Module- I

Meaning of Ethics, Definition of Ethics and Business Ethics, Introduction to

Business ethics, Need, Importance, Nature, Scope, Objectives of Business Ethics, Factors
influencing Business Ethics, Characteristics of Business Ethics, Ethical aspects in Marketing,
Ethical decision making

Prepared By:- Prasomee

Ethics:-
Derived from the Greek word “ethos”, which means “way of living”, ethics is a
branch of philosophy that is concerned with human conduct, more specifically the
behaviour of individuals in society. Ethics examines the rational justification for our
moral judgments; it studies what is morally right or wrong, just or unjust.
In a broader sense, ethics reflects on human beings and their interaction with nature
and with other humans, on freedom, on responsibility and on justice. It can be said
that in general, ethics is concerned with human independence when it focuses on the
relationship that exists between humans and the world. This independence is the
primary condition in ethical decision-making and in any objective analysis of the
facts. Individuals demonstrate independence when, in a decision-making process,
they choose to free themselves as much as possible from their conditioning. Insofar
as this operation assumes a degree of lucidity that allows us to judge objectively and
to decide what direction to take, it will be understood that making ethical decisions
is difficult.
Definitions:
Business ethics is a study of the moral rightness or wrongness of the acts involved in
the production, distribution and exchange of economic goods and services. – T.M.
Garrett

Business ethics deals with the values of what is right and wrong, good and bad and
moral and immoral in business relationship.- Thomas J. Adams
Business Ethics
Business Ethics studies how to deal with corporate governance, whistleblowing,
corporate culture, and corporate social responsibility. It emphasizes standard
principles prescribed by governing bodies. Non-compliance with business ethics
leads to unnecessary legal actions.

