Business

Ethics

MANAGEMENT

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Ethics

Introduction
 The term “business ethics” includes both words: ethics and business. The “ethics”
element refers to the application of values within a business context. In the for profit
environment, the business context means that a firm must (usually) earn a profit in
order to survive and to serve its mission.
 Values and ethics in simple words mean principle or code of conduct that govern
transactions; in this case business transaction.
 These ethics are meant to analyse problems that come up in day to day course of
business operations. Apart from this it also applies to individuals who work in
organisations, their conduct and to the organisations as a whole.
 Nowadays business ethics determines the fundamental purpose of existence of a
company in many organisations. There is an ensuing battle between various groups,
for example between those who consider profit or shareholder wealth maximisation
as the main aim of the company and those who consider value creation as main
purpose of the organisation.
 The former argues that if an organisations main objective is to increase the
shareholder’s wealth, then considering the rights or interests of any other group is
unethical.
 The latter, similarly argue that profit maximisation cannot be at the expense of the
environment and other groups in the society that contribute to the well-being of the
business.
 Nevertheless, business ethics continues to a debatable topic. Many argue that lots
of organisations use it to seek competitive advantage and creating a fair image in
the eyes of consumers and other stakeholders. There are advantages also like
transparency and accountability.

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Importance of Ethics
Primarily it is the individual, the consumer, the employee or the human social unit of the
society who benefits from ethics. In addition, ethics is important because of the
following:
Satisfying Basic Human Needs: Being fair, honest and ethical is one the basic human
needs. Every employee desires to be such himself and to work for an organization that
is fair and ethical in its practices.
 Creating Credibility: An organization that is believed to be driven by moral values is
respected in the society even by those who may have no information about the
working and the businesses or an organization. Infosys, for example is perceived as
an organization for good corporate governance and social responsibility initiatives.
This perception is held far and wide even by those who do not even know what
business the organization is into.
 Uniting People and Leadership: An organization driven by values is revered by its
employees also. They are the common thread that brings the employees and the
decision makers on a common platform. This goes a long way in aligning behaviours
within the organization towards achievement of one common goal or mission.
 Improving Decision Making: A man’s destiny is the sum total of all the decisions that
he/she takes in course of his life. The same holds true for organizations. Decisions
are driven by values. For example, an organization that does not value competition
will be fierce in its operations aiming to wipe out its competitors and establish a
monopoly in the market.
 Long Term Gains: Organizations guided by ethics and values are profitable in the
long run, though in the short run they may seem to lose money. Tata group, one of
the largest business conglomerates in India was seen on the verge of decline at the
beginning of 1990’s, which soon turned out to be otherwise. The same company’s
Tata NANO car was predicted as a failure, and failed to do well but the same is
picking up fast now.
 Securing the Society: Often ethics succeeds law in safeguarding the society. The
law machinery is often found acting as a mute spectator, unable to save the society
and the environment. Technology, for example is growing at such a fast pace that
the by the time law comes up with a regulation we have a newer technology with
new threats replacing the older one. Lawyers and public interest litigations may not
help a great deal but ethics can.

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 Ethics tries to create a sense of right and wrong in the organizations and often when
the law fails, it is the ethics that may stop organizations from harming the society or
environment.
 Ethics tries to create a sense of right and wrong in the organizations and often when
the law fails, it is the ethics that may stop organizations from harming the society or
environment.

Why Ethical Problems Occur In

Business

 Ethical problems occur in businesses due to several factors involving the behaviors
of competitors, producers, and consumers. Ethical behavior is acting in ways that
are consistent with how the business world views moral principles and values.
 Following are some of the reasons why ethical problems occur in business.
 Lack of Integrity: The Business Dictionary provides the following definition of
Integrity: “Strict adherence to a moral code, reflected in transparent honesty and
complete harmony in what one thinks, says and does.” Lack of integrity causes
erosion of trust in the organisation.
 For example, Managers of an organisation misrepresent the balance sheet to gain
trust of investors is an example of lack of Integrity.
Organisational relationship problem: These are problems that arise when there is
no clearly stated mission, goal or objectives of a company. This leads to disorganisation
in the company and can lead to legal problems.
 For example, Conflicts, sexual harassment, annual leave disputes, bullying and
other employee relations issues can negatively impact your organization.
Conflict of interest: In business, a confl ict of interest arises when a person
chooses personal gain over duties to their employer, or to an organization in which they
are a stakeholder, or exploits their position for personal gain.
 For example, a manager favouring an employee for promotion or raise because of
their personal relationship instead of the deserving one is an example of conflict of
interest.

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Misleading advertisements: Marketing communication has an obligation to

perform legally and ethically and with social welfare in mind. Advertising is routinely
attacked for its misleading ads.
 For example, if a company advertises their product claiming that it slows down
ageing even if there is lack of results, it can be said that it's a misleading
advertisement.

