Business Ethics and Social Responsibility (130)

Unit – 1
Business- Introduction; Objective of Business; Attitudes, Beliefs and Values; Principles of
Business Ethics

ETHICS
Ethics is the branch of philosophy that studies the norms, values and behaviour of a person thus
considered as normative science. Value study of a person is used to determine his positive and
negative attitude towards life. In olden days, people might have found some of their actions was
wrong and others right. The question what is right and what is wrong gave birth to ethical and
unethical codes.
The word ethics is derived from the Greek word Ethikos‘ and Latin word Ethicus‘ mean custom or
character. In fact, ethic word has originated from ‘ethos’, meaning character or manners. Ethics can be
considered as the source of character of a person expressed as right or wrong conduct or action. The
concept of ethics deals with human beings. So it is a social science.

Ethics can be distinguished in three categories:

 Normative ethics  Descriptive Ethics  Meta-Ethics
Normative ethics can be used to regulate the right and wrong behaviour of individuals. Norms and
standard are also known as values or codes. It is concerned with criteria of what is morally right and
wrong. It includes the formulation of moral rules that have direct implications for what human
actions, institutions, and ways of life should be like. It asks- How should people act? What acts are
right? Normative ethics is the study of how people ought to behave. It is an argumentative discipline
aimed at sorting out what behaviours (or rules for behaviour) would be best. It is seeing whether their
current moral behavior is reasonable.
Descriptive ethics, also called applied ethics, is used to consider controversial issues, such as
abortion, animal rights, capital punishment and nuclear war. Descriptive ethics is the study of how
people do behave, and how they think they should behave. It is grounded in observation of some sort
— looking at people as they are, not necessarily as they should be. It is to observe what sorts of moral
standards they claim to follow.
Meta ethics- The term "meta" means after or beyond. Its attempts to answer broad questions like
these- Where do our morals come from? What does right means? Ethics focuses on the issues of
universal truths, ethical judgements and the meaning of ethical terms. We may define metaethics as
the study of the origin and meaning of ethical concepts. We should respect elderly person is a matter.
Why we should respect elderly person is concern of meta-ethics.
Normative ethics is about what is right. Descriptive ethics is about what people think is right or the
way they behave. Meta ethics is about if something is considered good then on what basis.
Ethics includes the following
1. Ethics refers to well based standards of right and wrong that prescribe what humans ought to do.
2. Ethics refers to the study and development of one‘s ethical standards.
Thus, the term ‘ethics’ can be defined as the norms, standards, and moral principles or duties/
obligations which judges right and wrong in issues of society.
The three types of Ethics are: Transactional, Participatory and Recognitional Ethics
Objectives of Ethics
 To define the greatest good of man and establish a standard for the same
 Establish moral standards/ norms of behaviour
 To study of human behaviour, what is moral or immoral should be assessed
 Apply judgement upon human behaviour based on these standard and norms
 Suggest moral behaviour about dos and don’ts
BUSINESS ETHICS
Wheeler- Business Ethics (आआआआ आआआआ) is an art and science for maintaining harmonious
relationship with society, its various groups and institutions as well as reorganizing the moral
responsibility for the rightness or wrongness of business conduct. Business ethics is thus a set of
professional standards/ values/ norms, which emphasize principles of honesty, integrity and fairness
in business dealings between employer-employee, company-customer, company-supplier, company-
the general public etc.
The other significant principles included in business ethics are:
Self-Instructional Material Commitment to agreements
Broad-mindedness Considerateness
Importance given to human esteem and self-respect Responsible citizenship
Attempt to excel Accountability
These principles, if strictly pursued, lead to a decent business environment and create healthy
relationships in the organization. However, deviations from these principles can occur due to the
following factors:
Ignorance and indifference to issues
Selfishness
Imperfect reasoning
Business ethics is the application of general ethical ideas to business behaviour. Ethical business
behaviour facilitates and promotes good to society, improves profitability, fosters business relations
and employee productivity. The concept of business ethics has come to mean various things to various
people, but generally it‘s coming to know what it right or wrong in the workplace and doing what‘s
right - this is in regard to effects of products/ services and in relationships with stakeholders.
Business ethics is applicable to every type of business. The social responsibility of a business requires
the observing of business ethics. A business man should not ignore the business ethics while assuming
social responsibility. Business ethics means the behaviour of a businessman while conducting a
business, by observing morality in his business activities.
Business Ethics or Ethical standards are the principles, practices and philosophies that guide the
business people in the day today business decisions. Business ethics can be said to begin where the
law ends. Business ethics is primarily concerned with those issues not covered by the law, or where
there is no definite consensus on whether something is right or wrong.
 Characteristics of Business Ethics
Note: Kindly look into this also. There might be repetition.
The following are the important features of business ethics:-
1. Business ethics are the principles, which govern and guide business people to perform business
functions and in that sense business ethics is a discipline
2. It is considered both as a science and an art.
3. It continuously tests the rules and moral standards and is dynamic in nature
4. It is based on principles such as sincerity, human welfare, service, good behaviour etc.
5. It is based on reality and social customs prevailing in business environment.
6. It studies the activities, decisions and behaviour which are related to human beings
7. It has universal application because business exists all over the world
8. Many of the ethical principles develop the personal dignity
9. Business ethics keeps harmony between different roles of businessman, with every citizen,
customer, owner and investors.
