Business Ethics

Meaning of Ethics: The word “ethics” has been derived from the Greek word “Ethikos” or
“ethos” which means character or manners. Thus, it is said to be the science of conduct. It deals
with certain standard of human conduct and morals. It is also a science of morals. The field of
ethics involves systematizing, defending and recommending concepts of right and wrong
behaviour. Ethics is a mass of moral principles or set of values about what is right or wrong,
true or false, fair or unfair proper or improper, what is right is ethical and what’s wrong is
unethical.

Definition of Ethics:
Churchill defined ethics as the application of moral values or codes to complex problems using
a rational decision making process. The out come of this process is usually a behaviour or set of
behaviours. Webster dictionary states that “ethics is the discipline dealing with what is good or
bad, right or wrong or moral duty or obligation. It is a group of moral principles or set of values.
These principles govern the conduct of an individual or a profession.

Development of Ethics
1) Greek Ethics 2) Medieval Ethics
(Deals with moral duties of citizen) (Deals with inner aspect of ones morality
3) Modern Ethics
(Ones action should be good not only to one self but also to others)
Modern ethics deals with several ethics like business ethics, professional ethics, medical ethics,
educational ethics, environmental ethics, bio-ethics, eco-tourism ethics, Cyber ethical etc.

Business Ethics
Business Ethics are application of general ethical rules to business behaviour. It is the
application of moral principles to business relationships & activities. Its purpose is to guide
managers & employees in performing their jobs. Thus, business ethics refers to application of
ethical principles to business. “According to Velasquez” Business ethics is a specialized study
of moral right or wrong. It concentrates on moral standards as they apply to business policies,
institutions & behaviour.

Ethical and unethical behaviour in business

Ethical
1) Charging fair prices
2) Truthful advertisement
3) Paying taxes & duties honestly
4) Using fair weights & measurement
5) Fair treatment of workers
Unethical
1) Using false claims in advertisement
2) Using company property for personal use
3) Leaking confidential information
4) Keeping two sets of books to evade tax
5) Bribing govt. official to get undue favour
6) Adulteration of goods
7) Polluting the environment
 Need for ethics in business:
1) Moral Consciousness : Due to moral consciousness many businessman have avoided
adulteration, over charging, spurious goods, black marketing, false advertising etc.
2) Enlightened Self interest : To increase sales and profits businessman has to serve its
customers with good quality & fair prices, treat its employees with respect & dignity
reword shareholders with good dividend & capital gain, pay tax honesty.
3) Social pressure : Social pressures from trade unions, shareholders Associations &
consumer forum & other social groups bring pressure to avoid unethical practices to
maintain good relation.
4) Legal pressure : Laws of the land need to be observed by business houses irrespective of
its self interest.
5) Protection of stake holders : Shareholders, employees, suppliers, govt. customers,
creditors & local public are to be safeguarded.
6) Code of conduct “Business code” govern the inter relationship of members.
7) For survival
8) Business operates within the society.

Nature or Feature of Business:

Ethics :
1) Business ethics is the application of moral standard in business affairs.
2) Business ethics is a broad term & covers all business practices that are desirable from the
society point of view.
3) It seeks to make businessmen honest, fair & responsible citizen.
4) It requires just & fair treatment of all the stake holders.
5) It is wider and broader term than law and morality.
6) It helps to impose self discipline on businessman.

Goals or Objective of Business Ethics

1) To evaluate human practices by calling upon moral standards.
2) To give prescriptive or curative advice on how to act morally in a specific kind of
situation.

Ethics and law

Law is a body of rules that are used for regulating the conduct of the members of the society.
• Ethics examines both the individual and social good in all dimensions.
• What is lawful need not necessarily be ethical.
• All types of ethical behaviour may not be legislated.