Basic Work Ethics For an Organization

Ideally, the policies a business operates with are compassion, fairness, honour,
responsibility, and integrity. One of the best ways to communicate organizational ethics
is by training employees about company standards. Basic work ethics for any
organization should include:

 Uniform rules and regulations: An ethical organizational example is the common

treatment of all staff, i.e., with the same respect, regardless of race, culture, religion,
or lifestyle, with equal chances for promotion. Therefore, small company managers
should desist from favouring any one employee, for it can lead to lawsuits and is
also highly counterproductive.

 Communication of the rules and regulation to all employees: Company policies

must be clearly communicated to each employee with a transparency at all levels of
the hierarchy. Employees are the spine of all organizations and should have a say in
the goals and objectives of a firm.

 Respect for Employees: Respect employees and in return receive the same.
Regulations should not be so rigid, and therefore, don’t expect staff to attend work
two days before a marriage. If somebody is not well, don’t ask them to attend office
unless or until there’s an emergency.

 Allow a degree of freedom to employees without constant micro-

management: Key roles of responsibility need to be established on the first day of
joining with responsibilities commensurate with a person’s expertise. Employees
should be inducted into training if needed.

 Clear cut salary and promotion policy: Employees crib if they are underpaid.
Make sure they get what is deserved and decided in the presence of the person. A
major attrition factor is a poor appraisal, promotion prospects are ideally based on
merit, not favour. Clarity is crucial.

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 Clear and uniform holiday schedule: It is the responsibility of human resource

professionals to prepare the holiday calendar at the beginning of the year and
circulate the same among all employees.

 Effects of Work Ethics within an organization: Preferably a workplace ethic

culture will ensure that employers guide and mentor staff appropriately while
management treats all as equal. Transparency is essential.

 How Leadership ethics and Employee ethics can impact the

organization: Owner and executive level accountability is a vital function of
leadership. Executives, as equally as employees, are expected to be honest and
transparent. Organizations need to abide by ethical norms; all of which benefit the
consumer, the society and the firm.

 What are the core ethical elements that define the ethics of an
organization: There are at least four elements that aim to create an ethical
behavioural culture of employees within an organization.

 A written code of ethics and standards (ethical code).

 Ethics training for executives, managers, and employees.

 The availability of ethical situational advice (i.e. advice lines or offices).

 A confidential reporting system.

How to Develop Strong Work Ethics

The employment market is now so competitive that if one doesn’t have a positive work
ethic, then employers do not bat an eyelid about looking for someone who meets their
firm’s requirement.

Step 1: Be professional about your work

Professionalism is beyond a clean shirt, for it includes one’s values, attitude, and
demeanour. Practice being cordial and positive while refraining from gossip.
Knowing how to communicate constructively and positively, while respecting the
feelings of others is an invaluable tool. Respect others and develop a reputation
for having integrity, meaning honesty, fairness, and consistency in what you do
and say.

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Reliability and honesty: Work ethic that is more than completing long hours for
its foundation is integrity. To develop integrity, one can:

 Act the same when people are not watching you, as when they are.

 Perform consistently at the same level of quality. Be conscientious. Be honest

in all things.

 Honesty isn’t a business policy; it is a state of mind.

Deliver best outputs: A work ethic is fundamental to success at anything, plus it

makes you a valuable employee. For career advancement this is more important
than ever before. In work assignments strive to exceed expectations by paying
attention to details and making the quality of work your central priority. Everyone
can work fast, but few will deliver best quality outputs with few mistakes.

Keep everything in an organized method like a good file system for documents
(both soft and hard copy), so you can retrieve these easily to get on with the
essential tasks. All of us have times when we are more productive, some in the
early morning, some later at night. Identify and schedule the difficult work to be
completed in those periods.

Be consistent in delivering good quality work and earn good reputation:

Everything worthwhile accomplishing requires discipline. Remain focused on a
long-term goal while avoiding getting side-tracked by a short-term gratification.
To be persistent and able to follow through on assignments… Train yourself.

However productive you may be, there is always an opportunity to increase one’s
level of quality work. Effectiveness means doing the work that matters. Be
effective first, then become efficient. Efficient is achieving improved output in less
time. There is no point in becoming efficient at doing that non-value added work.

Step 2: Manage your time

Know your strength and weaknesses (including potential distractions, so

you can avoid them): Evaluate work. Identifying one’s weaknesses and making
a plan to improve these areas builds a stronger work ethic. One way of
evaluating this is to create a list summarizing the skills and requirements of your
work, and the strengths and weaknesses. Be honest about weaknesses, and
what it is that distracts you – this is step one in learning to manage those
weaknesses.

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Accelerate becoming a more productive employee by regularly visualizing

yourself as channelled toward higher accomplishments. Vision yourself as highly
efficient and feed the subconscious mind with this vision until it is accepted as a
command. The individual that you ‘‘vision”, is the individual that you “become”.
Lastingly successful people have one common denominator: they focus on
strengths and manage around any weaknesses

Set yourself deadlines for delivering even small tasks: Being able to
complete your tasks and finish what you start, is an essential part of character
building. You cannot imagine a fully mature, fully functioning person who is
unable to finish what she begins. The development of this habit is the key to long
-term success. Don’t waste time by doing stuff that is not important? Constantly
evaluate to check which things absolutely must get done.