The discipline also emphasizes a code of conduct; a set of unwritten rules which are
not legally enforceable. There is a lot of fine print when it comes to ever-changing
corporate regulations. Business ethics, therefore, educates businessmen and
employees about ethical procedures and penalties for non-compliance.
Business Ethics (contd.)
Business ethics ascertain social, cultural, legal, and other economic limitations and
safeguard the interest of parties involved. Further, it emphasizes moral and social
values like consumer protection, welfare, fair business practices, and service to
society.
• Being transparent
• Customer needs should be prioritized
• Workplace diversity
• Respecting customer information
Need of business ethics
• Survival of the business units
• Growth of business unit
• Earning goodwill
• Improving the confidence
• Maintaining inter-relationship
• Solving social problems
Nature of business ethics
• Concept of ethics deals with human beings only
• because only human beings have been endowed with the freedom of choice and the means of
free will
• A set of systematic knowledge about moral behaviour and conduct
• The science of ethics is a normative science
• (Normative sciences are concerned not with factual judgements but with judgements of what
‘ought to be’. Hence, Ethics is concerned with judgement of value or what ought to be.)
• Ethics deals with human conduct which is voluntary and not forced or coerced by persons or
circumstances
 Nature of business ethics
1. Ethical Values:
• Business ethics is totally focused on their morality factor because, in today’s world, community firms play a vital role in society and its actions are
directly affected by the welfare and well-being of the society. Business affects society in terms of which type of products it supplies and produces.
• So, that is the reason, it is mandatory that the business community conduct its activities with self-check, self-inspection, self-control, self-sacrifices
and also keeping always in mind the ethical values of community and their society.
2. Relative Term:
• Ethics is a term of relation with the concept of morality and immorality. It differs from an individual to an individual, society to society, culture to
culture, country to country. It helps to define the moral and immoral term of business ethics.
3. The interest of Society:
• In this features of business ethics, Business ethics said that business should first do excellent to society and community and then to itself because
social welfare is also the objective of a business.
• Business is an important institution and they have various social responsibilities to protect the category of all formal or informal groups which are
directly or indirectly related to the organization like employees, shareholders, consumers, and their stakeholders also to contribute to the growth of the
business.
4. Business Social Relationship:
• Business ethics helps to set or formulate the terms and standards to understand social affection or relationship of business. It describes what
community or society expects from business and what it presumes about the business.
Nature of business ethics
5. Provides the framework:
• Business is an institution which includes various social and economic rules and regulations. Business is always trying to restrict its activities
(formal or informal) within the limits of the social, cultural, regional, religion, and economic environment.
6. Facilitates the protection of social groups:
• Business ethics is a type of code of conduct which includes the guidance of norms and behavior of an individual i.e., how to behave yourself,
how to follow the norms, how to improve yourself, and so on. It gives protection to consumers and other social members such as
shareholders, society, and employees.
7. Not against profit-making:
• Business ethics is not in against real or fair profit making. However, it is totally against those profits which are earned by cheating and
exploiting their customers, employees, and investors. It helps to support business activities but by accurate or fair means and not through
illegal activities.
8. Needs willing acceptance:
• Business ethics cannot be forced by law and other aspects. It must be accepted as self-indulgence by any businessman. It should come from
the inner part of the soul. Businessman follows the guidelines of ethical trade activities by own and not by force of any law.
Scope of business ethics
Scope of business ethics (contd.)
• 1. Ethics in Compliance:
• Compliance includes the factor of obeying and sticking to rules, regulations, and authority. The
motive of this compliance is to do the right things at the right place and at the right person. They
neglect the wrong way to work and accept the factor of law.
• An ethical climate in the business protects that compliance with the law is fulfilled to abide by the
laws.
• 2. Ethics in Finance:
• It includes various ethical issues which are faced to the company in terms of finance like:-
• (i) Misleading financial evaluation or analysis,
• (ii) Misinterpretation in transaction analysis with another party,
• (iii) Securities fraud,
• (iv) Executive compensation,
• (v) Bribery and overbilling of expenditures.
Scope of business ethics (contd.)
• 3. Ethics in Human Resources:
• Human resource management (HRM) plays a very crucial role in introducing ethics. Ethics should be a value factor for HR consultants. The
ethics of human resource management (HRM) covers those duties, rights, ethical issues between the relation of employer and employees.
• The issues of ethics faced by HRM include:
• (i) Sexual harassment,
• (ii) Discrimination on the basis religion, age, weight, and so on,
• (iii) Occupational health and safety,
• (iv) Issues relating to the fairness of employees or employers work.
• 4. Ethics in Marketing:
• Marketing ethics is the factor of applied ethics which works with the moral principles behind the regulation and operation of marketing
approach. The ethical issues confronted in the area include:
• (i) Price discrimination and price fixing,
• (ii) Text or copy of advertisements
• (iii) Miscommunicating advertisements,
• (iv) Black and grey markets.
• 5. Ethics of Production:
• This concept of business ethics focuses on the activities of companies to ensure that the production process does not cause harm. If the
product is not suitable for our customers than it will be immediately out of the market.
• In business ethics, the companies produce our products with the respect of customer traditions, morals, thoughts, values, and others. They
consider some points such as:-
• (i) Remove defective products,
• (ii) Maintain ethical relations between the company and the environment like pollutions.
Elements/ components of business ethics
•The top management in every organisation plays a vital role in instilling and developing an ethical
Top Management Commitment culture within the organisation. They have the power to shape the working of the organisation through
their exemplary behaviour.

•The well-defined guidelines for the ‘code of conduct’ is essential for the effective implementation of
Publication of a ‘Code’ ethical business behaviour. A ‘code’ refers to the principles of conduct for the whole organisation in the
form of written documents and propagates values like honesty, sincerity, adherence to laws and so on.

Establishment of Compliance •The existence of an effective controlling system is must to ensure that the employees do display desired
ethical behaviour. This may be done through setting-up compliance mechanisms like efficient
Mechanism communication systems, audit controls, etc.

•It is imperative that employees’ participation is sought both in defining and implementation of the
Involving Employees at all Levels necessary code of conduct within the organisation. Through active involvement of the employees it will
be easy to mould their attitude in the right perspective.