[Link]
Principles of Business Ethics(BE-Niraj, Paras)
Service first and profit next; Satisfactions to consumers i.e. do not cheat or deceive the customers;
Well being of the community; Dignity of human labour; Best possible utilization of inputs; Social role
of business; Fairness in competition i.e. do not destroy or distort competitions or tarnish the image of
competitors;
The Principles of business ethics developed by well known authorities like Cantt, J. [Link], Herbert
Spencer, Plato, Thomas Garret, Woodrad, Wilson etc are as follows
1. Sacredness of means and ends: The first and most important principles of business ethics
emphasize that the means and techniques adopted to serve the business ends must be sacred and pure.
It means that a good end cannot be attained with wrong means, even if it is beneficial to the society.
2. Principle of proportionality: This principle suggests that one should make proper judgment before
doing anything so that others do not suffer from any loss or risk of evils by the conducts of business.
3. Not to do any evil or co-operate: It is unethical to do a major evil to another or to oneself, whether
this evil is a means or an end. Sonali Cable Example
4. Co-operation with others: These principles state that business should help others but only in that
condition when other deserves for help.
5. Publicity: According to W. Wilson, anything that is being done or to be done, should be brought to
the knowledge of everyone. If everyone knows, none gets opportunity to do an unethical act.
6. Equivalent price: According to W. Wilson, the people are entitled to get goods equivalent to the
value of money that he will pay.
7. Universal value: According to this principle the conduct of business should be done on the basis of
universal values.
8. Human dignity: As per this principle, man should not be treated as a factor of production and
human dignity should be maintained.
9. Non violence: If businessman hurts the interests and rights of the society and exploits the consumer
by overlooking their interests this is equivalent to violence and unethical act.
Need of Business Ethics
1. Stop business malpractices: Some unscrupulous businessmen do business malpractices by
indulging in unfair trade practices like black-marketing, artificial high pricing, adulteration, cheating
in weights and measures, selling of duplicate and harmful products, hoarding, etc. These business
malpractices are harmful to the consumers. Business ethics help to stop these business malpractices.
2. Improve customers' confidence: Business ethics are needed to improve the customers' confidence
about the quality, quantity, price, etc. of the products. The customers have more trust and confidence
in the businessmen who follow ethical rules. They feel that such businessmen will not cheat them.
3. Survival of business: Business ethics are mandatory for the survival of business. The businessmen
who do not follow it will have short-term success, but they will fail in the long run. This is because
they can cheat a consumer only once. After that, the consumer will not buy goods from that
businessman. He will also tell others not to buy from that businessman. So this will defame his image
and provoke a negative publicity. This will result in failure of the business. Therefore, if the
businessmen do not follow ethical rules, he will fail in the market. So, it is always better to follow
appropriate code of conduct to survive in the market.
4. Safeguarding consumers' rights: The consumer has many rights such as right to health and safety,
right to be informed, right to choose, right to be heard, right to redress, etc. But many businessmen do
not respect and protect these rights. Business ethics are must to safeguard these rights of the
consumers.
5. Protecting employees and shareholders: Business ethics are required to protect the interest of
employees, shareholders, competitors, dealers, suppliers, etc. It protects them from exploitation
through unfair trade practices.
6. Develops good relations: Business ethics are important to develop good and friendly relations
between business and society. This will result in a regular supply of good quality goods and services
at low prices to the society. It will also result in profits for the businesses thereby resulting in growth
of economy.
7. Creates good image: Business ethics create a good image for the business and businessmen. If the
businessmen follow all ethical rules, then they will be fully accepted and not criticised by the society.
The society will always support those businessmen who follow this necessary code of conduct.
8. Smooth functioning: If the business follows all the business ethics, then the employees,
shareholders, consumers, dealers and suppliers will all be happy. So they will give full cooperation to
the business. This will result in smooth functioning of the business. So, the business will grow,
expand and diversify easily and quickly. It will have more sales and more profits.
9. Consumer movement: Business ethics are gaining importance because of the growth of the
consumer movement. Today, the consumers are aware of their rights. Now they are more organised
and hence cannot be cheated easily. They take actions against those businessmen who indulge in bad
business practices. They boycott poor quality, harmful, high-priced and counterfeit (duplicate) goods.
Therefore, the only way to survive in business is to be honest and fair.
10. Consumer satisfaction: Today, the consumer is the king of the market. Any business simply
cannot survive without the consumers. Therefore, the main aim or objective of business is consumer
satisfaction. If the consumer is not satisfied, then there will be no sales and thus no profits too.
Consumer will be satisfied only if the business follows all the business ethics, and hence are highly
needed.
11. Importance of labour: Labour, i.e. employees or workers play a very crucial role in the success
of a business. Therefore, business must use business ethics while dealing with the employees. The
business must give them proper wages and salaries and provide them with better working conditions.