Prioritize tasks and set the most important ones in the morning: Complete
projects and tasks immediately. A trademark behavior of a worker with a poor
work ethic is delaying work until another day, which usually only leads to an
incomplete or late project.

Avoid procrastination: Procrastinating is a great waste. Imagine all that could

be accomplished by eliminating procrastination from this moment on. To
overcome procrastination, first realize that it’s not the real issue. Procrastination,
laziness, bad time management, or lack of discipline, are merely symptoms of
the issue. The real reason is beneath this. You can also use the Pomodoro
technique to avoid procrastination.

Avoid negative talk and gossip: Keep the lazy, the negative minded, and the
unproductive, at arm’s length, for it’s a psychological prison. Associate with
ambitious, hard-working people, and soon count yourself amongst them.

 Provide feedback that improves situations and builds people up.

 Be an active listener and keep an open mind.

Step 3: Keep a balance and deliver consistent high performance work

Do sport, sleep well, and socialize: Play is best when it’s earned, equally
sleep. Earn sleep by working hard on one’s goals in the day. A good work ethic
isn’t just being glued to a computer. It is also understanding how to take care
with decent sleep, and eating nutritiously. Take time to relax and recharge while
keeping priorities in your life clear, helps maintain a good perspective at work.

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Step 4: Develop good work habits

Steer the self-development path towards choosing to be an employee with a

strong ethic, after all, creating a habit for oneself is really a question of being an
action-minded person. The ‘doing component’ flows easily when embracing the
‘being part.’

Create and learn habits: Values to inculcate and habitualize:

 Valuing punctuality and attendance.

 Valuing time, orderliness, neatness, and speed.

 Working smarter but not harder; being psychologically self-employed.

 Playing an internal game of working, yet enjoying the importance of relaxation

and rest.

“Do it now” habit: Never leave ‘till tomorrow what can be accomplished today.’
Good ethics habitualize both attitude, action, and inevitably – consequence: how
you do, what you do this moment.

 The initiative habit – positivity.

 The main cause of poor productivity and self-sabotage is procrastination, for

many reasons, including the perceptions that a task is unpleasant, may lead
to negative consequences, or is overwhelming.

 Cultivate flexibility.

“Do it right” habit: A disciplined habit makes a difference in the long term.
Don’t try to break bad habits. Alternatively, choose preferable substitutes that
you move forward to, in place of the old ones.

Other good habits: Concentration is the ability to stay on a task until it is

completed, by working in a straight line to get from where one is, without
distraction or diversion, to the destination, i.e., completion of the work.

 Get off to a good start.

 Clean up and get organized.

 Plan activities.

 Streamline work and emphasize the important work.

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 Concentrate on one work task at a time until completion.

 Work steadily.

 Make smart use of technology.

 Be in control of office paper, work in-basket, and e-mail.

 Multitask on routine matters.

 Make better use of time.

Don’t forget to create some quiet, uninterrupted time!

Core Elements of a Strong Work Ethics

It is difficult to define the elements of good work ethics, as it is such an individualistic
approach and thinking. What may be good work ethics for me may not be the same for
you. Much depends upon how each organization or person looks at work ethics and the
moral values that each follows. What moral values you practice in daily life will define
your attitude towards work and your work ethics. But there are a few common elements
that are universally followed and employers look for it in their employees.

 Honesty: This is the core element of work ethics; all the other elements are
based upon your honesty. Be honest about your successes and failures, take credit
only where due, do not steal other’s works or ideas, and own up to your failures.

 Integrity: Do not let people down, try to fulfi l your commitments, and be
consistent in your thoughts, action and behaviour.

 Impartiality/Fairness: Be fair to all, do not practice favouritism. Treat everyone

as equals.

 Alertness: Be aware of what is happening around and keep an eye on things.

 Openness: Share your ideas, results and resources with the other team
members, so that everyone has the same opportunity and know what you are doing.
Being secretive is counterproductive.

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 Respect for others: No matter how urgent a deadline or heated that tempers
become, remain diplomatic and poised and show grace under pressure. Whether
serving a client, meeting a customer or meeting with management, do the best to
respect other’s opinions, even in stressful circumstances. It shows one values
other’s individual worth and professional contribution.

 Reliability and Dependability: Means being punctual for work and meetings,
delivering assignments within budget and on schedule. Be reliable about keeping
promises for reputation precedes one so that clients, customers, and colleagues do
trust in you to do all that you say you will – everyone appreciates the stability this
embodies.

 Determination: Obstacles cannot stop you as they are a challenge to be

overcome. Embrace challenges positively and know that your role is to solve
problems with purpose and resilience. Push on, no matter how far it is necessary to
go.

 Dedication: Continue until the job is complete, and delivered. “It’s good enough” is
not sufficient for you and the team, as you aim to be “outstanding” in content and
quality. Put in the extra hours to get things right by attending to detail and
excellence.

