Program Name Bachelor of Business Administration

MBBA202L L T P C
Business Ethics
Owning School/Department School of Management 2 0 0 2
Pre-requisites/Exposure Principle of Management

Module: 1

Business Ethics: Meaning, Nature and Importance of ethics in business, Value vs Ethics,
Code of Ethics vs Code of Conduct, Social Responsibility. Discussion of scenario to illustrate
importance of ethical behaviour in business. Emerging Business Ethics Issues. The
Institutionalization of Business Ethics

Defining Ethics – A Comprehensive Approach

The word “Ethics” is derived from a Greek word “ethikos” which means one’s character. It
involves judgments as to good and bad, right and wrong and what ought to be (Hartman
2002)

According to famous philosopher Epicurus “Ethics deals with things to be sought and things
to be avoided with ways of life and with telos”. *Telos here refers to the aim or end of life.

Ethics are applicable in all segments of life, i.e. personal life, professional life or social life.
In our daily life we must take various decisions which must be ethical. Often, we face the
situation that what would be right or wrong. Normally we take the decision which is ethically
right.

Ethics can be defined as “A system of accepted beliefs that control behavior, especially such
a system based on morals”- Cambridge Dictionary.

“Moral Principles that govern a person’s behavior or the conducting of an activity”- Oxford
Dictionary.

“Ethics is about the theory of right of song not about the practice application of these
principles. This is the area of moral.”

“Ethics involves the values that a person seeks to express in a certain situation, moral the way
he or she said sets out to achieve this.”
Ethics reflects a branch of social science. It deals with moral and social values. It helps us to
sort out what's good and what's bad. It asks us to do things right and to stop doing anything
wrong.

Thus, separate ethics, good and bad, right and wrong, fair and unjust, moral and immoral and
proper human action. Ethics in short, means a code of conduct. This is like the 10 Christian
Bible Commandments. It tells one person how to act with another

Features of Ethics:

 Ethics is a sort of moral compass that guides a person or organization on what is right
and wrong
 Professional ethics may be based on.
 Ethics may vary from one profession to another.
 Nature of the profession, type of organization, etc., has an ethical impact.
 Ethics are guidelines which define the thin line between good and bad, good and bad.
 Values are generally derived from reasonable traditional moral principles.
 Human ethics are omniscient
 Ethics are inherently pervasive.

Elements of Ethics:
 Equity
 Decide which is right and which is wrong
 Rules and practices that underpin responsible behaviour between individuals and groups.

So, from this point of view about “Ethics,” when we move towards the term “Business
Ethics,” we can easily state that Business Ethics is the broad guideline for all stakeholders to
work and perform the organization and win-win situation. Business ethical conduct ensures
long-term corporate acceptance in society and the welfare of society.
Concept of Business Ethics:

The term Business Ethics refers to the system of moral principles and behavioral rules that
apply to business. Because being a social organization, it is not carried out in a way that is
detrimental to the interests of society and business. Business ethics is the set of universal
moral system principles that control the organization’s smooth and ethically sound
functioning. Business ethics builds long term brand loyalty.

We may take the examples of Tata Group of Companies, Wipro, and Infosys in Indian
scenario. Some Indian businesses are well known for ethically doing business.

The entrepreneurs must therefore give their consumers a regular supply of good quality goods
and services at reasonable prices. They must avoid indulging in unethical business practices
such as adulteration, encouraging false ads, cheating on weights and measures, black
marketing, and so on. They must give their employees equal pay and have decent working
conditions. They should not be abusing the workers. They need to promote market
competition. We must protect the rights of small businesses. They must avoid competition,
which is unfair. They must avoid monopolies. We must pay all their taxes to the government
regularly. Organizational ethics and sustainable development are interrelated.

In a nutshell business ethics means conducting business with a human touch to give welfare
to society. They are a set of rules that decide the right and wrong.

Ethical issues at the organization can be:

 Harassment
 Fraudulent activities
 Theft
 Malpractice
 Misrepresentation of data or facts
 Insider trading
 Poor disclosure

Definitions of Business Ethics:

According to Andrew Carne “Business ethics is the study of business situations, activities,
and decision where issues of rights and wrongs are addressed”
According to Raymond C. Baumhart, --“The ethics of business is the ethics of responsibility.
The businessman must promise that he will not harm knowingly.”

According to Betting – “Business ethics is related with test of social values”

According to Rewy and Bearas – “Business ethics is related with impact of routine conduct
of organization and individuals”

According to Burshoulz – “Business ethics is a dynamic philosophy of soci-economic

adjustments whose field is widening day by day”

According to Geret- “Sound ethics is good business in the long run”

According to B. O Wheeler – “Business ethics is primarily concerned with the relationship of

business goals and techniques to specifically human ends”

Nature of Business Ethics:

The nature or features of business ethics are: -

 Code of conduct: Business ethics is a code of conduct. It tells what to do and what
not to do for the welfare of society. All businessmen must follow this code of
conduct.

 Based on moral and social values: Business ethics is based on moral and social
values. It contains moral and social principles (rules) for doing business. This includes
self-control, consumer protection and welfare, service to society, fair treatment to
social groups, not exploiting others, etc.

 Gives protection to social groups: Business ethics give protection to different social
groups such as consumers, employees, small businessmen, government, shareholders,
creditors, etc.

 Provides basic framework: Business ethics provide a basic framework for doing
business. It gives the social, cultural, economic, legal and other limits of business.
Business must be conducted within these limits.

 Voluntary: Business ethics must be voluntary. The businessmen must accept

business ethics on their own. Business ethics must be like self-discipline. It must not
be enforced by law.

 Requires education and guidance: Businessmen must be given proper education and
guidance before introducing business ethics. The businessmen must be motivated to
use business ethics. They must be informed about the advantages of using business
 ethics. Trade Associations and Chambers of Commerce must also play an active role
in this matter.

