MOD 3

Definition:
Business ethics is a form of applied ethics or professional ethics, that examines ethical
principles and moral or ethical problems that can arise in a business environment. It applies
to all aspects of business conduct and is relevant to the conduct of individuals and entire
organizations.
Business ethics is the study of appropriate business policies and practices regarding
potentially controversial subjects including corporate governance, insider trading, bribery,
discrimination, corporate social responsibility, and fiduciary responsibilities. Business
ethics is the implementation of policies and procedures regarding topics such as fraud,
bribery, discrimination, and corporate governance. The purpose of business ethics is to
ensure a consistent moral attitude within the company, from executive-level management
to new hires. It helps to ensure everyone is treated with respect, fairness and honesty.

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 to exploit others, etc.
Need for Business ethics

 Survival of the Business Unit.

 Growth of Business Unit.
 Earning Goodwill.
 Improving the Confidence.
 Maintaining Inter-relationship.
 Solving Social Problems.

Social responsibility programs can boost employee morale in the workplace and lead to
greater productivity, which has an impact on how profitable the company can be.
Businesses that implement social responsibility initiatives can increase customer retention
and loyalty.

Need for Business Ethics

1. The principles for business conduct help businesspersons judge the social
consequences of their decisions and actions.
2. Business ethics lays emphasis on sustainability, social development,
stakeholders, consumer satisfaction, etc.
3. It helps in developing socially responsible businesses.
4. It helps in reconciling conflicting interests of various sections of the society
such as workers, shareholders, consumers, and distributors.
5. It has a legal imperative.
6. It encourages business firms to fulfil their social obligations towards society.
Importance of Business Ethics

1. It improves the standard of behaviour.

2. It leads to more effective business practices.
3. It leads to long-term gain for the business.
4. It improves the moral values of employees.
5. It regulates the ethical behaviour of the industry as a whole.
6. It helps regulate IT security and protect confidentiality.

Benefits of Business Ethics

 Draws more investors toward the business.
 Provide a competitive advantage in terms of customers.
 Build Customer Loyalty.
 Enhance a Company's Reputation.
 Avoid Legal Issues.
 Retain Good Staff.

Types of Business Ethics

 Personal responsibility.
 Representative or official responsibility.
 Personal loyalties.
 Corporate responsibilities.
 Organizational loyalties.
 Economic responsibilities.
 Technical morality.
 Legal responsibility.

Factors influencing Business Ethics

 Personal Code of Ethics. A man's personal code of ethics that is what one considers
moral is the foremost responsible factor influencing his behaviour.
 Legislation.
 Government Rules and Regulations.
 Ethical Code of the Company.
 Social Pressures.
 Ethical Climate of the Industry.

Characteristics of Business Ethics:

Business ethics is the study of goals and means for the rational selection of sacred objects
and their fulfilment. It accepts the principles of “Pure goals inspire for pure means” and
“Means justifies the end”. It is essential that goals and means should be based on morals.

The following are the ten important characteristics of a business:

 Economic activity: Business is an economic activity of production and distribution of
goods and services.
 Buying and Selling:
 Continuous process:
 Profit Motive:
 Risk and Uncertainties:
 Creative and Dynamic:
 Customer satisfaction:
 Social Activity:

The essentials of ethics in Marketing

 Be Transparent.
 Protect Consumer Data and Privacy.
 Commit To Sustainability and Human Rights.
 Respond Meaningfully to Consumer Concerns.
 Maximise Benefits and Minimise Risks.
 Don't Exaggerate.
 Don't Make False Comparisons.
 Don't Make Unverified Claims.

Social and Ethical aspects of Marketing:

Honesty – Be forthright in dealings and offer value and integrity.
Responsibility – Accept consequences of marketing practices and serve the needs of
customers of all types, while being good stewards of the environment.

Social and Legal Aspects of Marketing:

It must focus on the values and norms of the society as well. (ii)Ethical Aspect of Marketing:
Ethical aspect of marketing is keeping in view the ethical values of the consumer and the
society. The seller, must know what ethical values his market has and their product must
not violate their ethical needs.

Social and Ethical aspects of Finance:

The ethics in finance incorporate truthfulness, integrity, honesty, justice, and fairness in all
sorts of financial activities. Financial ethics or business ethics are actually subsets of general
ethics.