 Accountability: Accept responsibility personally for one’s actions and outcomes in

all situations, plus avoid excuses when work does not proceed as planned –
admitting mistakes or oversights are used as a learning curve and will not be
repeated again. Employers expect employees to attain to high standards, and they
should fully support staff who accept responsibility, instead of passing the buck.

 Confidentiality: Any confi dential information of documents you have should

remain confidential. You cannot discuss it or show it to anyone else, other than the
people authorized to do so.

 Responsibility: Take responsibility for your thoughts, actions, behaviour and

work.

 Legality: Always work within the legal boundaries, do not break or twist the law to fit
your agenda.

 Competence: Improve your performance and competence by constantly

learning and including the new learning into your work.

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 Professionalism: From how one dresses and presents oneself in the business
world, to how others are treated, professionalism is such a very broad category that
it encompasses all the elements of a work ethic.

 Humility: Acknowledge other’s contribution, and share credit for successes. You
have integrity and are open to learning from mentors and others, even as you teach
via your action, example, and words. Though you take the work seriously, you are
also maintaining a sense of humor about yourself.

 Initiative: Do not be afraid to put forth your ideas or volunteer for work.

These days a work ethics is important in many situations. It is a skill that can be learned
by every person and has so often proved to be the path of success for many. All
businesses give a higher regard to an ethical employee, and hiring staff with positive
ethics is appreciated around the world.

Simply stating that “I have a good work ethic” is not the way to demonstrate it to an
employer. Don’t provide generic, wishy-washy utterings, allow the employer to visualize
your ethic by defining how they are incorporated in your accomplishments, without
condition.

Role of Management in Inculcating

Workplace Ethics
 Management needs to act as a source of inspiration for the employees. It is
generally observed that team managers, leaders influence their team members to a
large extent. Superiors strictly need to adhere to the rules and regulations of the
organization for their employees to follow the same. Don’t expect your team
members to sit till late if you yourself leave early.

 It is the role of the management to motivate the employees and guide them as to
what is right and wrong. Remember a boss is like the captain of the ship. It is your
responsibility to take your team members along and provide constant mentoring.

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 Constant communication between the management and employees is of utmost

importance in inculcating workplace ethics. Management ought to be transparent
with its employees. Let them have a say in company’s decisions. Let them decide
what is right and what is wrong for them. Sit with them, discuss, brainstorm ideas
and listen to what they have to say. Never ignore their opinions. Let them come out
with their grievances.

 Lend a sympathetic ear to their problems as well. Try to provide them a solution. If
you feel most of your employees have a problem coming to office early as they in
any case have to stay back till late in the evening as per the client’s availability,
please adjust the office timings accordingly. Be realistic and logical. If the problem is
genuine and faced by a major chunk of employees, there is no harm in changing the
policies. Think from the employee’s perspective as well. Policies should not be too
rigid.

 Don’t be too strict with the employees. If someone is not present in the office, please
do not call his family members to enquire about him. No one would like it. We all are
mature professionals to understand that if there is work, we need to finish it first
rather than waste our time in gossiping and surfing social networking sites.
Management can’t force employees to respect the organization. Respect must be
commanded and not demanded. Respect your employees if you expect the same in
return.

Code Of Ethics
A code of ethics is a guide of principles designed to help professionals conduct
business honestly and with integrity. A code of ethics document may outline the mission
and values of the business or organization, how professionals are supposed to
approach problems, the ethical principles based on the organization's core values, and
the standards to which the professional is held.

In some industries, including banking and insurance, specific laws govern business
conduct. In others, a code of ethics may be voluntarily adopted.

Following are the main types of code of ethics

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 Compliance-Based Code of Ethics

 For all businesses, laws regulate issues such as hiring and safety standards.
Compliance-based codes of ethics not only set guidelines for conduct but
also determine penalties for violations.

 In some industries, specific laws govern business conduct. These industries

formulate compliance-based codes of ethics to enforce laws and regulations.
Employees usually undergo formal training to learn the rules of conduct.

 Some companies appoint a compliance officer to ensure that the aims and
principles of the code of ethics are followed. He is tasked with keeping up to
date on changes in regulation codes and monitoring employee conduct to
encourage conformity.

 This type of code of ethics is based on clear-cut rules and well-defined

consequences rather than individual monitoring of personal behavior.

 Value-Based Code of Ethics:

 A value-based code of ethics addresses a company's core value system. It

may outline standards of responsible conduct as they relate to the larger
public good and the environment.

 Value-based ethical codes may require a greater degree of self-regulation

than compliance-based codes.

 Some codes of conduct contain language that addresses both compliance

and values. For example, a grocery store chain might create a code of
conduct that espouses the company's commitment to health and safety
regulations above financial gain.

 Code of ethics among professionals:

 Financial advisers registered with the financial regulator of the state are
bound by a code of ethics known as a fiduciary duty. This is a legal
requirement and also a code of loyalty that requires them to act in the best
interest of their clients.

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Importance of Code of Conduct

 The main purpose of a code of conduct is to set and maintain a standard for
acceptable behavior to all stakeholders in a company. It is a reminder to the
employees of what is expected from them. It further highlights that their actions
should be always aligned with the ethos of the business. In addition, it should
provide understanding of consequences and disciplinary actions if the conduct is
broken.