There must be good relations between employer and employees. The employees must also be given
proper welfare facilities.
12. Healthy competition: The business must use business ethics while dealing with the competitors.
They must have healthy competition with the competitors. They must not do cut-throat competition.
Similarly, they must give equal opportunities to small-scale business. They must avoid monopoly.
This is because a monopoly is harmful to the consumers.
Importance of Business Ethics (few points may match with advantages given earlier)
There may be many reasons why business ethics might be regarded as an increasingly important area
of study, whether as students interested in evaluating business activities, or as managers seeking to
improve their decision-making skills.
1. Ethics lays the strategic decision-making. Leaders and workers of a business characterized by
ethical behaviour make decisions that are socially acceptable. They allow all the stakeholders to
participate in the decision-making process.
2. They increase employee retention. Employees always want to stay longer in a business where the
employers value their rights and opinions. To them, their basic needs are satisfied.
3. An ethical business attracts investors. A business that promotes ethics in its management and
operations create an investment-friendly environment. Investors like putting their money where they
are sure it is safe.
4. Ethics minimizes costs. Fewer funds are spent in employee recruitment since most employees are
retained in the business.
5. Ethical practices help in building and maintaining reputation. A large part of ensuring business
success is down to maintaining a good reputation among your customers. One of the main things that
customers will scrutinize when they decide whether they trust or want to engage with a business or
not is that business’s ethics. If you can brand yourself explicitly as an ethical business, so much the
better!
6. An ethically oriented company is bound to avoid fines. They comply with the law, file their tax
returns in time, ensure quality of products and services, etc.
7. Ethics in a business attracts more employees. When your company is reputable, more people will
be interested to work for you.
8. Good Business ethics is the key to enhancing productivity. People will work harder at their jobs
if they believe that what they are doing is ethical. They will not be held back by moral qualms, and
they may feel extra motivated to work because they feel that by doing so they are making the world a
better place. So if you want to make a normal profit rise and rise until you are making big bucks, you
need to keep your business totally ethical.
9. Ethics create customer loyalty. A reputation build on good ethics helps create a positive image in
the marketplace. This, in turn, makes customers trust your products and services. They also pass
information to their friends and family, hence, creating more customers for you.
10. Ethics encourage teamwork. Employers and employees who trust each other work together
harmoniously and effectively.
11. A business that values ethics attracts more suppliers. A business without suppliers is as good
as a failed enterprise. Suppliers are attracted to a company that appreciates what they supply and pay
for them promptly.
12. Ethics in enhances partnerships. Partnerships in the business world are very crucial. They help
expand your marketplace and improve business relations. In order to get a good partner(s), your
reputation must be built on a strong business ethics foundation.
13. Ethics reduces business risks. As trust and loyalty are built on ethics, chances of losing potential
customers, suppliers, employees and even the company itself are minimal.
14. It improves a company’s bottom line (last line that shows profit or loss). The bottom line of
your business will increase since costs and risks are reduced.
15. Ethics increases business profits. The decrease in risks and costs mean that the output is likely to
be higher than the input hence the company makes a profit.
16. Ethics lead to sustainable growth in sales. An increase in customers leads to an increase in
demand. Therefore, more goods and services are sold. It may seem that a little selfishness might help
your business, however this is never the case. Selfish or unethical actions may seem to give your
business a temporary boost, but they will thwart your long term goals. Ethical action is the key to
sustainability and success in business.
17. Good ethics in a business boosts the morale of the employees. Good business ethics involves
rewarding your employees. When an employee is rewarded, he/she works harder leading to more
profits.
18. Ethics helps in building consumer confidence. Other than customer loyalty, business ethics
makes consumers believe in you even during difficult times. For example, when a company’s product
is found to be faulty and the company takes full responsibility, consumers are bound to trust that it
was just a mistake.
19. Ethics enable a company to make good use of the limited resources. Instead of wasting the
company’s resources on themselves, company leaders can put them to good use.
20. Ethics in business allows for healthy competitions. It is common to find two or more companies
that offer similar services and goods. A company characterized with ethical behaviour will not engage
in malpractices such as spreading false information about the other company or lowering their prices.
Instead, they will allow the customers to choose where they like.
21. Ethics lead to long-term gains. A company that values ethics believes in small, but long-term
benefits rather than big, but short-term returns.
22. Ethics helps in maintaining quality. An ethical company will strive to deliver goods and
services of high quality to their customers even in times when the demand is higher than supply.
23. Ethics offers extra asset protection. Employees who abide by the business ethics are in a
position to respect and protect the business’s assets. For instance, they will not make long personal
calls using the business line.
24. Ethical practices foster community improvement. Ethics teaches the art of giving back.
Ethically oriented companies will help a community to be better through things like road construction
or schools construction.
25. Good business ethics is an end in itself. Both inside and outside of business, having good ethics
is an end in itself, and something that we can derive satisfaction from in its own right. So, if you want
employees, vendors and consumers to feel satisfied, then running an ethical business is very
important. That way, when people go to work they will feel a sense of satisfaction at doing something
that is morally sound. And, when people buy your products or services, they can do so safe in the
knowledge that what they are doing is ethical.