Ethical issues of Finance:

Integrity. Financial managers should strive for unimpeachable integrity. Customers,
shareholders and employees should be able to trust a financial manager's words. Managers
should not allow prejudice, bias and conflicts of interest to influence their actions.
Ethical issues of HR:
Ethical Issues Faced by Human Resource
 Employment Issues: HR professionals are likely to face maximum ethical dilemmas in
the areas of hiring of employees.
 Cash and Incentive Plans:
 Employees Discriminations:
 Performance Appraisal:
 Privacy:
 Safety and Health:
 Restructuring and layoffs:
Ethics in Decision making:
Ethical decision-making refers to the process of evaluating and choosing among alternatives
in a manner consistent with ethical principles. In making ethical decisions, it is necessary to
perceive and eliminate unethical options and select the best ethical alternative.
Most ethical decisions have:
(a) multiple alternatives;
(b) consequences that extend beyond the immediate situation;
(c) uncertain consequences;
(d) outcomes that mix various economic, legal, and social benefits and costs; and
(e) personal implications.

A large portion of the study of ethics deals with the approach or source of the principles or
standards to be used for ethical decision making in business. A number of schools of
thought have developed that include the following approaches (in no specific order):

 Utilitarian
 Moral rights
 Universalist
 Cost-benefit
  Fairness or justice
 Common good
 Virtue
 Deontological (based on study of moral obligation)
 Theological
 Contextualist
 Principle-based
 As well as others

Four principles of Ethical Decision Making:

Autonomy,
Beneficence,
Non-maleficence, and
Justice

Ethical decision making will be reserved for use in a group decision making. Specifically, this
address ethical decision making in business as providing the guiding requirements or goals
for right conduct. These requirements often come as the result of organizational definition,
agreement, or long-standing custom. There is clear recognition that ultimately a personal
choice must be made with respect to right conduct, but business ethics will provide the
assessment framework for correct behaviour in the business organization.

Three Frameworks:

Based upon the three-part division of traditional normative ethical theories discussed
above, it makes sense to suggest three broad frameworks to guide ethical decision making:
The Consequentialist Framework; The Duty Framework; and the Virtue Framework.

Steps of ethical Decision Making:

1 - Gather the facts. (Don't jump to conclusions without knowing the facts).
2 – Define the ethical issue(s)
3 – Identify the affected parties.
4 – Identify the consequences.
5 – Identify the relevant principles,
6 – Consider the organisational character
7 – Think creatively about potential.
8 – Check confidence and take decision

Consequences:
Think about potential positive and negative consequences for affected parties by the
decision (Focus on primary stakeholders to simplify analysis until the decision maker
become comfortable with the process).
What is the magnitude of the consequences and the probability that the consequences will
happen?
Short term vs. Long term consequences – will decision be valid over time.
Broader systemic consequences – tied to symbolic and secrecy
 Symbolic consequences – Each decision sends a message.
 Secrecy consequences – What are the consequences if the decision or action becomes
public?

A customer service representative taking responsibility for failing to follow through with a
service action is making an ethical decision. A manager taking responsibility for his team not
making a deadline because of his lack of oversight is ethical behaviour.

Steps for accurate ethical decision making:

Step 1: Identify the problem. Sometimes just realizing a particular situation is ethical
can be the important first step. Occasionally in our organizations, we may feel that
it’s just the “way of doing business” and not think to question the ethical nature.

Step 2: Identify the potential issues involved. Who could get hurt? What are the
issues that could negatively impact people and/or the company? What is the worst-
case scenario if we choose to do nothing?

Step 3: Review relevant ethical guidelines. Does the organization have policies and
procedures in place to handle this situation? For example, if a client gives you a gift,
there may be a rule in place as to whether you can accept gifts and if so, the value
limit of the gift you can accept.

Step 4: Know relevant laws and regulations. If the company doesn’t necessarily have
a rule against it, could it be looked at as illegal?
 Step 5: Obtain consultation. Seek support from supervisors, co-workers, friends, and
family, and especially seek advice from people who you feel are moral and ethical.

Step 6: Consider possible and probable courses of action. all of the possible
solutions for solving the problem. Brainstorm a list of solutions—all solutions are
options during this phase.

Step 7: List the consequences of the probable courses of action. From both the
positive and negative benefits of each proposed solution. Whom can the decision
affect?

Step 8: Decide on what appears to be the best course of action. With the facts we
have and the analysis done, choosing the best course of action is the final step.
There may not always be a “perfect” solution, but the best solution is the one that
seems to create the best and the least harm.

Most organizations provide such a framework for decision making. By providing this type of
framework, an employee can logically determine the best course of action. The Department
of Defence uses a similar framework when making decisions.