 It is often believed to be the same as code of ethics. However, that is not the case. A
code of conduct provides guidelines about acceptable behavior, while a code of
ethics is a set of principles about a company’s judgement.

 As previously mentioned, code of conduct for employees is likely to differ across

industries, although it should reflect on;

 The professional standards and behavior expected from the employees, freelancers,
partners and other relevant stakeholders in the organization.

 Integrity and ethical standards of the company demonstrating the core values of the
business which may include integrity itself, transparency or honesty among others. It
is imperative the document clearly outlines how to handle any conflict and what is
expected if conflict of interests occurs from the stakeholders.

 Level of professionalism, the employees should adopt in following the reputation and
standards of the business. The expected behavior should be aligned to the nature of
the profession itself. Thus, the tone of the document will vary across different
industries as some require more attention and comprehensiveness of the contents
of a code of conduct.

 Code of conduct also acts as a public statement providing the users and customers
of a business with understanding of the ethics of the company, how they data is
being handled and other information and standards that might concern the public.

 The document serves as a protection from fines regarded to ethical misconduct as is

proves the effort to prevent illegal behavior and follow best practices in the industry

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Code of Conduct Best Practices

 When developing a company code of conduct, you should bear in mind these best
practices;

 Avoid technical jargon and write the document for the reader.

 Take time to think about all the details that should be covered in the code of
conduct.

 Make it comprehensive and answer all the questions that might arise.

 Make it easily accessible by all the employees and other stakeholders.

 Design the document in line with the company branding and make it easy to
follow.

Sections to Include in Code of Conduct

 The contents of the document will differ from business to business but you can find
the standard sections of conduct that are usually covered below;

 Company core values and vision

 Bans on illegal activities: activities including smoking, drinking, foul language

 Internet usage: Cyber security; corporate email; social media

 Discrimination and harassment

 Confidentiality procedures

 Dress code

 Community involvement

 Gift and entertainment policies

 Meal and rest break policies

 Relationships in the workplace

 Violation of the code of conduct

 Compliance program

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 As stated, code of conduct should provide clear and thorough information that
leaves no space for confusion. However, in case your employees require further
guidance it is essential to provide them with a channel/information, where they can
seek more information.

Example of code of conduct: Intels Code of conduct

 The Code affirms Intel’s five principles of conduct:

 Conduct Business with Honesty and Integrity

 Follow the Letter and Spirit of the Law

 Treat Each Other Fairly

 Act in the Best Interests of Intel and Avoid Conflicts of Interest

 Protect the Company’s Assets and Confidential Information

What Is the Difference Between a Code of Ethics and

a Code of Conduct?
 A code of ethics is broader in its nature, outlining what is acceptable for the
company in terms of integrity and how it operates. A code of conduct is more
focused in nature and instructs how a business' employees should act daily and in
specific situations.

Resolving Ethical Issues

Though there are no golden rules to resolve ethical issues but managers can take a
number of initiatives to resolve ethical issues. A brief description is given below.

 Know the Principles

 In ethical decision making there are three basic principles that can be used
for resolution of problem. These three principles are that of intuitionism, moral
idealism and utilitarianism.

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 The principle of intuition works on the assumption that the HR person or the
manager is competent enough to understand the seriousness of the situation
and act accordingly, such that the final decision does not bring any harm to
any person involved directly or indirectly.

 The principle of moral idealism on the other hand states that there is a clear
distinction between good and bad, between what is acceptable and what is
not and that the same is true for all situations. It therefore asks to abide by
the rule of law without any exception.

 Utilitarianism concerns itself with the results or the implications. There is no

clear distinction between what is good and what is bad; the focus is on the
situation and the outcome. What may be acceptable in a certain situation can
be unacceptable at some other place. It underlines that if the net result of the
decision is an increase in the happiness of the organization, the decision is
the right one.

 Debate Moral Choices

 Before taking a decision, moral decisions need to be thought upon and not
just accepted blindly. It is a good idea to make hypothetical situations,
develop case studies and then engage others in brainstorming upon the
same. This throws some light into the unknown aspects and widens the
horizon of understanding and rational decision making.

 Balance Sheet Approach

 In balance sheet approach, the manager writes down the pros and cons of
the decision. This helps arrive at a clear picture of things and by organizing
things in a better way.

 Engage People Up and Down the Hierarchy

 One good practice is to announce ones stand on various ethical issues loudly
such that a clear message to every member of the organization and to those
who are at the greater risk of falling prey to unethical practices. This will
prevent the employees from resorting to unethical means.

 Integrating Ethical Decision Making into Strategic Management

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 Morality and ethical make up for a perennial debate and ethical perfection is
almost impossible. A better way to deal with this is to integrate ethical
decision making into strategic management of the organization. The way the
HR manager gains an alternate perspective rather than the traditional
employee oriented or stakeholder oriented view.

All these steps can bring better clarity into resolving ethical dilemmas. The choice lies
with the manager and his own and the organization value clarity.

