
govern the activities of a businessman.
o Ethics defines what is right and what is wrong.
For a businessman the ethical decision expected are:
 To provide the customers with true information regarding the products and services.
 Allowing the customer to make free choice.
 Providing quality products of reasonable price etc.

Types of business activities

All human activities concerned with earning money are included under the term
business. Cultivation by a farmer, teaching by a teacher and treatment by a patient from a
doctor are also treated as business activates.
There are different types of business activities, which may be classified as follow:
1. Industry
2. Commerce
Industry: industry refers to an activity which converts raw material to into useful products.
Manufacturing enterprises are engaged in the production of goods. These kind of industries
can be classified as follow:
Analytical Industry / Enterprises: In analytical industry the basic raw material is
broken into different parts to produce finishing goods.
Synthetics Industry / Enterprises: In synthetic enterprises two or more material are
mixed to manufacture some new product.
Assembling Industry / Enterprises: in assembling enterprises various finished
products are combined to produce a new finished product.
Commerce:
 Commerce is an important branch of business.
 It refers to the purchasing and selling of goods and services in exchange for
money or in kind.
 Commerce includes all processes related to the exchange of goods and
services.
Commerce can be divided into two categories
1. Internal trade: Internal trade refer to buying and selling of goods within the
geographical limits of a country
 2. External trade: External trade refer to buying and selling of goods beyond the
geographical limits of a country.

Meanings of business
Business is an economic activity which involve production, or purchase of goods for
sale, transfer or exchange of goods for earning profit.
According to Lewis Honey:
“Business is a human activity directed towards producing or acquiring wealth through
buying and selling goods”.
Characteristics of Business
i. An economic activity: Main aim to earn money and not psychological satisfaction.
ii. Production and procurement of goods and services
o Either produce or procure goods and services from other producers.
o Deals in consumer goods, industrial goods or services (banking, insurance etc.)
iii. Sale of goods or services for satisfaction of human need
o Production, sale or exchange of goods and services are popular business activities.
o Production for self-consumption or purchasing a good for gift purpose is not
business.
iv. Dealing in goods or services on a regular basis
o Buying or selling goods or services once or twice is not business.
o Only regular buying or selling of goods or services for economic motive is
business.
v. Profit earning
o No businessman can survive without earning sufficient profit.
o If profit motive is missing in a transaction, then it cannot be considered as
business transaction.
vi. Uncertainty
o Presence of risk factor and possibility of loses.
o Businessman will always earn profit is not certain.
vii. Customer satisfaction
 Objectives of business
The structure, direction and management of a business closely depend upon its
objectives. Some of the important objectives are as follows:
I. Economic objective
II. Social objective
III. Human objective
IV. National objective
Economic objective
Business is basically an economic activity, hence its primary objective are economic in
nature. Main economic objective of are:
 Earning profit: A business enterprise is established for earning some income
for earning some income (profit).
o Profit is essential for the survival of every business.
o Profit are also necessary for the expansion and growth of business.
 Creating customers: Profit arise from businessman efforts to satisfy the need
and wants of customers.
o No business can succeed without providing customers value for their
money.
 Innovation: Business can be successful only when its create new design, better
machines, improved technology etc.
o Innovation includes improvement in management, production, selling
services etc.
 Growth
 Survival
 Prestige

Social objective
Business is a part of society and it cannot survive and grow without the support of
society. Therefore, business must discharge social responsibilities in addition to earning
profit some of the social objective are discussed as under:
 Supply desired goods at reasonable price: Good and services should be of good
quality are these should be of reasonable price.
 Fair remuneration to employees: Employees must be given fair compensation for
their works. In addition to wages and salary, a reasonable part of profit should be
distributed among employees in recognition of their contribution.
 Employment generation: Business should provide opportunities for gainful
employment to the members of the society. Unemployment has become a serious
problem and government is unable to offer jobs to all.
  Fair return to investors: Business is expected to pay fair return to shareholder and
creditor in the form of divided and interest. Investor also expect safely and
appreciation of their investment
 Social welfare: Business should provide support to social, cultural and religious
organizations. Business enterprises can build schools, colleges, library and hospital
etc.
 Payment of government dues: Every business enterprise should pay tax dues to
the government honestly and all the right time.

Human objective
Human objective of business are concerned with the well-being of labour. Their
objective helps in achieving economic and social objectives of business.
Some of these objectives are:
 Labour Welfare: Business must recognize the rights of labour and human factors
should be given due recognition. Proper opportunities should be provided for
utilizing individual talents and satisfaction aspiration of workers.
 Developing human resources: Employees must be provided the opportunities for
developing new skills. Human resources are the most valuable assets of business
and their development will help in the growth of business.
 Participative management: Employees should be allowed to take part in decision
making process of business. This will help in the development of employees. Such
participation will also provide for improving the quality of decision.
 Labour management corporation: business should strive for creating and
maintaining cordial employer-employee relations so as to ensure peace and
progress in industry.

