B U S IN ESS
ETH IC S
M EA N IN G
Ethics is a set of rules that
define right and wrong conduct.
Business ethics can be defined as
written and unwritten codes of
principles and values that govern
decisions and actions within a company.
In the business world, the
organizations culture sets standards for
determining the difference between
good and bad decision making and
behavior.
Long term ism in business
Issues of corporate ethics have taken the form of short-
termism vs. long-termism
If businesses are focused on long term stability and
growth, they are ethical:
Short term strategies, aimed at earning per share for the
year in question, compromise on longer interests
Warren Buffet has often stressed on long term strategies
Investigations into Fannie Mae suggested that the entire
senior management was intensively focused on earnings
guidance
Capital market orientation of companies force them to be
tempted by short term targets:
Increasingly, the entire system of how companies are
evaluated by analysts, investors and stock markets leads to
a short term approach
McKinsey survey [March 2006] shows that companies are
focused on short term strategies due to market pressures
3 M odels ofM anagem ent Ethics
Three Types Of Management Ethic
Moral
Amoral
Immoral
3 M odels ofM anagem ent Ethics
1. Moral ManagementConforms to high
standards of ethical behavior.
2. Immoral ManagementA style devoid of
ethical principles and active opposition to what
is ethical.
3.
Amoral Management
Intentional - does not consider ethical factors
Unintentional - casual or careless about
ethical considerations in business
5
D eveloping M oralJudgm ent
6-23
M aking EthicalJudgm ents
Behavior or act
that has been
committed
compared with
Prevailing norms
of acceptability
Value judgments
and perceptions of
the observer
W arren Buff
ets rule ofthum b for ethical
conduct
I want employees to ask themselves
(when they are in doubt about whether
a particular conduct is ethical or not)
whether they are willing to have any
contemplated act appear the next day
on the front page of their local paper
to be read by their spouses, children
and friends with the reporting done by
an informed and critical reporter.
[Berkshire Hathaways code of ethics]
Stakeholder Versus Shareholder
Shareholder Perspective
Those who approach
ethical decision making
from a shareholder
perspective focus on
making decisions that are
in the owners' best
interest. Decisions are
guided by a need to
maximize return on
investment for the
organizations
shareholders.
Stakeholder Perspective
Stakeholders may
include: employees,
suppliers, customers,
competitors,
government agencies,
the news media,
community residents
and others. The idea
behind stakeholder
based ethical decision
making is to make sound
business decisions that
work for the good of all
affected parties
W hat is EthicalBehavior?
. In many situations lines between right and wrong are blurred. Such situations
can lead to ethical dilemmas.
When faced with ethical dilemmas, its important to consider outcomes of the
decision-making process. One way of dealing with ethical dilemmas is by
using the four way test to evaluate decisions. This test involves asking four
questions:
Is my decision a truthful one?
Is my decision fair to everyone affected?
Will it build goodwill for the organization?
Is the decision beneficial to all parties who have
a vested interest in the outcome?
W HO IS RESPO NSIBLE FO R CREATING
ETHICS IN AN O RG ANIZATIO N ?
A companys managers play an important role in
establishing its ethical tone. If managers behave as
if the only thing that matters is profit, employees
are likely to act in a like manner. A companys
leaders are responsible for setting standards for
what is and is not acceptable employee behavior.
Its vital for managers to play an active role in
creating a working environment where employees
are encouraged and rewarded for acting in an
ethical manner.
O TH ER FA C TO R S IM PA C TIN G
O R G A N IZ ATIO N A L ETH IC S
Corporate culture
Existence and application of a written code of ethics
Formal and informal policies and rules
Norms for acceptable behavior
Financial reward system
System for recognizing accomplishment
Company attitude toward employees
How employees are selected for promotions
Hiring practices
Applications of legal behavior
Degree to which professionalism is emphasized
The companys decision making processes
Behaviors and attitudes of the organizations leaders
7 Principles ofAdm irable
Business Ethics
1. Be Trustful
2. Keep An Open Mind
3. Meet Obligations
4. Have Clear Documents
5. Become Community Involved
6. Maintain Accounting Control
7. Be Respectful
Overview of issues in business ethics
Corporate social
responsibility
fiduciary responsibility,
stakeholder concept v.
shareholder concept
industrial espionage.
General business ethics
Ethics of human resource
management
Ethics of sales and marketing
Ethics of production
Ethics of intellectual property,
knowledge and skills
IM P O RTA N C E O F ETH ICS
IMPORTANCE OF BUSINESS
ETHICS
Public expects business to exhibithigh
levels ofethicalperform ance and social
responsibility.
Encouraging business fi
rm s and their
em ployees to behave ethically is to
preventharm to society.
Prom oting ethicalbehavioris to protect
business from abuse by unethical
em ployees orunethicalcom petitors.
High ethicalperform ance also protects
the individuals w ho w ork in business.
Coke & Pepsiin India
Today, more from the world of
product safety. This time the story
is about Coke and Pepsi, and
allegations that the versions of their
products manufactured in India
contain unacceptably high levels of
pesticides.
worlds biggest brand names,
known for wooing customers around
the world, are facing a credibility
crisis in one of their crucial
emerging markets.
RELIG IO U S VIEW S
O N BU SIN ESS
ETH ICS
SW AM IVIVEKAN AN D VIEW S O N ETH ICS
THE BASIS OF INDIAN
SUBJECTIVITY LIES IN
THE BELIEF OF GOD.
HE SUGGESTED THE
FUNDAMENTAL LAW
OF ETHICS
DONT INJURE
OTHERS, LOVE
EVERYONE AS YOUR
OWNSELF UNIVERSE
IS ONE
In order to w in the gam e,you need to
plan.To plan inform ation is im perative.
G etitthrough legal& ethicalm eans.In
life and business,ethicalstandard
m ustbe set,
ETH ICAL STAND ARD M UST BE SET,
ETH ICAL STAND ARD M UST BE M ET.
CONCLUSION
Ethics are important not
only in business but in all
aspects of life because it
is an essential part of the
foundation on which of a
civilized society is build.
A business or society
that lacks ethical
principles is bound to fail
sooner or later.