Theories of Business Ethics

The theories of business ethics can be divided into two categories:

1. Teleological theories, and

2. Deontological theories.

1. Teleological Theories:

 According to teleological theories the Tightness of an action is determined

solely by its consequences rather than by any feature of the action itself.
Actions that result in greatest possible balance of good or evil are considered
ethical. Thus, teleological theories are based on the concept of goodness.

 Now the question is which is good and what is evil. In classical utilitarianism,
pleasure is regarded good, and pain is considered evil. In broader terms,
goodness is human well-being.

 Bentham and Mill explained the doctrine of utilitarianism:

 The Principle of Utility:

Jeremy Bentham (1748-1832) explains this principle as follows:

By the principle of utility is meant that principle which approves or

disapproves of every action whatsoever, according to the tendency which
it appears to have to augment or diminish the happiness of the party
whose interest is in question – or, what is the same thing in other words,
to promote or to oppose that happiness.”

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Thus, the consequences of an action are measured in terms of the

pleasure and pain caused to different individuals. Bentham suggested a
procedure called hedonistic calculus for this purpose.

Bentham’s theory is criticised for two reasons. First, it is not always

possible to measure in quantities the pleasure and pain caused by an
action. Second, pleasure does not constitute human well-being. Even pigs
are capable of pleasure and his theory is criticised as a ‘pig philosophy’ fit
only for swine.

According to critics, one absurd consequence of Bentham’s principle is

that it would be better to live the life of a satisfied pig than that of a
dissatisfied human being such as Socrates. For human beings, friendship
and aesthetic enjoyment are as good as pleasure.

 The Principle of Utilitarianism:

John Stuart Mill (1806-1873) modified the principle of utility by recognising

that pleasures differ in their quality which is an important as the quantity of
pleasure. Mill concluded, “It is better to be a human being dissatisfied than
a pig satisfied; better to be Socrates dissatisfied than a fool satisfied. And
if the fools, or the pig, are of a different opinion, it is because they know
only their side of the question.”

Thus, there are two forms of utilitarianism:

a. Action utilitarianism under which an action is right if and only if it

produces the greatest balance of pleasure over pain for
everyone. For example, telling a lie or breaking a promise is
right if its consequences are better than those of any alternative
course of action. Thus, classical utilitarianism does not require
observing rules such as “Tell the Truth.”

b. Rule Utilitarianism under which an action is right if and only if it

confirms to generally accepted rules and produces the greatest
balance of pleasure over pain.

c. Act utilitarianism is simple and easily understood. But rule

utilitarianism is morally more sound and does not require
calculating the consequences of each action.

 The principle of utilitarianism consists of the following elements:

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i. Consequentialism – The Tightness of any action depends solely

on its consequences.

ii. Hedonism – Pleasure alone is good.

iii. Maximisation – A right action is one that creates greatest

amount of net pleasure.

iv. Universalism – Everyone’s consequences are alike.

 Advantages of Teleological Theories:

Teleological theories are consistent with the ordinary moral reasoning.

Utilitarianism why telling the truth, keeping promise, and other acts which
provide some benefit are morally relevant.

Teleological theories provide an objective and precise method for moral

decision-making. A decision maker can choose the right course of action
by calculating and comparing the consequences of different alternatives.

Economists assume that people seek to maximise their utility or welfare.

The economic theory is based on the ethical theory of utilitarianism.

2. Deontological Theories:

 According to deontological theories certain actions are right not due to some
benefit to self or others but due to their basic nature or the rules underlying
them. For example, bribery by its very nature is wrong irrespective of its
consequences.

 Similarly, the Golden Rule “Do unto others as you want them do unto you”
appeals to human dignity and respect for others.

 W.D. Ross, the 20th century Britisher philosopher has given the following
moral rules:

I. Duties of Fidelity — to keep promises, both explicit and implicit, and to

tell the truth.

II. Duties of Reparation — to compensate people for injury that we have

wrongfully inflicted on them.

III. Duties of Gratitude — to return favours that others do for us.

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I. Duties of Justice — to ensure that goods are distributed according to

people’s merits.

II. Duties of Beneficence — to do whatever we can to improve the

condition of others.

III. Duties of Self-improvement — to improve our own condition with

respect to virtue and intelligence.

IV. Duties of Non-maleficence — to avoid injury to other.

Thus, deontological theories refute the argument that consequences

determine what we ought to do. Actions are right or wrong not because of
their consequences but because of our duty or obligation.

 Deontological theories have the following merits:

Deontological theories make sense in cases in which consequences are

irrelevant. It appears more sensible to care for relations than for
consequences. For example, it is the duty of a manufacturer to honour the
warranty on a defective product even when the cost of doing so is more
than the benefits.

Another merit of deontological theories is that they consider the role of

motives in evaluating actions. For example, two people give equal
amounts to charity. Here their benefit is the same. But the action of the
person who denoted due to genuine concern for poor is better than that of
the person who donated to impress others. Thus, the motive with which
actions are done determine their Tightness.