National objective
National objectives are as under:
 Fully utilization of resources: business should use the national resources in the best
possible manner. Judicious allocation of the scarce resources is essential for growth
and development of the country.
 National self-reliance: It is the duty to business to help the government in increasing
export and in reducing dependence on imports.
 Development of small scale industries: Big business firm are expected to encourage
growth of small scale industries which are necessary for generating employment.
 Development of backward areas
 Control over pollution
 Business responsivities
Business responsibility is someone's duty (that often depends on the job level) to
perform or complete a task. The responsibilities of a business towards various interest
groups are as follows
 Responsibility toward consumers
o To provide quality goods and services at reasonable prices.
o To avoid artificial scarcity of products.
o To ensure customers satisfaction with survey.
o To avoid exploitation of customers.
o To maintain close link with customers through consumer cells
o To honor and protect rights of customers.
 Responsibility toward shareholders
o To ensure safety of investment.
o To ensure fair and regular return on investment
o To give complete information about the financial position of the business.
o To give them opportunities to participate in the decision making.
o To ensure appreciation of investment by proper utilization of resources.
o To make proper use of funds of shareholders.
o To undertake Research and development (R&D) activities.
o To give safety to investment of shareholders through growth.
 Responsibility toward shareholders
o Carrying on business with moral and ethical standards
o Prevention of environment pollution.
o Minimizing ecological imbalance.
o Contributing towards the development of social health and education.
o Making use of appropriate technology.

Ethical values
Ethical value denotes something's degree of importance, with the aim of
determining what action or life is best to do, or at least attempt to describe the value of
different actions.
 Ethical Decision Making
Managers and executives make hundreds of business decisions in an organization
every day in their business dealings. Many of these decisions may be morally and ethically
justifiable.
While some of them, often taken in the context of exigencies of business or
compulsions of competitive pressures may be unethical and even illegal.
Process of ethical decisions making.
Awareness  Judgment  Motivation  Behavior

Factor affecting in decision making

Some of the factors and personal characteristics that have an impact on decision makers are
described below.

 Corporate polices on ethics: If firm polices have doing all work in ethical
manners then it increases ethical decisions on the other hand if firm culture is
unethical then its employees also act as unethical.
 Significant factors: The who influence the work group like managers, co-
workers, subordinates, etc. called significant factors. They all impact directly or
indirectly in the business. Especially when revision these factors, then it also
impacts on the work place ethical decision.
 Moral: Moral are the roles people develop as result of cultural norms and
values. It depend mostly on nature on individual that what actually his
behavior is good or bad? So more morals more ethical organization.
 The influence of Co-workers: It is an idea that people learn ethical or unethical
behavior while interacting others. Associate, major impact on ethical decision
making.
 Individual factors: There are many factors like knowledge values, personal
goals, personality etc. called individual factors directly impact the ethical
decision making. In simple, there must be full appropriate knowledge for
ethical decision otherwise would be change of choosing unethical path.
Managerial Role in corporate Governance
Henry Milberg managerial Roles
Categories Roles
Interpersonal i. Figure-Head Role
Roles ii. The leader role
iii. The Liaison Role
Informational iv. The Monitor Role
Roles v. Dissemination Role
vi. Spokesperson Role
Decisional Roles vii. Entrepreneur Role
viii. Disturbance / Conflict handler
ix. Resource Allocator
x. Negotiator
1. Interpersonal Roles
The manager maintains an interpersonal role due to his formal, power and state.
These roles include the following
 Figure head: Every manager plays such role as the head or chief of the
organization which is symbolic or social and ceremonial in nature.
 Leader: this role involves influencing, leading and developing subordinates to
achieve organizational goals.
 Liaison: In this role, a manager develops and maintains a network of contacts and
informers both outside and inside the organization.

