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An organization and each of its employees, wherever they may be located, must conduct their
affairs with uncompromising honesty and integrity. Business ethics are no different than personal
ethics, and the same high standard applies to both. As a representative of their company all
employees are required to adhere to the highest standard, regardless of local custom.

Everyone is responsible for their own behavior. We live in a culture where responsibility and
accountability are minimized, with individuals hiding behind the label of "victim" as an excuse
for their actions. There is right and wrong, black and white, but many would prefer to operate in
shades of gray. As long as they do not cross the line, they feel that they are fine. As long as no
one catches them, their behavior is acceptable.

Individuals operating in shades of gray feel ethics are not as important as the legality of their
actions and think the ends justify the means. After all, they work in a results-driven environment
and it is the results that matter.

While certain actions might be legal, they may also be unethical and reflect poorly on an
organization as well as the individuals responsible for them. If these actions are tolerated and
allowed, an organizational culture is created that undermines the customer's confidence in the
company, as well as its products and services and ultimately destroys its reputation in the
marketplace.

Allowing even a single unethical activity can pull a thread that ultimately unravels the cloth of an
organization. Actions have consequences and unethical actions and their consequences can have
a rippling effect within a company. If all employees understand this and apply it to their actions
and the actions of their colleagues, it will result in a stronger company. Both the company and an
employees' ongoing employment within it require compliance to this philosophy.

Ethical behavior cannot be legislated. It is a combination of strong values and the impact of the
example set by peers and superiors. To better appreciate ethics, individuals must understand how
the following factors interact with each other to impact their actions, behaviors and decisions:

Values

Values are the principles or standards of personal behavior. Most values are shaped early in life
by parents, families, friends, teachers and spiritual leaders. As individuals mature, their values
can be changed or biased by their experiences and the choices they make in life. Specific
examples of sound values include honesty, integrity, trustworthiness, fairness and a sense of
justice.

A primary value possessed by most individuals is acknowledging the difference between what is
right and what is wrong. How one acts on this knowledge is the core of both value-based and
ethical behaviors.

Norms
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Norms are the guidelines or guiding values that define behavior in specific situations. Norms
governing employee behavior can be formed by organizations, informally created by groups, or
established by individual values. Some examples of organizational norms include:

· Every employee is 100% responsible for their behavior.

· Ethics are ethics.
· There is no difference between business and personal ethics.
· Ethics are critically important in both business and in life.
· Employees are expected to act ethically 100% of the time.
· Whether they will be discovered or not, employees must always do the right thing.
· Leadership obligations, which include giving clear direction and teaching fellow
employees by example.
· It is an employee's obligation to keep those they supervise acting ethically.
· Employees are expected to stop unethical acts, even if they think it will jeopardize their
job.

Convictions

A conviction is a firmly held belief or opinion and can include one's values, beliefs, corporate
values and norms. A company's strong ethical program relies upon employees' uncompromising
belief or conviction in "always doing the right thing." This underlying conviction is the
foundation for success.

Integrity

Integrity means acting unbiased by self-interest and within the framework of one's values and
norms. One of the most generally accepted norms of organizational behavior is that an
individual's private interests or desire to benefit personally should not influence how they carry
out their responsibilities. An employee is corrupt when he or she damages the company by
deriving personal benefits and gains from their decisions and actions.

Choices

Ethics is the collection of values, norms, standards and principles that provides a framework for
action. Action requires individuals to make choices. Ethical choices often create personal
dilemmas, where decisions may conflict with one's personal values and beliefs. The bottom line
in ethical behavior is determined by the individual choices one makes in both their business
dealings and in their personal lives.

Ethical choices and decisions are unquestionably difficult to make. Some may impact
profitability, employment or even personal relationships. The dilemma often lies in defining "the
right thing," which is not always obvious. This often involves determining and weighing the
various consequences specific decisions will have on the problem or situation. Ethical decision
making is further complicated by all involved parties emotionally arguing their positions.
Emotional arguments are subjective and tend to charge the decision making environment. The
right choice or "the right thing" will be an objective choice free of emotionalism. Once
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identified, the decision should be straightforward.

Courage

It takes courage to be ethical in the current cultural environment. Ethical decisions can be
unpopular because of their impact on both the company and other employees. They can be
stressful because of a fear of retribution or reprisals within the company and from others.

Courage must come from the uncompromising convictions, values and beliefs supported by an
organization's ethical philosophies and reinforced by the belief in "always doing the right thing."

Behaviors

Integrity or ethical behavior is guided by each of the factors discussed within this lesson
including values, norms, convictions, integrity, choices and courage. None is independent of the
others and each supports the others. They are what define your behaviors as either ethical or
unethical. Together they provide you with the guidelines that define your behavior.