 Relative Term: Business ethics is a relative term. That is, it changes from one
business to another. It also changes from one country to another. What is considered
as good in one country may be taboo in another country

 Universal Application: Business ethics have universal applications. It is applicable

to all the business units in all countries whether large or small. However, the degree
and intensity of ethics may vary from country to country due to the difference in
socio, economic, cultural factors. It is also pervasive in nature.

Importance of Business Ethics:

 Control Transgression
 Survival
 Protection of Society
 Protection of Consumer Rights
 Portray a Good Picture of Business
 Contentment
 Smooth functioning of Business

1. Control Transgression

Explanation: Business ethics help in controlling unethical behavior and transgressions within
an organization. By establishing clear ethical guidelines and standards, companies can
prevent misconduct and ensure that employees act responsibly.

Practical Example: Enron's collapse due to unethical accounting practices serves as a stark
reminder of the importance of ethical behavior. Implementing strong ethical guidelines can
prevent such transgressions and protect the company's reputation.

2. Survival

Explanation: Ethical practices are essential for the long-term survival of a business.
Companies that adhere to ethical standards are more likely to build trust with stakeholders,
avoid legal issues, and maintain a positive reputation.

Practical Example: Johnson & Johnson's handling of the Tylenol crisis in 1982, where they
recalled millions of bottles due to tampering, showcased their commitment to consumer
safety and ethics. This decision helped them regain public trust and ensured their long-term
survival.

3. Protection of Society

Explanation: Business ethics ensure that companies act in ways that protect and benefit
society. This includes environmental responsibility, fair labor practices, and contributing to
community well-being.

Practical Example: Patagonia's commitment to environmental sustainability, such as using

recycled materials and donating a portion of profits to environmental causes, demonstrates
how ethical practices can protect society and enhance the company's reputation.

4. Protection of Consumer Rights

Explanation: Ethical business practices protect consumer rights by ensuring fair treatment,
transparency, and honesty in all dealings. This builds consumer trust and loyalty.

Practical Example: Apple's commitment to user privacy and data protection highlights their
ethical stance on consumer rights. By prioritizing user privacy, Apple has built a loyal
customer base and a strong reputation.

5. Portray a Good Picture of Business

Explanation: Adhering to ethical standards helps businesses portray a positive image to the
public. This can attract customers, investors, and top talent, contributing to overall success.

Practical Example: Starbucks' ethical sourcing of coffee and commitment to fair trade
practices have helped the company build a positive image and attract socially conscious
consumers.

6. Contentment

Explanation: Ethical practices contribute to employee satisfaction and contentment. When

employees feel they are working for a company that values integrity and fairness, they are
more likely to be motivated and loyal.

Practical Example: Google's emphasis on creating an ethical and inclusive workplace has
led to high employee satisfaction and retention rates. Their commitment to diversity and
ethical practices makes employees feel valued and content.

7. Smooth Functioning of Business

Explanation: Ethical practices ensure the smooth functioning of a business by fostering a

positive work environment, reducing conflicts, and promoting cooperation among employees
and stakeholders.
Practical Example: Toyota's commitment to ethical practices and continuous improvement
(Kaizen) has led to efficient operations and high-quality products. This ethical approach has
contributed to their success and smooth business functioning.

Value, Morals and Ethics:

Values are the fundamental beliefs that guide or motivate attitudes and actions. They are the
principles that help you determine what is important in life. Values can be personal or
cultural and often influence behavior and decision-making.

Examples of Values:

 Honesty: Valuing truthfulness and integrity.

 Respect: Valuing the dignity and worth of all individuals.

 Responsibility: Valuing accountability and reliability.

Case Example: Imagine a company that values sustainability. This value influences its
decision to use eco-friendly materials and processes, even if it costs more. The company's
commitment to sustainability reflects its core value of protecting the environment for future
generations.

Morals

Morals are the standards of behavior or beliefs about what is right and wrong. They are often
derived from society, culture, or religion and can vary between different groups. Morals are
more about personal character and the principles that guide individual conduct.

Examples of Morals:

 Telling the Truth: Believing that honesty is the best policy.

 Helping Others: Believing in the importance of aiding those in need.

 Keeping Promises: Believing in the importance of being reliable and trustworthy.

Case Example: Consider a person who finds a wallet full of cash on the street. Their moral
belief in honesty would lead them to try to return the wallet to its rightful owner, rather than
keeping the money for themselves
Ethics

Ethics are the rules or principles that govern conduct within a specific context, such as a
profession or organization. Ethics are often codified into formal systems or codes of conduct
and are used to determine what is right and wrong in specific situations.

Examples of Ethics:

 Confidentiality: Keeping sensitive information private.

 Non-Maleficence: Avoiding harm to others.

 Justice: Ensuring fairness and equality.

Case Example: In the medical profession, ethics dictate that doctors must maintain patient
confidentiality. Even if a doctor learns sensitive information about a patient, they are
ethically bound to keep that information private unless the patient consents to its disclosure

Summary

 Values are broad principles that guide behavior and decision-making.

 Morals are personal beliefs about right and wrong.

 Ethics are formalized rules or principles that govern conduct in specific contexts.
What Is Social Responsibility?

Social responsibility is an ethical focus for individuals and companies that want to take action
and be accountable for practices that benefit society. It's become increasingly important to
investors and consumers who want to put their money into or purchase products from
companies that take steps to contribute to the welfare of society and the environment.

Critics have traditionally argued that the basic nature of business doesn't consider society to
be a stakeholder but many investors and consumers are embracing social responsibility and
driving change.

Understanding Social Responsibility

Social responsibility requires that individuals and companies act in the best interests of the
environment and society as a whole. Social responsibility is referred to as “corporate social
responsibility (CSR)” when it applies to businesses and it's becoming more popular due to
shifting social norms. Many companies have made CSR an integral part of their business
models without compromising profitability.

A Massachusetts Institute of Technology meta-analysis of 200 surveys over 20 years talked

with business leaders in more than 70 countries and there was a high level of interest in the
topic. The report called CSR a “halo strategy” and concluded that “by presenting themselves
as true believers in CSR (saints), businesses seek to improve the overall corporate image (the
halo) and expect broad benefits from diverse stakeholders to follow (the warm glow).”