•In order to ensure ethical behaviour within the organisation, regular and timely follow-up actions are a
Measuring Results must. This helps the organisation to take appropriate actions to ensure the achievement of the desired
results.
Types of business ethics
1. Corporate Responsibility: The organization works as a separate legal entity with certain moral and
ethical obligations. Such ethics safeguard the interest of all the internal and external parties associated
with the firm. This includes the employees, customers, and shareholders.
2. Social Responsibility: Making profits should not be at the cost of society. Therefore, corporate social
responsibilities (CSR) have been a common practice where businesses work towards environmental
protection, social causes, and spreading awareness.
3. Personal Responsibility: Employees are expected to act responsibly with honesty, diligence,
punctuality, and willingness to perform excepted duties. Individuals should settle dues in time and avoid
criminal acts.
4. Technology Ethics: In the 21st century, companies have adopted e-commerce practices. Technology
ethics includes customer-privacy, personal information, and intellectual property fair practices.
5. Fairness: Favouritism is highly unethical. Every individual possesses certain personal bias. But at the
workplace, personal beliefs and biases should not affect decision-making. The firm has to ensure fair
chances of growth and promotion for all.
6. Trustworthiness and Transparency: Businesses should maintain transparency in business practices
and financial reports.
Objectives of business ethics
i. Studies human behaviour and makes evaluative assessment about them as moral or immoral (a diagnostic goal);
ii. Establishes moral standards and norms of behaviour;
iii. Makes judgement upon human behaviour based on these standards and norms;
iv. Prescribes moral behaviour and makes recommendations about how to or how not to behave (therapeutic goal);
v. Expresses an opinion or attitude about human conduct in general.
Factors influencing Business Ethics
1. Social Factors:
• Every society has its own values, norms, beliefs, and customs. Business is a part of society and therefore, social morality
determines business morality. As social values and norms change, business ethics also undergoes change. A business
person’s level of ethics is conditioned by the values of his/her family, relatives, friends, etc.
2. Cultural Factors:
• Cultural values originate from religion, heritage, family system, education system, etc. These values mould the norms and
values used in business. Cultural values are passed on from one generation to another. They exercise an everlasting
influence on business behaviour.
3. Economic Factors:
• The level of economic development in a country influences the nature and level of business ethics. In general, business
ethics tend to become more liberal with industrial and commercial growth. For example, in a highly competitive business,
comparing one’s product with competitive products in advertisements is considered ethical.
4. Political Factors:
• The ideology of the political party in power exercises influence on business ethics. Government regulates business
behaviour through legislation. For example, Government of India’s policy of liberalisation, privatisation, and globalisation
(LPG) since 1991 has led to a shift in business ethics.
Factors influencing Business Ethics
5. Organisational Factors:
• The philosophy of promoters, management policy, and attitudes, superior-subordinate relations influences the ethical
perception, judgment, and behaviour of a business enterprise.
6. Business Associations:
• Trade associations, chambers of commerce, and professional bodies (e.g., All India Management Association,
Institute of Chartered Accountants of India) prescribe codes of conduct for their members. These codes help to
improve ethical standards on the part of businessmen and managers.
7. Media:
• Media and judiciary have in recent years become more active. They put pressure on unethical businessmen to shun
unethical practices. Media also highlights the activities of ethical businessmen and executives.
Characteristics of business ethics
1. Stakeholder Balance:
• This is the first characteristics of business ethics and it means that the business policies follow the two basic points like protect the interest
of shareholder values or balancing the needs of multiple stakeholders.
• Stakeholders include inner and outer business peoples such as employees, the local community, and the customers.
2. Mission and Vision Driven:
• In this characteristics of business ethics, ethical business is commonly focused on something more than profit, and those things are values
and beliefs. When these values are supported by management and valued by individuals, the workforce becomes more effective and united by
common goals rather than simply co-existing to pursue profits.
• These type of values and beliefs are performed better for their employees and their relationship with the public and its market.
3. Process Integrity:
• This is the third characteristics of business ethics and it means that the organizational culture is the product of hundreds of various
processes that take place on a regular basis. These processes can be healthy or unhealthy, depending upon various factors effective to the
process.
• For Example, ‘healthy’ competition is a formulation of success, equal treatment by management and distribution of foils. Unhealthy
