SOC SCI 108

BUSINESS ETHICS
AND
SOCIAL RESPONSIBILITY

Module 3:
Code of Ethics in Business
 Lesson

1 Ethics in Business
Few years from now, you will be employed whether in a public office or in a private enterprise.
As an employee, it is very important that you display good ethics, especially in your workplace. This
module was prepared for you so that you will have a good interpersonal relationship with all the people
around you, specifically with the ones you will work with.

Additionally, you are expected to:

1. define ethics;
2. explain why ethics is important in business;
3. classify the given ethical issues; and
4. create a good situation from the choices given.

Definition of Ethics
The term Ethics is derived from the Greek word ethos which means
“characteristic way of thinking”. Ethics, as a science, does not only evaluate the morality of our human
conduct but also provides us with a common understanding of the universal, objective, and irreversible
moral principles that should govern our human behavior and guide our moral decisions (Roa, 2011).
Ethics are moral principles that guide the conduct of the individual (Racelis, 2017). These are
rules of behavior based on ideas about what is morally good and bad (Merriam-Webster Dictionary).
Why is ethics important in business?
Ethical conduct, whether at the corporate, professional, or personal level, is a direct reflection of
the principles and values which regulate the person and the institution he/she represents. Organizations
establish their own culture that is socially expressed as their ideals. Such principles or ideals have an
impact on the relationships within the company, efficiency, prestige, performance and retention of
employees, legalities, and the wider community they work in.

As a result, most organizations generate a list of organizational values and codes of conduct to be
recognized and adhered by all workers. Motivating and enhancing constructive actions, and at the same
time building an atmosphere that prevents unethical behavior are vital obligations on the part of both
administrators and workers.

How to Apply Ethics

At the individual level, organizations ought to concentrate on improving and encouraging every
employee to respect and adhere to ethical principles. Certain aspects of individual ethics have their roots
in the individual. Achieving a strong sense of professionalism and recognizing certain professional
decisions' ethical implications are the key components of education, individual reflection, and
experience.

Examples of Ethical Issues in Business

1. Ethical Issues in Finance
Under the umbrella of finance and accounting, fairness in trading practices, trading
conditions, financial contracting, sales practices, consultancy services, tax payments, internal
audits, external audits, and executive compensation are included, whereas specific corporate
 ethical/legal abuse includes insider trading, bribery/kickbacks, misleading financial analysis, and
fraud on securities.

2. Ethical Issues in Human Resource (HR) Management

Human Resource Management 's tasks include hiring and orientation, performance
evaluation, training and development, labor relations, and health and safety concerns. Among the
ethical issues are discrimination by age (the young ones are preferred over the older ones),
gender preference, sexual orientation, race, ethnicity, disability, and physical appearance are all
ethical issues that the HR oversees.

3. Ethical Issues in Sales and Marketing

Marketing ethics deals with the beliefs, standards and/or morals that advertisers and
marketing organizations will operate upon. Ethical marketing issues include promotion of
obsolete or harmful products/services; openness about environmental threats; food ingredients
(Genetically Modified Organisms); possible health hazards or financial risks; protection for the
privacy and autonomy of consumers; truthfulness in advertising; and honesty in price and
delivery. Some claim that advertisements can affect the views of individuals and their
relationships with others, suggesting an ethical obligation to avoid distorting those expectations
and relationships.
Ethics in marketing includes practices in pricing, which involves unlawful acts such as
price manipulation and price skimming. According to Hayes (2020), price skimming is a product
pricing strategy by which a firm charges the highest initial price that customers will pay and then
lowers it over time. On the other hand, advertising has raised concerns over offensive
advertisements, objectification, and school marketing.
4. Ethical Issues in Production
Business ethics typically deals with company's duties to ensure its goods and industrial
procedures do not inflict unnecessary harm. Many products and services can be generated and
used at zero risk and it can be difficult to assess the ethical path. However, there are consumers
who patronize products that damage them, for example, tobacco products. Output can have
adverse effects on the environment like air pollution, destruction of habitats, and urban sprawl.

Lesson

2 Code of Ethics in Business

You have learned that ethics is the interpretation of what is proper or not, what is right or wrong,
what is just or unjust, and what is good or bad in human behavior. It allows you to establish the
standards (norms) on which rational decisionmaking is guided and measured.

In this next lesson, you will get to know about the Code of Ethics, and you are expected to:
1. explain what code of ethics is;
2. identify which of the common practices in the business organizations are acceptable or
not;
3. l suggest ways on how some common practices could be improved;
4. suggest ways on how some common practices could be improved;
5. write a good script that reflects good decision; and
6. formulate a “code of ethics” that reflects core principles derived from analyses.
What is Code of Ethics?

Code of Ethics is a set of rules about good and bad behavior. It 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.

Saucer and Sims (2013) offer recommendations for developing Code of Ethics in business
organizations:
1. Adopt code of ethics (use the Code of Ethics of other companies as a reference and modify
according to the needs of the company).
2. Offer training on ethics (for management and employees).
3. Hire and foster individuals with ethical value.
4. Deal with immoral activities. Employees must know the implications and effects of making
unethical actions, and should be ready to accept consequences.
5. Take constructive measures. For example, give rewards to employees who admit their mistakes.
If the company is conscientious and smart, it can encourage warehouse workers to take
responsibility for their mistakes and even praise them for coming forward, apologizing and
ensuring that a faulty product is not purchased by the customer. At first it seems counter-intuitive
to reward an employee for a mistake, but in the end, it provides everyone with the best result.
6. Carry out a social audit. Conduct survey to employees once in a while.
7. Cover all whistleblowers. These people detect illegal activities within organizations and disclose
the actions to the authority or managers. A whistleblower who works sincerely, correctly
reporting an issue, should be praised for his/her courage and integrity, as opposed to being
disciplined and ostracized. If an individual blasts the whistle, it is possible that the company
itself has failed internally to motivate and improve fair and ethical conversations.
8. Empower the defenders of integrity. Support those who work with honesty and integrity.
9. Ensure executive commitment. The anonymity of those who report the problems should be
practiced.
10. Communicate the principles of conduct within the company and across the industry.
11. Assign an officer who is clearly responsible for the enforcement of ethical standards. He/she can
be consulted for advice.
12. Establish a procedure for violations of ethical standards, and fully review any offenses reported.
13. Ensure high perseverance by the company's board of trustees.
14. Lead by example, above everything else.

It should be remembered that when faced with an ethical situation, the outcome of the decision-
making process should be considered. One way to tackle ethical situations is by using the four-way test
to evaluate decisions.
This four-way test consists of asking four questions:
1. Is my decision truthful?
2. Is my decision fair to all who are affected by it?
3. Will this build the organization's goodwill?
4. Will the decision benefit all parties with vested interest in the outcome?

Code of Ethics contains the following:

1. Vision means something that you imagine; a picture that you see in your mind (Merriam-
Webster Dictionary). The vision statement helps to ensure the alignment of the decisions to
the company goals.
Example: To make innovations that everyone could access and adapt depending on their
needs
 2. Values (value means something thought of as important or useful) Values in business help to
ensure that all of the employees work towards the company goals.
Example: We commit ourselves to serve our customers with quality service and utmost
respect.
3. Mission- a specific task with which a person or a group is charged (Merriam-Webster
Dictionary). The mission statement clearly and effectively guides the business or the
organization in its decision-making.
Example: To inspire all the young athletes of the country… tell them to dream and go for
it!
4. Principles- moral rules or beliefs that help you know what is right and wrong and that
influence your actions (Merriam-Webster Dictionary).
Examples:
Customers have to be respected.
Make sure to deliver quality product.

References
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