The crux of CSR is to enact policies that promote an ethical balance between the dual
mandates of striving for profitability and benefiting society as a whole. These policies can be
enacted by commission such as through donations of money, time, or resources, or by
omission practices such as by “going green,” reducing greenhouse gasses, or abiding by U.S.
Environmental Protection Agency regulations to limit pollution.

More consciously capitalistic investors and consumers are considering a company’s

commitment to CSR practices before making an investment or purchase. Embracing CSR can
benefit the prime directive: maximization of shareholder value.
Actions or the lack of them will affect future generations. CSR is good business practice and
a failure to execute it can hurt the balance sheet. It can boost company morale, especially
when a company can motivate its employees through social causes.

Areas of Focus

The International Organization for Standardization (ISO) emphasizes that a business’s ability to
maintain a balance between pursuing economic performance and adhering to societal and
environmental issues is a critical factor in operating efficiently and effectively.34 A company
can embrace CSR through philanthropy, by promoting volunteering, and by committing to
ethical labor practices and environmental changes.

Companies that manage their environmental impact might look to reduce their carbon
footprint and limit waste. There’s also a responsibility to treat employees ethically, such as by
offering a fair wage even when there are limited employee protection laws.

Examples of Socially Responsible Corporations

CSR takes on different meanings within certain industries and companies:

 Starbucks Corp. (SBUX) has committed to CSR from the start, including sustainability
and community welfare. It purchases Fair Trade Certified ingredients to manufacture
products, and it actively supports sustainable farming in the regions where ingredients
are sourced.56
 Ben & Jerry’s Homemade Holdings Inc. has integrated CSR into the core of its
operations. Like Starbucks, the company purchases Fair Trade Certified
ingredients.78
 Salesforce.com Inc. (CRM) developed what it calls the “1-1-1 model.” The company
dedicates 1% of its equity, 1% of its product, and 1% of its employees’ time back to
the community.9
 Big-box retailer Target Corp. (TGT) is also well known for its social responsibility
programs. It's donated money to communities in which the stores operate, including
education grants.1011
Social Responsibility in Business Ethics

Social responsibility in business refers to the obligation of companies to act in ways that
benefit society, beyond their financial and operational goals. It encompasses a range of
practices and initiatives aimed at improving the well-being of employees, communities, and
the environment.

Key Concepts

1. Corporate Social Responsibility (CSR)

 o Definition: CSR is the continuing commitment by businesses to behave
ethically and contribute to economic development while improving the quality
of life of the workforce, their families, and the local community.
o Example: Tata Group's various CSR initiatives, such as providing education
and healthcare services in rural areas.
2. Ethical Business Practices
o Definition: Ethical business practices involve conducting business in a
manner that is consistent with the ethical standards and values of society.
o Example: Infosys' adherence to ethical practices in its operations, including
transparency, integrity, and respect for all stakeholders.

3. Environmental Responsibility
o Definition: Businesses are expected to minimize their environmental impact
through sustainable practices.
o Example: ITC Limited's efforts in afforestation and sustainable agriculture to
reduce its carbon footprint.
4. Philanthropy
o Definition: Businesses often engage in philanthropic activities, such as
donating money, goods, or services to charitable causes.
o Example: Reliance Industries' contributions to disaster relief efforts and
educational programs.
Arguments for Social Responsibility

1. Justification for Existence and Growth: Businesses are part of society and should
respond to their demands to survive and grow.
2. Long-term Interest: Socially responsible actions can lead to long-term benefits, such
as customer loyalty and a positive brand image.
3. Avoidance of Government Regulation: By acting responsibly, businesses can avoid
stringent regulations and interventions.
4. Better Environment for Business: Contributing to social well-being creates a stable
and prosperous environment for business operations.
Arguments Against Social Responsibility

1. Violation of Profit Maximization: Critics argue that the primary responsibility of a

business is to maximize profits for its shareholders.
 2. Burden on Consumers: The costs of social responsibility initiatives may be passed
on to consumers in the form of higher prices.
3. Lack of Social Skills: Businesses may lack the expertise to address social issues
effectively.
4. Lack of Broad Public Support: Not all stakeholders may support the allocation of
resources to social responsibility initiatives.

Case Studies

1. Tata Group
o Initiatives: Tata Group has a long history of social responsibility, including
initiatives in education, healthcare, and rural development. The Tata Trusts,
for example, fund numerous social projects across India[1].
2. Infosys
o Initiatives: Infosys Foundation focuses on supporting education, healthcare,
and rural development. The foundation has built schools, hospitals, and
libraries in underserved areas[2].
3. ITC Limited
o Initiatives: ITC's e-Choupal initiative empowers farmers by providing them
with access to information and market prices, improving their income and
productivity[3].
4. Reliance Industries
o Initiatives: Reliance engages in various CSR activities, including disaster
relief, healthcare, and education. The company has also set up the Reliance
Foundation to manage its philanthropic activities.
These notes provide an overview of social responsibility in business ethics, highlighting key
concepts, arguments, and real-world examples. If you need more detailed information or
specific case studies, feel free to ask!

[1]: myCBSEguide [2]: iPrep [3]: Vedantu : Investopedia

References

[1] Social Responsibilities of Business and Business Ethics Class 11 Notes ...

[2] Social Responsibilities of Business & Business Ethics - iPrep

[3] Get Chapter 6 Social Responsibility of Business Class 11 Notes FREE PDF

What is Social Responsibility?

An organization’s obligation to make decisions and perform them for the benefit of society
and its values is known as the social responsibility of a business. It is assumed under social
responsibilities that businesses will respect the values and aspirations of society and try their
best to fulfil these aspirations and accomplish their business goals. In simple terms, it is the
responsibility of an organization to be a responsible member of society and work towards its
betterment. However, according to critics, social responsibility practices are exact opposites
of the major motive of a business’s existence. Social responsibility in business is also known
as Corporate Social Responsibility (CSR).
For example, a factory not disposing of its chemicals and waste in the water bodies,
improving working hours and conditions of the employees, donating part of the firm’s profits
to educational services for poor children, etc. Social responsibilities performed by the
companies not only help society but also help the business gain a positive image and build its
brand in the market. It motivates the employees of the firm to work hard, as they feel good to
be a part of an organization that works well for society and respects its values.