 Deontological theories suffer from the following weaknesses:

Deontological theories fail to provide a precise criterion to understand our

moral obligations and to resolve moral conflict. Ross gave no order of
priority among his rules and when these rules are in conflict there is no
guide. For example, telling the truth or keeping a promise may cause
harm to someone.

 Virtue ethics

 The virtue ethical theory judges a person by their character rather than by an
action that may deviate from their normal behavior.

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 It takes the person’s morals, reputation, and motivation into account when
rating an unusual and irregular behavior that is considered unethical.

 For instance, if a person plagiarized a passage that was later detected by a

peer, the peer who knows the person well will understand the person’s
character and will judge the friend accordingly.

 Conversely, a person who has a reputation for academic misconduct is more

likely to be judged harshly for plagiarizing because of their consistent past of
unethical behavior.

 One weakness of virtue ethical theory is that it does not take into
consideration a person’s change in moral character.

 Rights

 In ethical theories based on rights, the rights established by a society are

protected and given the highest priority.

 Rights are considered to be ethically correct and valid since a large

population endorses them.

 Individuals may also bestow rights upon others if they have the ability and
resources to do so.

 For example, a person may say that her friend may borrow her laptop for the
afternoon. The friend who was given the ability to borrow the laptop now has
a right to the laptop in the afternoon.

 A major complication of this theory on a larger scale is that one must

decipher what the characteristics of a right are in a society. The society has
to determine what right it wants to uphold and give to its citizens.

 Ethical egoism

 Ethical egoism is a normative ethical position which holds that moral agents
ought to act in their own self-interest.

 Ethical egoism, at least within the field of business ethics, is one of the most
influential and debated ethical theories.

 The immediate attraction of ethical egoism within the field of business ethics
seems to be that ethical egoism focuses on what is in the company’s best
interest.

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 Companies focusing solely on profit maximization seem thus to be acting in

accordance with ethical egoism.

 Relativism theory

 Ethical relativism is the theory that holds that morality is relative to the norms
of one's culture. That is, whether an action is right or wrong depends on the
moral norms of the society in which it is practiced.

 The same action may be morally right in one society but be morally wrong in
another. For the ethical relativist, there are no universal moral standards that
can be universally applied to all peoples at all times.

 The only moral standards against which a society's practices can be judged
are its own. If ethical relativism is correct, there can be no common
framework for resolving moral disputes or for reaching agreement on ethical
matters among members of different societies.

 Most ethicists reject the theory of ethical relativism. Some claim that while
the moral practices of societies may differ, the fundamental moral principles
underlying these practices do not.

Morale Issues in Business

Following are the examples of morale issues in business

 Ethics in Compliance:

 Compliance issues cover broader business ethics concerns. In general, a

problem arises when the company’s interests are used to outweigh societal
or business norms and law.

 Compliance ethical issues in business are often tied to companies straying

from the way they are legally responsible for conducting business.

 Businesses are required to comply with all environmental, central and state
regulations. If they don’t, they can jeopardize the health and livelihood of
those within and outside of their company. Some businesses knowingly
disregard these regulations to improve profits.

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 One of the ethical issues in business examples is a company that illegally

dumps its waste. They know that it is wrong but do it because it reduces the
cost of finding safe alternatives.

 Ethics in Finance:
 Ethics in finance is one of the main things which everyone has to follow from
small, medium and big level companies.
 It is considered important as without a financial component no business can
run for a long time.

 Ethical issues in Finance

 Financial markets: Insider trading and other unethical practices like Churing
are major issues in financial market
 Hostile takeovers: The term hostile takeover refers to the acquisition of one
company by another corporation against the wishes of the former.
 Financial statements: Misinterpretation of financial statements for gaining
investors' trust in the company.

 Ethics in Human Resource:

 It deals with the enforcement of the rights of employees in an enterprise.
 Such rights are as follows:
 Having a right to work and be compensated for the same
 Possessing a right for free association and participation
 Enjoying a right for fair treatment in an enterprise
 Holding a right to work in a hazard-free environment
 Blowing whistle (an activity where an employee can raise voice
against any wrong practice of anyone in an enterprise)

 Ethics in Marketing:
 Deals with a number of issues, which are as follows:
 Misinforming the customers about the products or services
 Deciding high prices for the products and services
 Creating false impression on the customers/consumers about the fea-
tures of products
 Promoting sexual attitudes through advertising; thus, affecting the
young generation and children.

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Ethical Principles in Business

Organisational Structure and Ethics

 Organizational structure plays crucial role in a number of organizational decisions

and activities.

 the organizational structure lays out the whole foundation of the organization.
Organizational structure identifies how many divisions will work there in the
organization and who will report to whom.

 It also identifies the systems through which the work of various divisions will be
coordinated to accomplish the common organizational objective.

 Various experts have provided that the organizational structure of a firm has lot of
influence on the ethical behavior shown by the firm. As Ferrell has said, “An
organization’s structure is important to the study of business ethics because the
various roles and job descriptions that comprise that structure may create
opportunities for unethical behavior.”

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Role of Board of Directors

 The board of directors is often held responsible for the decisions taken by the
company and hence are answerable to the shareholders as well as the regulators.