12 Ethical Principles for Business Executives

Ethical values, translated into active language establishing standards or rules describing the
kind of behavior an ethical person should and should not engage in, are ethical principles. The
following list

of principles incorporate the characteristics and values that most people associate with ethical
behavior.

1. HONESTY. Ethical executives are honest and truthful in all their dealings and they do not
deliberately mislead or deceive others by misrepresentations, overstatements, partial truths,
selective omissions, or any other means.

2. INTEGRITY. Ethical executives demonstrate personal integrity and the courage of their
convictions by doing what they think is right even when there is great pressure to do otherwise;
they are principled, honorable and upright; they will fight for their beliefs. They will not sacrifice
principle for expediency, be hypocritical, or unscrupulous.

3. PROMISE-KEEPING & TRUSTWORTHINESS. Ethical executives are worthy of trust.

They are candid and forthcoming in supplying relevant information and correcting
misapprehensions of fact, and they make every reasonable effort to fulfill the letter and spirit of
their promises and commitments. They do not interpret agreements in an unreasonably technical
or legalistic manner in order to rationalize non-compliance or create justifications for escaping
their commitments.
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4. LOYALTY. Ethical executives are worthy of trust, demonstrate fidelity and loyalty to persons
and institutions by friendship in adversity, support and devotion to duty; they do not use or
disclose information learned in confidence for personal advantage. They safeguard the ability to
make independent professional judgments by scrupulously avoiding undue influences and
conflicts of interest. They are loyal to their companies and colleagues and if they decide to
accept other employment, they provide reasonable notice, respect the proprietary information of
their former employer, and refuse to engage in any activities that take undue advantage of their
previous positions.

5. FAIRNESS. Ethical executives and fair and just in all dealings; they do not exercise power
arbitrarily, and do not use overreaching nor indecent means to gain or maintain any advantage
nor take undue advantage of another’s mistakes or difficulties. Fair persons manifest a
commitment to justice, the equal treatment of individuals, tolerance for and acceptance of
diversity, the they are open-minded; they are willing to admit they are wrong and, where
appropriate, change their positions and beliefs.

6. CONCERN FOR OTHERS. Ethical executives are caring, compassionate, benevolent and
kind; they like the Golden Rule, help those in need, and seek to accomplish their business
objectives in a manner that causes the least harm and the greatest positive good.

7. RESPECT FOR OTHERS. Ethical executives demonstrate respect for the human dignity,
autonomy, privacy, rights, and interests of all those who have a stake in their decisions; they are
courteous and treat all people with equal respect and dignity regardless of sex, race or national
origin.

8. LAW ABIDING. Ethical executives abide by laws, rules and regulations relating to their
business activities.

9. COMMITMENT TO EXCELLENCE. Ethical executives pursue excellence in performing

their duties, are well informed and prepared, and constantly endeavor to increase their
proficiency in all areas of responsibility.

10. LEADERSHIP. Ethical executives are conscious of the responsibilities and opportunities of
their position of leadership and seek to be positive ethical role models by their own conduct and
by helping to create an environment in which principled reasoning and ethical decision making
are highly prized.

11. REPUTATION AND MORALE. Ethical executives seek to protect and build the
company’s good reputation and the morale of its employees by engaging in no conduct that
might undermine respect and by taking whatever actions are necessary to correct or prevent
inappropriate conduct of others.

12. ACCOUNTABILITY. Ethical executives acknowledge and accept personal accountability

for the ethical quality of their decisions and omissions to themselves, their colleagues, their
companies, and their communities.
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Unethical behavior is an action that falls outside of what is considered morally right or proper for
a person, a profession or an industry. Individuals can behave unethically, as can businesses,
professionals and politicians.

Unethical Behavior Among Individuals

 Lying to your spouse about how much money you spent.

 Lying to your parents about where you were for the evening.
 Stealing money from the petty cash drawer at work.
 Lying on your resume in order to get a job.
 Talking about a friend behind his back.
 Taking credit for work you did not do.
 Cheating on a school paper by copying it off the Internet.
 Taking $20.00 out of your friend's wallet when he is sleeping.
 Using your position of power at work to sexually harass someone.
 Selling a house and not disclosing known defects to the buyers.
 Selling a car and lying about the vehicle's accident history.

Unethical Behavior Among Businesses

 Dumping pollutants into the water supply rather than cleaning up the pollution properly.
 Releasing toxins into the air in levels above what is permitted by the Environmental
Protection Agency.
 Coercing an injured worker not to report a work injury to workers' compensation by
threatening him with the loss of a job or benefits.
 Refusing to give an employee a final paycheck for hours worked after the employee
leaves the company.
 Not paying an employee for all of the hours worked.
 Incorrectly classifying an employee as an independent contractor and not as an employee
in order to reduce payroll taxes and avoid purchasing unemployment and workers'
compensation insurance.
 Engaging in price fixing to force smaller competitors out of business.
 Using bait and switch or false advertising tactics to lure customers in or convince them to
buy a product.
 Rolling back the odometer on a vehicle that is for sale.
 Refusing to honor a warranty claim on a defective product.