competition is totally different, they have misaligned goals and unequal treatment of the better performers.
• So, that is the reason, human resource managers help to review the integral processes and protect them with transparency.
4. Long-term Perspective:
• In this characteristics of business ethics, companies follow the long term process with their ethical values and beliefs. This long term view
should not only relate to wealth or profits but it also relates to the community and their standards. It helps to reflect the self-reflection policy
so that the employees of an organization can freely take decisions and improve themselves also.
• Thinking in the long term perspective also allow businesses to make the plan effective for their future growth and developments.
Principles of business ethics
Principles of business ethics
• Honesty: The best way to gain the trust of the employees is to have transparent communication with them.
• Avoid Conflicts: Firms need to minimize conflicts of interest in the workplace. Excessive competition within the workforce
can end disastrously.
• Compliance: Firms need to comply with all the rules and regulations.
• Relevant Information: It is necessary to provide information that is comprehensible. All the relevant facts, whether positive
or negative, must be disclosed. It is unethical to hide unreasonable terms and conditions in the fine print.
• Law Abiding: Corporate laws protect the rights of every section of society. Any kind of discrimination is unethical.
Personal biases of individuals should not affect the decision-making of leaders.
• Fulfilling Commitments: It is unethical to justify non-compliance by interpreting agreements unreasonably.
Types of business ethics
1. Corporate Responsibility: The organization works as a separate legal entity with certain moral and ethical
obligations. Such ethics safeguard the interest of all the internal and external parties associated with the firm.
This includes the employees, customers, and shareholders
2. Social Responsibility: Making profits should not be at the cost of society. Therefore, corporate social
responsibilities (CSR) have been a common practice where businesses work towards environmental
protection, social causes, and spreading awareness.
3. Personal Responsibility: Employees are expected to act responsibly with honesty, diligence, punctuality, and
willingness to perform excepted duties. Individuals should settle dues in time and avoid criminal acts.
4. Technology Ethics: In the 21st century, companies have adopted e-commerce practices. Technology ethics
includes customer-privacy, personal information, and intellectual property fair practices.
5. Fairness: Favouritism is highly unethical. Every individual possesses certain personal bias. But at the
workplace, personal beliefs and biases should not affect decision-making. The firm has to ensure fair chances
of growth and promotion for all.
6. Trustworthiness and Transparency: Businesses should maintain transparency in business practices
and financial reports.
Ethical Intensity level
There are 4 main levels of ethical intensity in that ethical issues and performance may be considered:
• (i) Individual level – It is concerned with individual values, perceptions and motives. The
intellectual bias is an important part of spiritual development. Probably, it has the issues like
bribery, corruption and unethical behaviour etc.
• (ii) Corporate level – It is concerned of the ethical values with social motives. Some issues like
anti-competitive practices, immoral attitudes, black marketing, misleading tasks and fiduciary
responsibilities etc., may be included in it.
• (iii) Societal level – The ethical aspects at society level have a comprehensive part to be based on
social values. Some of the issues like intellectual rights, discrimination in resource utilisation,
protect unsocial elements and issues of cultural respects are included in it.
• (iv) Global level – It is concerned with global environment, human rights and duties and
technology utilisation etc.
Unethical behavior
1. Environmental Competition:
• In industries where there is intense competition amongst the companies producing similar products like paper industry, electrical industry,
etc. companies tend to foster unethical behaviour in their desire to win customer confidence.
2. Inter-Organisational Dependence:
• Companies that manufacture tinned food items can sell them after getting approval of Food Products Organisation (FPO). To expedite such
approvals, companies tend to resort to unethical practices like bribery or presentation of false data or samples.
• Bribery and kickback can take the forms of money (paying money to get the work done, for example, paying money to an official to obtain
license for starting a business), gifts (to get the work done by offering gifts like jewellery, electronic gadgets etc.), entertainment (offering
facilities in five star hotels, foreign trips etc.) or political contributions (giving donations to political parties for their election campaigns,
providing them hotel accommodation etc. in order to procure quotas, licenses or orders.)
• (a) Bribery is a payment or remuneration for performing an act which is inconsistent with the nature of work or for which one has been hired
to perform. It is in the form of personal payment, gift or special favour to an official to get the work done.
• (b) Kickback is different in terms of mode of payment from bribery. In this, payment is given after the favour gets completed.