 The role of the board of directors can be summed up in one single sentence: the
buck stops with them and hence they are the final authority as far as the company
is concerned.

 Apart from these roles and duties, the board of directors is also answerable to the
shareholders and the regulators.

 So, this means that the board of directors must take decisions that are in the larger
interests of the shareholders and they must protect the interests of the
shareholders at all costs.

 This brings us to the final aspect that the board of directors has to have a coherent
approach towards managing the company and hence, must be consensual in its
decision making.

 Unless the board of directors agrees on decisions either unanimously or through a

majority vote, there cannot be movement for the company. Hence, it is clear that
boardroom battles and directors with hidden agendas can be avoided to the extent
possible in the larger interest.

 Since the board has the final say in matters concerning the company, the CEO and
the leadership have to present the information truthfully and accurately.

 In the case of Satyam, there were allegations that the CEO and some of the
compromised members of the board kept the other directors in the dark about some
key decisions. This should not be allowed to happen.

Best practices in business ethics

 Develop ethical standards: An integral fi rst step is to formalize your

expectations and make it clear about which behaviors are and aren’t acceptable. If
you haven’t done so already, create a code of ethics section in your employee
handbook that outlines proper business conduct. This should eliminate any
confusion and ambiguity about your company’s ethical practices and keep
everyone on the same page.

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 Ensure proper behaviour of leaders: It’s important that you don’t tolerate
unacceptable behavior and show that there are consequences. Holding employees
accountable should prevent the perpetuation of any unsavory behaviors and nip
them before they get out of control.

 Praise positive behaviour: Just as it’s important to stomp out unethical practices,
it’s equally important to praise your employees for following best practices. This
doesn’t have to be anything over the top, but you should make it a point to
acknowledge individuals who live up to expectations. Doing so should serve as
positive reinforcement, which can have some long-term benefits for your business.

 Be diligent about enforcing policies: Not everyone is going to uphold every

single ethical expectation 100 percent of the time, and rules will inevitably be
broken. But, it’s important that you don’t tolerate unacceptable behavior and show
that there are consequences. Holding employees accountable should prevent the
perpetuation of any unsavory behaviors and nip them before they get out of control.

 Promote Community involvement: A common thread among some of the

world’s most ethical companies is, most tend to place an emphasis on community
involvement and are genuinely interested in having a positive impact on the world.
Whether it’s raising money for local causes, establishing volunteer programs for
employees or donating to worthy charities. This creates a positive impact.

Ethics and Indian Corporate Culture

 Ethics in India is based on a number of scriptures, thoughts, ideas, and Vedas. In
India, the organizational culture is divided into two broad divisions, namely
professional culture and community culture. The professional culture helps the,
employees to maintain a certain acceptable level of discipline in the enterprise.

 The community culture of an enterprise emerges from the varied cultural

backgrounds to which its employees belong. One important aspect of organizational
community culture is that the beliefs and views of any particular culture or religion
should not alienate any individual belonging to another culture. The Indian corporate
culture has borrowed many ethical values that have been taught by Indian
scriptures.

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 Some of these ethical values are as follows:

a. Respect – Respect means that every individual should have respect for the
beliefs and values of other individuals. In a multi-ethnic country as India, the
people should respect each other’s views, beliefs, and ideas to maintain
good mutual relationships.

b. Trust – Trust means that the employees of an enterprise should cultivate

mutual trust and faith in each other. Doubts may create misunderstandings,
problems, and chaos among individuals, and thus need to be avoided. Such
doubts can be solved by placing trust in each other to facilitate a better
working of an enterprise.

c. Spirituality – It emphasizes the positive inner transformation of an

individual’s life. An individual performs efficiently and feels satisfied at
workplace when he/she is in peaceful and contented frame of mind. Now-a-
days, the enterprises are realizing the importance of spirituality,
contemplation, meditation, and yoga practices, which are the essence of the
Indian culture. Such practices help people to lead a more sensible life,
increase work efficiency, and decrease stress levels.

d. Tolerance – It helps to maintain cordial relationships among the employees

of an enterprise. Tolerance refers to increase in the level of adaptability of an
employee to various organizational changes. The individuals need to be
permissible and receptive to the challenges of their work. They should
accept people as they are without judging them.

e. Flexibility – Flexibility refers to the degree at which an individual can adapt

with the surroundings in the organizational environment. It takes into account
the receptive and adaptive nature of an individual towards fellow employees
and assigned tasks.

f. Sincerity – Sincerity refers to truthfulness and transparency in the nature

and behavior of employees in an enterprise. It also necessitates an honest
code of conduct in an enterprise.

g. Patience – Patience refers to the degree at which the individuals can

tolerate any delays in the fulfilment of their wishes or goals. Individuals with
high degree of patience are not affected by delays in getting rewards for
their accomplished tasks.

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e. Perseverance – Perseverance refers to the quality of an individual to not to

give up soon and keep on trying for achieving goals. Individuals with
perseverance can keep their spirits high to achieve the desired goals.

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