Types of Social Responsibilities

1. Economic Responsibility:

As we know, a business organization is an economic entity; therefore, economic

responsibility is its primary social responsibility. In simple terms, economic responsibility
means producing goods and services according to the needs and wants of the customers and
selling them the same at a profit. It means that the organizations should understand whether
the customers are demanding quality or price and then provide them with the same. Earning
profit is a responsibility of the business as it ultimately increases the incentives of the
employees. Therefore, the economic growth of an organization affects society as a whole.

2. Legal Responsibility:

It is the duty and responsibility of an organization to legally abide by the rules, laws, and
regulations while performing business activities. As the authorities enact these laws for the
good of society, an organization following these rules is a socially responsible firm. Besides,
an organization performing activities as per the laws gets no interference from the
government. Legal responsibilities include paying taxes on time to the government, keeping
its books of accounts and financial statements clean and accurate, etc.

3. Ethical Responsibility:
It is the behaviour expected from business organizations’ by society; however, it is not
codified in the law. Therefore, there is no legal obligation on the companies to perform
ethically responsible activities. Ethical responsibility is beyond the laws and includes fair
trade practices, respecting the religious sentiments of people, maintaining and protecting the
environment, etc. It also means that a business should not get involved in black marketing,
adulteration, fraud, etc.

4. Discretionary Responsibility:

It is a philanthropic responsibility and is completely voluntary. It includes charitable services,

providing education facilities to poor people, helping people affected by floods or other
natural calamities, donating to healthcare facilities for those who cannot afford them, etc. The
management of an organization is responsible for avoiding speculative activities and
safeguarding its capital investment by undertaking healthy business ventures only that can
provide them with good ROI(Returns on Investment).

Social Responsibility towards different Interest Groups:

Business social responsibility is a voluntary effort of businesses to take a few steps and
measures in order to satisfy the expectations of different interest groups. An interest group
represents an association of individuals or organizations that based on one or more shared
concerns, attempts to influence public policy in their favour. Business is concerned with
interest groups because every decision and action a company takes will directly or indirectly
affect the interests of these groups. The following are the responsibilities of businesses
towards different interest groups.

1. Social Responsibility of Businesses Towards the Owners

Business owners are the person who owns the businesses. They are liable for all profits and
losses. Owners take all the risks of running the business, capital allocation, etc. The following
are the responsibilities of businesses towards their owners:

 To run the business efficiently.

 To allocate and utilize capital and resources.
  To ensure appreciation and growth of capital.
 To provide a fair and regular return on capital invested.
2. Social Responsibility of Businesses Towards Investors

Investors are those who provide funds to businesses through various investment instruments
(Equity, Bonds, Debentures, etc.). Financial institutions, HNIs, and retail investors fall under
this category. The following are the responsibilities of businesses towards their investors:

 To provide required and essential information regarding the schemes of future

growth.
 To ensure the safety of investors’ investments.
 To provide regular payment of interest.
 To give timely repayment of the principal amount to the investors.
3. Social Responsibility of Businesses Towards Suppliers

Suppliers are businessmen or merchants who supply raw materials and other items that are
required by manufacturers or traders. A supplier also includes a distributor who supplies the
final finished product to the consumers or customers. The following are the responsibilities of
businesses towards their supplier:

 To give regular orders for the purchase of goods.

 To make a deal with fair terms and conditions.
 To avail reasonable credit period.
 To pay the dues on time.
4. Social Responsibility of Businesses Towards Customers

Businesses produce and sell goods or services to customers. It can not survive without the
support of the customers and have to fulfill their wants and needs in order to attain success.
The following are the responsibilities of businesses towards their consumers:

 To provide customers with goods and services that fulfill their needs and
requirements.
 To provide them with qualitative goods and services.
 To maintain a regular supply of goods and services in the market.
 To provide customers with goods and services at reasonable and affordable prices.
 To provide them with proper after-sales services for the purchased goods and
services.
  To provide customers with all essential information including warnings regarding the
goods and services.
 To provide them with a manual for the use of goods and services.
 To follow proper and fair-trade practices and take corrective measures against
malpractices.
 To ensure that the grievances of the customers are listened to and resolved quickly.
5. Social Responsibility of Businesses Towards Employees

All businesses need employees and workers to work for their business. These employees put
in their best effort for the benefit of the businesses. If employees are satisfied with their needs
and requirements, they will work efficiently, which will help in the success of the business.
The following are the responsibilities of businesses towards their employees:

 To provide the employees and workers with timely and regular salaries and wages,
respectively.
 To provide them with a good workplace and safe environment.
 To provide the employees with better career opportunities and prospects.
 To provide the employees with job security and social security through Provident
Fund, Health Insurance, Retirement Benefits, etc.
 To provide them with proper training for their development and growth.
 To respect their democratic rights in the formation of unions.
6. Social Responsibility of Businesses Towards Society or Community

Society consists of various entities, including individuals, groups, organizations, families, etc.
All these entities are related to each other; they interact with each other and also depend on
each other, directly or indirectly. It is the responsibility of every entity to perform a job or a
business that will benefit society at large. The following are the responsibilities of businesses
towards society:

 To maintain a balance between the economy and the ecosystem.

 To generate employment opportunities.
 To protect the environment by conserving natural resources and wildlife.
 To promote sports and culture.
 To help the weaker sections of society.
 To preserve the social and cultural values of society and promote these values.
 To provide proper assistance in education, development, etc., of society.
7. Social Responsibility of Businesses Towards Government
Businesses are governed by certain rules and regulations which are set by the government.
These rules and regulations also help businesses to perform their responsibilities towards
society. The following are the responsibilities of businesses towards the government:

 To pay fees, duties, and taxes honestly and regularly.