2. Informational Roles
All managers maintain and develop information network by creating a network of
interpersonal relations with others. Under it manager play the following roles.
 Monitor: As a monitor a manager has to search, receive, collect wide variety of
information for developing plans for decision making and other managerial
functions.
 Dissemination: A manager provides the collected information according to
demand and use to subordinates and concerned units.
 Spokesperson: in this role the manager conveys various types of information to
the external parties about the organizations plans, policies, programs through
proper communication media.
3. Decisional Roles
It is the role of managers to create strategy formulation and decision making. These are
 Entrepreneur: By this role a manager identifies various opportunities threats,
strengths and weaknesses of organization and accordingly implements change
and takes corrective actions.
 Disturbance: The managers remove the daily riots, troubles, conflicts and
distractions that occur day to day in an organization.
 Resource allocator: In this a manager makes work plan or programs of time
management allocation of resources like finance, law material etc.
 Negotiator: the manager negotiates with different groups of different parties such
as labour union, clients, governments and other agencies and benefits.
 Simon’s decision making process
Herbert A. Simon planned a model for decision making that was known as the
Simon’s model of decision making. According to Herbert A. Simon, the decision making
model is based on the following sequence of steps, these steps are
i. Identify the problem
ii. Generating alternative solution
iii. Selecting a solution
iv. Implementing and evaluation the solution
This model has the following three phases:
o The intelligence phase
o The design phase
o The choice phase
Intelligence: The intelligence phase of the decision making process involves problem
searching and problem formulating.
Problem Searching: For searching the problem, the reality or actual is compared to
some standards. Differences are measured and the differences are evaluated to determine
whether there is any problem or not.
Problem formulating: When the problem is identified there is always a risk of solving
the wrong problem. In problem formulation, establishing relations with some problem
solved earlier or an analogy proves quite useful.
Design Phase: In this phase, various alternatives are developed in order to get the best
possible alternative to solve a particular problem. The decision maker makes a detailed
analysis of each and every alternative before taking the final decision.
Choice Phase: In is the stage in which the possible solutions are compared against one
another to find out the most suitable solution.
 Ethical Corporate behavior
Organizational ethics is used to consider the issues of morality and rationality in
organizations. Organizational ethics is completely different from management ethics.
Organizational ethical issues can be handled at three levels. These levels are:
 Corporate mission
 Constituency relations
 Policies and practices
Corporate mission refers to the objectives of an organization that are used to define
its ethical responsibilities.
Constituency relations define the responsibilities of the elements of an organization.
The elements of an organization may be employees, customers, suppliers, shareholders and
the general public.
Organizational ethics can also be used to evaluate the policies and practices of the
organizations. Public commitment to ethical principles can give way to business and
administrative practices.
Organizational ethics also depends on the type of the organization. Organizations can
be classified by considering their economic and ethical concerns. Organizations can be
classified into four types. These are
Exploitative: Organizations with low economic and ethical concerns are called
exploitative organizations. These organizations utilize child labour and use rivers for
dumping wastes to maximize their profits.
Manipulative: Organizations with high economic performance concerns and low
ethical concerns are called manipulative organizations. These organizations use tax laws,
labour laws and union leaders to maximize profit.
Holistic: Organizations with high ethical concerns and low economic concerns are
called holistic organizations. These organizations spend their money in social and
environmental purposes.
Balanced: Balanced organizations have high ethical and economic concerns. These
types of organizations gain profit as well as work for social and environmental purposes
What employer’s responsibility on employees?

All the rights of an employee in the organization have been mentioned below:
1. Break time
Irrespective of the company size, status, turnover, and the working hours on a specific
day, employees are still eligible to receive at least half an hour break to freshen up and
calm themselves.
2. Fixed working hours
The employee has a right to pack up and leave for the day after completing his daily
working hours. In case of special projects which need the employee’s presence, he can ask
the employer to provide the extra pay for the extra hours spent at the workplace.
3. Safe and healthy work environment
With safe culture, we also refer to the 24*7 electricity, AC facility, clean washrooms,
kitchens, no bullying, no harassment, women safety, male safety, etc.
4. Medical Claim Facility
The organization generally provides medical claim facilities to their employees if some
mis-happening or accident occurs within the organization. It is solely the shared
responsibility to ensure that the office environment is safe and free of such threats.
5. Saying no to work on Holidays
Employees hold all rights to refuse to work on the paid holidays. Nobody from the
company can force him to open his laptop and start working from home on the paid
holidays.
6. Paid leaves
7. Availability of company resources
8. An organized work place
9. Privacy in the workplace
10.Reasonable treatment
11.Right to ask unfair terminations
What employee’s responsibility on employers
What about responsibilities that employees have to you as their employer? While your
employees don't really have any responsibilities to you legally, most companies expect
employees to recognize the following responsibilities:
1. Obedience.
Obeying rules, policies, and work directions and commands is a basic part of what it
means to be an employee.
2. Dealing honestly with the employer.
That means not lying or stealing from the employer, and honestly representing
himself/herself in an employment application.
3. Working with reasonable care and skill.
In other words, the employee gives full value of the time for which they are being paid.
4. Not disclosing information to others. confidential employer
5. Disclosing any possible conflict of interest.
This can include work for a competitor or a relationship that could compromise the
employer.
6. Reasonable performance
Employees must complete assigned tasks within the time limit they are expected to be
completed.
7. Caring for the employer's property, equipment, and facilities.