3. Pressure for High Performance:
• When workers are pressurised by management to report high performance in terms of production, they may adopt short cuts, compromise
with quality and speed up the assembly line. This is unethical in nature.
Unethical behavior
4. Poor Financial Performance:
• If firms are reporting financial losses and heavy debts and are unable to recover them through regular business operations, they many adopt
unethical practices to convert their loss-incurring units into profit making units. (This was done by Satyam Computers in 2009).
5. Labour Dissatisfaction:
• If workers are dissatisfied with their employers’ behaviour and policies, they resort to unethical behaviour to show the discontentment and
disregard for their employers.
Ethical aspects in marketing- Five Dos
• Be Transparent
• Whenever you are marketing a product or service to customers, ensure that you are fully transparent about it,
including key information about its safety and effective use.
• Protect Consumer Data And Privacy
• Consumers are becoming increasingly concerned about entrusting their personal data with companies. For this
reason, it’s important to emphasise the company’s commitment to consumer privacy.
• Commit To Sustainability And Human Rights
• Ethical consumerism is becoming a bigger priority for many customers. People want to feel assured that what
they are purchasing is sustainable and ethically produced. Be honest about your ingredients, product
components, and your supply chain.
• Respond Meaningfully To Consumer Concerns
• If customers have safety concerns about a product or service, then this should be seen as a company’s top
priority. Always seek to protect consumer rights and immediately investigate any complaint.
• Maximise Benefits And Minimise Risks
• Every ethical marketing strategy should try to benefit as many people as possible while creating as little harm
or cost as possible. Making an overall and lasting positive impact should always be the aim.
Ethical aspects in marketing- Five Don’ts
• Don’t Exaggerate
• When you exaggerate the benefits of a product or service, you are making a false claim. You are promising a customer a
level of quality that cannot be delivered.
• Don’t Make False Comparisons
• This is an unscrupulous tactic that involves making false, inaccurate, or misleading statements about a competitor’s
products.
• Don’t Make Unverified Claims
• This involves promising to deliver results (e.g. improved skin) without providing any scientific evidence to back this up.
• Don’t Stereotype
• This involves the promotion of stereotypes (e.g. portraying women in objectionable manner) in order to sell a product. The
harm here is that this sort of marketing helps to maintain a sexist culture.
• Don’t Exploit Emotions
• Getting an emotional reaction from consumers is one of the most effective ways to generate interest. However, if you evoke
negative emotions such as rage, fear, sadness in a tasteless way, this could be seen as exploitative. Customers want their
emotions to be sympathised with, not manipulated.
• Examine your current marketing strategy and see how it could be altered in line with these 10 ethical principles. If you
change the planning, implementation, and monitoring of your strategy with ethics in mind, you will be able to drive success
while maintaining a solid reputation.
Ethical decision making
Choose an Option Implement Your
Evaluate Alternative for Action and Test Decision and Reflect
Identify the Ethical Get the Facts Actions on the Outcome
It
Issues
Could this decision or What are the relevant facts Which option best respects After an evaluation using all How did my decision turn
situation be damaging to of the case? What facts are the rights of all who have a of these lenses, which out, and what have I learned
someone or to some group, not known? Can I learn more stake? (The Rights Lens) option best addresses the from this specific situation?
or unevenly beneficial to about the situation? Do I Which option treats people situation? What (if any) follow-up
people? Does this decision know enough to make a fairly, giving them each what If I told someone I respect actions should I take?
involve a choice between a decision? they are due? (The Justice (or a public audience) which
good and bad alternative, or What individuals and groups Lens) option I have chosen, what
perhaps between two have an important stake in would they say?
“goods” or between two Which option will produce
the outcome? Are the the most good and do the How can my decision be
“bads”? concerns of some of those least harm for as many implemented with the
Is this issue about more than individuals or groups more stakeholders as possible? greatest care and attention
solely what is legal or what is important? Why? (The Utilitarian Lens) to the concerns of all
most efficient? If so, how? What are the options for stakeholders?
Which option best serves
acting? Have all the relevant the community as a whole,
persons and groups been not just some members?
consulted? Have I identified (The Common Good Lens)
creative options?
Which option leads me to
act as the sort of person I
want to be? (The Virtue
Lens)
Which option appropriately
takes into account the
relationships, concerns, and
feelings of all stakeholders?
(The Care Ethics Lens)
Important Reading- Sarbanes Oxley Act

https://corporatefinanceinstitute.com/resources/economics/sarbanes-
oxley-act/
Thank You