 To set up new business units as per the guidelines provided by the Government.
 To follow the pollution control norms set up by the Government.
 To run the business fairly and not indulge in any corruptive and unfair activities.

Code of Ethics vs Code of Conduct

Definition and Purpose

A code of ethics is akin to a moral compass for an organisation or profession. It outlines broad ethical
principles and values that guide decision-making, especially when facing ethical dilemmas. For
instance, the American Counseling Association's (ACA) Code of Ethics 2024 provides a framework
for counselors to uphold client dignity and well-being while promoting professional values.

On the other hand, a code of conduct is more like a rulebook. It specifies the expected behaviours and
standards that employees must follow in their day-to-day work. The Responsible Business Alliance
(RBA) Code of Conduct is an excellent example, offering detailed standards for social,
environmental, and ethical practices across various industries.

The key distinction lies in their objectives. While a code of ethics aims to influence the mindset and
ethical decision-making of professionals, a code of conduct focuses on concrete behavioural
expectations and compliance with specific rules.
Six key differences between a Code of Conduct and a Code of Ethics:

Aspect Code of Conduct Code of Ethics

Set of rules and guidelines outlining Set of principles and values guiding the
Definition expected behavior and actions within an moral and ethical behavior of individuals or
organization. professionals.

Can be applicable to various professions or

Scope Specific to an organization or industry.
individuals.

Enforced by the organization or Enforced by professional associations or

Enforcement
governing body. self-regulation.

Defines acceptable behavior and Guides ethical decision-making and

Purpose
promotes a positive work environment. promotes integrity and trust.

Includes specific rules, policies, and Includes general principles, values, and
Content
procedures. standards.

Emphasizes compliance with rules and

Focus Emphasizes moral and ethical principles.
regulations.

References

[1] Code of Ethics vs. Code of Conduct: Differences and Tips

[2] Code of Conduct vs. Code of Ethics - What's the Difference? - This vs. That

[3] Code of Ethics vs. Code of Conduct: 5 Key Differences (2024 Guide)

Institutionalization of ethics:

The institutionalization of ethics involves integrating ethical principles into the core
operations and culture of an organization. This process ensures that ethical considerations are
embedded in decision-making, policies, and daily practices at all levels of the organization.
Key aspects of institutionalizing ethics include:
1. Formal Codes of Ethics: Developing and implementing a formal code of ethics that
outlines the organization's values, principles, and expected behaviors.
2. Ethical Leadership: Ensuring that leaders at all levels demonstrate ethical behavior
and serve as role models for employees.
3. Training and Development: Providing regular training and development programs to
educate employees about ethical standards and how to apply them in their work.
 4. Ethics Committees and Officers: Establishing ethics committees or appointing
ethics officers to oversee ethical practices and address ethical issues within the
organization.
5. Communication and Awareness: Promoting awareness of ethical standards through
effective communication channels and ensuring that employees understand the
importance of ethics in their roles.
6. Monitoring and Enforcement: Implementing mechanisms to monitor compliance
with ethical standards and enforce them through appropriate disciplinary actions when
necessary.
By institutionalizing ethics, organizations can create a culture of integrity, enhance their
reputation, and build trust with stakeholders.
Is there a specific aspect of institutionalizing ethics you are interested in exploring further?

References

[1] The institutionalization of organizational ethics

[2] Institutionalising Ethics Handbook - te i

[3] The Institutionalization of Organizational Ethics - JSTOR

Real-world case of the institutionalization of ethics:

Case Study: Johnson & Johnson's Tylenol Crisis

Background: In 1982, Johnson & Johnson faced a major ethical crisis when seven people
died after taking Tylenol capsules laced with cyanide. This incident posed a significant threat
to the company's reputation and consumer trust.
Ethical Response:
1. Immediate Action: Johnson & Johnson swiftly recalled 31 million bottles of Tylenol,
despite the financial cost, prioritizing consumer safety over profits.
2. Transparency: The company maintained open communication with the public and
media, providing regular updates on the situation and their actions.
 3. New Safety Measures: Johnson & Johnson introduced tamper-evident packaging,
setting a new standard for the industry and ensuring consumer safety.
Outcome: The company's ethical handling of the crisis restored public trust and reinforced its
reputation for prioritizing consumer well-being. This case is often cited as a benchmark for
ethical crisis management and demonstrates the importance of institutionalizing ethics in
business practices.
Would you like to explore another case or discuss a specific aspect of this one?

References

[1] Case Studies - Ethics Unwrapped

Discussion of scenario to illustrate the importance of ethical behaviour in business:

MedSure is a pharmaceutical company dedicated to advancing healthcare through innovative

solutions. Founded in 2000, MedSure specializes in developing and distributing medical,
diagnostic, and pharmaceutical products. The company is headquartered in Harare,
Zimbabwe, and offers a range of healthcare equipment, devices, medicines, and laboratory
reagents. MedSure aims to improve patient outcomes and enhance the quality of life through
its comprehensive healthcare offerings.
Imagine a scenario where a pharmaceutical company, "MedSure," is developing a new
drug for a rare, life-threatening disease. While the drug shows promising results in clinical
trials, there are still some lingering side effects that could potentially be serious for a small
percentage of patients. The company's leadership team is faced with a critical decision: to
fully disclose the potential side effects in their marketing materials and patient information,
potentially impacting sales, or to downplay them to maximize profits.
Ethical Choice: MedSure chooses to transparently disclose all potential side effects, including
the risks, to patients and healthcare providers. They prioritize the well-being of patients
above immediate profit, providing detailed information about potential risks and offering
support to those who might experience adverse reactions.