Ethics and Moral

Ethics is a broader term than morals. The term moral is derived from Latin word “mos” which
means custom or usage. Custom is defined by a group over time where as character is personal
attributes. Societies have customs where as people have character. Ethics is treated as scientific
study of morality. Morals are generally accepted customs & conduct & proper living in a
society. Morals indicate what people do where as ethics indicate what people should do. Morals
are the values that have gained social acceptance and recognition.
 Values and Ethics
Values may be defined as beliefs that guide actions and judgment in different situations.
They represent the basic convictions about what is the right behavior.
Edward Springer defines the value “as the constellation of likes, dislikes, view points,
inner inclination, rational & irrational judgment, prejudices and association pattern that
determines a persons view of the world”.
Values are the deep seated ideas and feelings that manifest themselves as a behaviour or
conduct.
Values & ethics are closely related with each other. Ethics is the entire body of moral
values & values are the language of ethics.

TYPES OF VALUES
Instrumental Values
The values which concern the way we approach the end states. These relate to means for
achieving desired results. That is, do we believe in ambition, cleanliness, honesty or obedience,
courage etc.
Some are like –
 Hard work and achievement.
 Education and intellectual pursuits
 Self-sufficiency; independence.
 Truthfulness; honesty.
 Assertiveness; Standing up for yourself.
 Being well-mannered and courteous towards others.
 Open-mindedness; receptivity to new ideas.
 Caring towards others.
Terminal Values
They are those end state goals that we praise such as comfortable life, a sense of
accomplishment, equality among all people.
 Happiness; satisfaction in life.
 Peace and harmony in the world.
 Knowledge and wisdom
 Pride in accomplishment.
 Security; freedom from threat.
Both sets of values have significant influence on daily behavior at work.

Negative and Positive Values

The values can also be categorized as negative and positive values which denote a sense
of right or wrong, good or bad and other judgmental criteria based on our strong sense of what
the ideal ought to be.
Negative Values
 Anger
 Meanness
 Arrogance
 Crookedness
 Greed
 Lust
They generate negative thoughts
Positive Values
 Integrity, honesty
  Truthfulness
 Kind heartedness, humility
 Friendliness
 Faith
 Self-respect
 Open mindedness
 Creativity
 Civil sense
 Simplicity
 Forgiveness
 Poise
 Detachment, etc
They generate positive thoughts.
Attitude of Indian Managers Towards Business Ethics:
Prof. Arun Monappa conducted a survey of 115 business executives regarding attitude
towards business ethics. They were belonging to different industries, ages, educational
standards, religious affiliations and income groups. They were attending the middle and senior
management programme of I.I.M. Ahmedabad. The findings are given in his work Ethical
Attitudes of Indian managers, are as follows :
1) A majority of business managers believe in good ethics. Various circumstances like
unnatural competition, company policy and plethora of rules and regulations often prevent
the managers from putting this belief into practice.
2) The problem that caused managers the greatest concern were those which involved ‘buying
business’; using gifts, bribes, personal favours, etc.
3) Most managers do take time in making a decision to consider the ethical implications.
4) Managers reiterated the importance of company policy in influencing ethical action. A
man’s personal code of conduct was given only a second place.
5) The influence of supervisors through whom the company policy is most often transmitted,
was considered important in influencing ethical action.
6) Dishonest methods of competitors and unethical climate in the industry were often cited as
deterrents to the honest transaction of business.
7) Corruption and greed of government officials red-tapism, nepotism and suffocating
regulations were considered obstacles to ethical business behaviour.
8) The attitudes and reactions of the older business managers to situations demonstrated a
greater ethical awareness than those of younger ones.
9) The size of company had no discernible influence on ethical decision-making.
10) Managers were dissatisfied with the idea that profits should be the only guidelines for a
businessman in decision-making.
11) Formal education and training did not seem to have stimulated the desire to act honestly.
12) The ethical attitudes of those who belonged to a religion which was more organized were no
better than those in whose religion there is no much scope for guidance.
13) Certain areas like construction, engineering research and development, banking, investment
and insurance seemed more prone to encouraging unethical practices that others.
14) A majority of the managers welcomed the idea of a code of conduct and felt it would help
to improve the ethical climate in the country.
15) Managers felt that management of each company, i.e., self-regulation, would be the
authority best suited to enforce the code.

THREE VALUES SYSTEM FOR INDIAN MANAGERS

Simplicity – Sacrifice - Sharing