Why Ethics Matter in This Scenario:

 Patient Safety: By being transparent, MedSure protects patients from potential harm
by allowing them to make informed decisions about using the drug, considering the
potential risks and benefits.
 Reputation and Trust: Maintaining ethical behavior builds trust with patients,
healthcare professionals, and the wider public, leading to a positive brand image and
loyalty even if sales are initially impacted.
 Legal Compliance: Downplaying side effects could lead to legal issues, lawsuits, and
regulatory repercussions, significantly damaging the company's standing.
 Long-term Profitability: While short-term profits might be lower, prioritizing ethics
can lead to sustained long-term success by building a strong reputation for patient-
centric care, which can attract more customers in the long run.
Unethical Choice (Negative Consequences):
 Profit Over Patient Care: If MedSure chooses to downplay side effects to maximize
immediate profits, they could face ethical backlash, damage to their reputation, and
potential legal issues.
 Loss of Trust: Patients and healthcare providers who discover the company was not
fully transparent may lose trust in MedSure, leading to decreased sales and negative
publicity.
 Ethical Dilemma for Employees: Employees might feel pressure to engage in
unethical practices, leading to internal conflicts and low morale.
Key Takeaways: [1, 2, 3]
 Ethical behavior in business is crucial for building trust with stakeholders, protecting
consumers, and maintaining a positive reputation in the long run. [1, 2, 3]
 Leaders must prioritize ethical decision-making even when faced with difficult
choices that might impact short-term profits. [2, 3, 4]
  Transparency and open communication are key elements of ethical business practices,
especially when dealing with potentially sensitive information about products or
services. [1, 2, 5]

Generative AI is experimental.

[1] https://online.marquette.edu/business/blog/why-are-ethics-important-in-business

[2] https://online.maryville.edu/online-masters-degrees/management-and-leadership/careers/
importance-of-business-ethics/

[3] https://www.limestone.edu/blog/why-business-ethics-are-important

[4] https://www.investopedia.com/terms/b/business-ethics.asp

[5] https://online.marquette.edu/business/blog/what-are-the-12-ethical-principles-for-business-
executives

2. Case
Let's discuss a scenario that illustrates the importance of ethical behavior in business:
Scenario: The Volkswagen Emissions Scandal
Background: In 2015, it was discovered that Volkswagen (VW) had installed software in
their diesel vehicles to cheat emissions tests. This software made the cars appear to comply
with environmental standards during testing, while in reality, they emitted pollutants far
above legal limits.
Ethical Issues:
 1. Deception: VW intentionally deceived regulators, customers, and the public about the
environmental impact of their vehicles.
2. Environmental Harm: The excessive emissions contributed to air pollution, posing
health risks and environmental damage.
3. Breach of Trust: The scandal eroded trust between VW and its stakeholders,
including customers, regulators, and investors.
Consequences:
1. Legal and Financial Penalties: VW faced billions of dollars in fines, legal
settlements, and compensation costs.
2. Reputation Damage: The company's reputation suffered significantly, leading to a
loss of customer loyalty and market share.
3. Leadership Changes: Several top executives resigned or were dismissed as a result
of the scandal.
Importance of Ethical Behavior:
1. Trust and Credibility: Ethical behavior builds trust with stakeholders, which is
crucial for long-term success. Once trust is broken, it can be challenging to rebuild.
2. Sustainability: Ethical practices contribute to sustainable business operations by
considering the long-term impact on the environment and society.
3. Legal Compliance: Adhering to ethical standards helps ensure compliance with laws
and regulations, avoiding legal repercussions and financial losses.
4. Corporate Culture: Promoting ethical behavior fosters a positive corporate culture,
encouraging employees to act with integrity and accountability.
This scenario highlights how unethical behavior can lead to severe consequences for a
business, emphasizing the need for ethical practices to maintain trust, sustainability, and
compliance.

Some other related Cases:

Sure! Here are the detailed case studies, including company backgrounds, products, countries
of origin, and discussion questions with answers:

1. Enron Scandal

Company Background: Enron Corporation was an American energy, commodities, and

services company based in Houston, Texas, USA. Founded in 1985 through a merger
between Houston Natural Gas and InterNorth, Enron grew to become a major player in
electricity, natural gas, communications, and pulp and paper, with revenues of nearly $101
billion in 2000[1]. Products: Enron was involved in energy trading, natural gas distribution,
electricity generation, and broadband services. Ethical Issues: Executives manipulated
financial statements to hide debt and inflate profits. Consequences: The scandal led to
Enron's bankruptcy, loss of jobs, and significant financial losses for investors. Importance of
Ethical Behavior: This case highlights the need for transparency and honesty in financial
reporting to maintain trust and avoid catastrophic consequences.

Discussion Questions and Answers:

1. What were the key factors that led to the unethical behavior at Enron?

o The key factors included a culture of greed and pressure to meet financial
targets, lack of transparency, and weak regulatory oversight. Executives
prioritized personal gain over ethical behavior.

2. How could Enron's leadership have prevented the scandal?

o Enron's leadership could have fostered a culture of integrity, implemented

stronger internal controls, and encouraged transparency and accountability.
Regular audits and ethical training could have also helped.

3. What role did the company's corporate culture play in the unethical practices?

o Enron's corporate culture emphasized aggressive growth and profitability at

any cost, which led to unethical practices. The lack of ethical leadership and
accountability contributed to the widespread fraud.

4. How did the Enron scandal impact the accounting and auditing profession?

o The scandal led to increased scrutiny of the accounting and auditing

profession, resulting in the creation of the Sarbanes-Oxley Act, which
established stricter regulations and oversight to prevent similar incidents.

5. What lessons can other companies learn from the Enron scandal to avoid similar
issues?

o Companies can learn the importance of ethical leadership, transparency, and

strong internal controls. Fostering a culture of integrity and accountability is
crucial to prevent unethical behavior.

2. Nike's Labor Practices

Company Background: Nike, Inc. is an American multinational corporation that designs,

manufactures, and sells athletic footwear, apparel, and equipment. Founded in 1964 as Blue
Ribbon Sports, it was renamed Nike, Inc. in 1971. Nike is headquartered near Beaverton,
Oregon, USA. Products: Nike's product lineup includes athletic shoes, apparel, sports
equipment, and accessories. Notable brands include Air Jordan, Nike Air Max, and Converse.
Ethical Issues: In the 1990s, Nike faced criticism for poor labor conditions in its overseas
factories, including reports of child labor, low wages, and unsafe working conditions.
Consequences: Nike's reputation suffered, leading to consumer boycotts and negative media
coverage. Importance of Ethical Behavior: This scenario underscores the importance of fair
labor practices and corporate social responsibility in maintaining a positive brand image and
consumer trust.

Discussion Questions and Answers:

1. What were the main ethical issues in Nike's labor practices?

o The main ethical issues included child labor, low wages, and unsafe working
conditions in overseas factories. These practices violated basic human rights
and labor standards.

2. How did consumer activism influence Nike's response to the labor issues?

o Consumer activism, including boycotts and negative media coverage,

pressured Nike to address the labor issues. The company implemented
changes to improve working conditions and transparency in its supply chain.

3. What steps did Nike take to address the labor concerns, and were they effective?

o Nike introduced a code of conduct for suppliers, increased factory inspections,

and partnered with NGOs to improve labor practices. These steps were
effective in improving conditions and restoring the company's reputation.

4. How can companies ensure ethical labor practices in their supply chains?

o Companies can ensure ethical labor practices by implementing strict supplier

codes of conduct, conducting regular audits, and collaborating with third-party
organizations to monitor compliance.

5. What role do consumers play in promoting ethical behavior in businesses?

o Consumers play a crucial role by demanding transparency and ethical

practices from companies. Their purchasing decisions and activism can drive
positive changes in corporate behavior.

3. Wells Fargo Account Scandal

Company Background: Wells Fargo & Company is an American multinational financial

services company headquartered in San Francisco, California, USA. Founded in 1852, it
provides banking, investment, mortgage, and consumer and commercial finance services[3].
Products: Wells Fargo offers a wide range of financial products, including checking and
savings accounts, credit cards, loans, mortgages, and investment services. Ethical Issues: In
2016, it was revealed that Wells Fargo employees had created millions of unauthorized bank
accounts to meet sales targets. Consequences: Wells Fargo faced hefty fines, legal actions,
and a damaged reputation. Importance of Ethical Behavior: This case demonstrates the
need for ethical leadership and a corporate culture that prioritizes integrity over short-term
gains.

Discussion Questions and Answers:

1. What were the root causes of the unethical behavior at Wells Fargo?

o The root causes included an aggressive sales culture, unrealistic sales targets,
and pressure on employees to meet quotas. This environment led to fraudulent
activities to achieve targets.

2. How did the company's sales culture contribute to the scandal?

o The sales culture prioritized short-term gains and sales targets over ethical
behavior. Employees were incentivized to open unauthorized accounts to meet
quotas, leading to widespread fraud.

3. What measures could Wells Fargo have implemented to prevent such unethical
practices?

o Wells Fargo could have implemented more realistic sales targets, fostered a
culture of integrity, and provided ethical training for employees. Stronger
oversight and internal controls would have also helped.

4. How did the scandal affect Wells Fargo's relationship with its customers and
employees?

o The scandal damaged Wells Fargo's reputation, leading to a loss of customer

trust and loyalty. Employees faced increased scrutiny and a demoralizing work
environment.

5. What can other financial institutions learn from the Wells Fargo scandal to
improve their ethical standards?

o Financial institutions can learn the importance of ethical leadership, realistic

performance targets, and a culture that prioritizes integrity. Regular audits and
ethical training are also essential.

4. BP Deepwater Horizon Oil Spill

Company Background: BP p.l.c. (formerly British Petroleum) is a British multinational oil

and gas company headquartered in London, England, UK. Founded in 1909 as the Anglo-
Persian Oil Company, BP is one of the world's largest oil companies[4]. Products: BP's
products include petroleum, natural gas, motor fuels, aviation fuels, and lubricants. The
company operates service stations worldwide under the BP, Amoco, and Aral brands. Ethical
Issues: In 2010, the Deepwater Horizon oil rig, operated by BP, exploded, causing a massive
oil spill in the Gulf of Mexico. Investigations revealed that BP had ignored safety warnings
and cut corners to save costs. Consequences: The spill caused extensive environmental
damage, loss of marine life, and significant financial penalties for BP. Importance of Ethical
Behavior: This scenario highlights the critical role of ethical decision-making in
environmental stewardship and the long-term sustainability of business operations.

Discussion Questions and Answers:

1. What were the primary ethical failures that led to the Deepwater Horizon oil
spill?

o The primary ethical failures included ignoring safety warnings, cutting corners
to save costs, and prioritizing profits over environmental and worker safety.

2. How did BP's cost-cutting measures contribute to the disaster?

o BP's cost-cutting measures led to inadequate safety protocols and equipment

maintenance, increasing the risk of accidents. These measures compromised
the safety of the oil rig operations.

3. What actions did BP take in response to the spill, and were they sufficient?

o BP took actions such as capping the well, cleaning up the spill, and
compensating affected communities. While these actions helped mitigate the
damage, the long-term environmental impact remained significant.

4. How can companies in high-risk industries ensure they prioritize safety and
environmental protection?

o Companies can prioritize safety and environmental protection by

implementing strict safety protocols, conducting regular risk assessments, and
investing in safety training and equipment.

5. What long-term impacts did the oil spill have on BP's reputation and
operations?

o The oil spill severely damaged BP's reputation, leading to financial losses,
legal penalties, and increased regulatory scrutiny. The company had to invest
heavily in rebuilding its image and improving safety standards.

5. Facebook-Cambridge Analytica Data Scandal

Company Background: Meta Platforms, Inc. (formerly Facebook, Inc.) is an American

multinational technology conglomerate based in Menlo Park, California, USA. Founded in
2004 by Mark Zuckerberg and his Harvard College roommates, Meta owns and operates
Facebook, Instagram, WhatsApp, and other products. Products: Meta's products include
social media platforms (Facebook, Instagram), messaging services (WhatsApp, Messenger),
and virtual reality products (Meta Quest). Ethical Issues: In 2018, it was discovered that
Cambridge Analytica had harvested data from millions of Facebook users without their
consent for political advertising. Consequences: The scandal led to regulatory scrutiny, loss
of user trust, and a decline in Facebook's stock value. Importance of Ethical Behavior: This
case emphasizes the importance of data privacy and ethical handling of

References

[1] Enron - Wikipedia

[2] https://en.wikipedia.org/wiki/Nike,_Inc

[3] Wells Fargo - Wikipedia

[4] BP - Wikipedia

[5] History of Facebook - Wikipedia

Emerging Business Ethics Issues:

Emerging business ethics issues are evolving as technology advances and societal
expectations change. Here are some of the key issues currently facing businesses:

1. Data Privacy and Security

With the increasing reliance on digital technologies, protecting customer data has become a
critical ethical issue. Companies must ensure they handle personal information responsibly
and comply with data protection regulations like GDPR and CCPA.

2. Artificial Intelligence and Automation

The use of AI and automation raises ethical concerns about job displacement, decision-
making transparency, and potential biases in AI algorithms. Companies need to address these
issues to ensure fair and ethical use of technology.

3. Environmental Sustainability

Businesses are under pressure to adopt sustainable practices to combat climate change. This
includes reducing carbon footprints, managing waste, and using resources responsibly.
Ethical behavior in this area is crucial for long-term environmental health.

4. Diversity and Inclusion

Promoting diversity and inclusion within the workplace is essential for ethical business
practices. Companies must ensure equal opportunities for all employees, regardless of race,
gender, age, or other characteristics, and create an inclusive work environment.

5. Corporate Social Responsibility (CSR)

CSR involves businesses taking responsibility for their impact on society and the
environment. This includes ethical sourcing, community engagement, and philanthropy.
Companies are expected to go beyond profit-making and contribute positively to society.

6. Supply Chain Ethics

Ensuring ethical practices throughout the supply chain is increasingly important. This
includes addressing issues like child labor, fair wages, and safe working conditions for all
workers involved in the production process.

7. Transparency and Accountability

Businesses must be transparent in their operations and accountable for their actions. This
includes honest communication with stakeholders, accurate financial reporting, and ethical
decision-making processes.

8. Workplace Harassment and Discrimination

Preventing harassment and discrimination in the workplace is a significant ethical issue.

Companies must create policies and training programs to ensure a safe and respectful work
environment for all employees.

Emerging business ethics issues with real-world examples:

1. Data Privacy and Security

Example: The Facebook-Cambridge Analytica Scandal In 2018, it was revealed that

Cambridge Analytica had harvested data from millions of Facebook users without their
consent for political advertising. This breach of data privacy led to significant regulatory
scrutiny and a loss of user trust. Facebook had to implement stricter data protection measures
and improve transparency to regain user confidence.

2. Artificial Intelligence and Automation

Example: Amazon's Use of AI in Hiring Amazon faced criticism for its AI-powered hiring
tool, which was found to be biased against women. The tool, trained on resumes submitted
over a 10-year period, favored male candidates for technical roles. Amazon had to scrap the
tool and re-evaluate its approach to using AI in recruitment to ensure fairness and eliminate
bias.

3. Environmental Sustainability

Example: Patagonia's Commitment to Sustainability Patagonia, an outdoor clothing

company, is renowned for its commitment to environmental sustainability. The company uses
recycled materials in its products, promotes fair labor practices, and donates a portion of its
profits to environmental causes. Patagonia's efforts have set a benchmark for sustainability in
the apparel industry.

4. Diversity and Inclusion

Example: Google's Diversity and Inclusion Initiatives Google has implemented various
initiatives to promote diversity and inclusion within its workforce. These include unconscious
bias training, diverse hiring practices, and support for employee resource groups. Despite
challenges, Google continues to strive for a more inclusive workplace, setting an example for
other tech companies.

5. Corporate Social Responsibility (CSR)

Example: Microsoft's CSR Programs Microsoft has structured its CSR around environmental
sustainability, empowering communities through education and technology, and upholding
high standards of corporate governance. The company aims to be carbon negative by 2030
and has various initiatives to bridge the digital divide globally.

6. Supply Chain Ethics

Example: Apple’s Supplier Responsibility Program Apple has faced scrutiny over labor
practices in its supply chain, particularly in factories in China. In response, Apple
implemented a Supplier Responsibility Program to ensure fair labor practices, safe working
conditions, and environmental responsibility. The program includes regular audits and
transparency reports.

7. Transparency and Accountability

Example: Johnson & Johnson's Handling of the Tylenol Crisis In 1982, Johnson & Johnson
faced a crisis when cyanide-laced Tylenol capsules led to several deaths. The company’s
transparent and accountable response, including a nationwide recall and the introduction of
tamper-evident packaging, restored public trust and set a standard for crisis management.
8. Workplace Harassment and Discrimination

Example: Uber's Workplace Culture Issues Uber faced significant backlash over allegations
of workplace harassment and discrimination. The company conducted an internal
investigation, resulting in the dismissal of several executives and the implementation of new
policies to improve workplace culture. Uber's efforts to address these issues highlight the
importance of creating a safe and respectful work environment.

These examples illustrate how businesses can face and address ethical challenges,
emphasizing the importance of ethical behavior in maintaining trust, sustainability, and a
positive corporate culture.

Would you like to explore any of these examples in more detail?

References

[1] 9 Examples of Accountability at Work (Practical & Real-Life)

[2] Real-Life Examples of Accountability: 19 Workplace Scenarios

[3] 25 Accountability Examples (How to Show Accountability) - Helpful Professor

[4] 7 Environmental Sustainability Examples

[5] 50 sustainability examples in everyday life - Ideapod

[6] 20 Real-world Examples of Sustainability - Green Coast

[7] Data Privacy Examples - IBM

[8] The 18 biggest data breaches of the 21st century | CSO Online
References

[1] 8 Current Ethical Issues In Business (and How to Prevent Them)

[2] Ethical issues in business ethics