Unethical Behavior by Professionals

 Doctors, dentists and lawyers dating their clients.

 Not telling a patient his true diagnosis because the physician didn't know the details of
the diagnosis.
 A dentist preforms unnecessary procedures on a patient in order to receive the insurance
payment.
 Using a patient as a teaching tool for students for long periods of time without the
permission of the patient or patient's family.
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 A lawyer will not return money or provide a which was being held for a client.
 A lawyer represents parties on both sides of a legal transaction.

Unethical Behavior Among Politicians and the Government

 Using the Internal Revenue Service (IRS) to target groups that you do not like by
auditing those groups or refusing to give them tax exempt status.
 Obtaining private tax information about your political opponents from the Internal
Revenue Service and using that information in a campaign.
 Knowingly telling lies about your own political position or about the political position of
your opponent just to get elected.
 Accepting excess campaign contributions that violate campaign finance laws.
 Using money that was donated to your campaign for personal, non-approved expenses.
 Using your position of power to coerce lobbyists into buying expensive gifts for you and
for your wife.
 Secretly spying on U.S. citizens in violation of the Fourth Amendment and lying about
the spying that is going on.
 Using your position of power to close traffic lanes in order to intentionally create a traffic
jam that affects residents of a city because residents in that city are not likely to vote for
you in an election.

These are just some of the many different examples of unethical behavior that could occ

Deontological Ethical Theories

Definition: The Deontological Ethical Theories hold that the actions are morally right
independent of their consequences.

Types of Deontological Ethical Theories

1. Negative and Positive Rights Theories: The negative rights theory asserts that an action
is right if it protects the individual from harm or unwarranted interference from other
people or the government while exercising his right. Suppose an individual has the right
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to use, sell or dispose of his personal car then the other persons have the correlative duty
to not to prevent him from doing whatever he want to do with his car.

The positive rights theory posits that an action is right if it provides or tends to provide an
individual with anything that he needs to exist. Suppose an individual has the right to
adequate health care services to survive this means other agents, perhaps the government
has the correlative duty to provide him with the necessary health care services.

2. Social Contract Theories: The social contract theories posit that people contract with
each other to abide by the moral and political obligations towards the society in which
they live. This theory is based on the notion that if there is no order and law in the
society, then people will have unlimited freedoms, i.e. the right to all things and will
resort to all misdeeds such as rape, murder, plunder, etc.

Thus, there will be an endless “war of all against all” and in order to overcome such
situation people enter into an agreement with each other to give up some of their
freedoms and accept the obligation to respect and safeguard the rights of the others. Thus,
an individual gains the civil rights that constitute the social benefits that he is entitled to
the extent he fulfills his due obligations towards the society.

3. Social Justice Theories: The social justice theories state that the action will be
considered right if it confirms the fairness in the distributive, retributive and
compensatory dimensions of cost and rewards. The distributive dimension means the
perceived fairness in the distribution of social benefits and burden among the group
members. The retributive dimension considers the punishment proportionate to the extent
of crime while the compensatory dimension is the way people are compensated in
relation to the injuries inflicted upon them.

For example, if the second-hand smoke hurts the passive or non-smokers at work, there
should be a fair distribution of health risk burden and the proportionate punishment
should be imposed on the party responsible for it. Also, the affected parties shall be
compensated to the extent they have suffered the injuries.

Thus, a theory asserts that the rightness or wrongness of actions does not depend on the goodness
or badness of their consequences.

Ethical Theories

Definition: The Ethics is the branch of philosophy that deals with the principles of morality and
the well-defined standards of right and wrong that prescribe the human character and conduct in
terms of obligations, rights, rules, benefit to society, fairness, etc.

In other words, the ethics encompass the human rights and responsibilities, the way to lead a
good life, the language of right and wrong, and a difference between good and bad. This means it
is concerned with what is right or wrong for the individuals and society. The term “ethics” have
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been derived from the Greek word “ethos” which means character, habit, disposition or custom.
Several philosophers have propounded different types of ethical theories which are listed below:

1. Teleological Ethical Theories

2. Deontological Ethical Theories
3. Virtue Ethical Theories
4. System Development Ethical Theories

Further, ethics can be classified into three major study areas:

 Meta-ethics is concerned with the theoretical meaning of morality and ethical principles,
i.e. what we understand when we talk about what is right or wrong.
 Normative ethics deals with the content of moral judgments i.e. determining the moral
course of action and includes the criteria for what is right or wrong, good or bad, kind or
evil, etc.
 Applied ethics is concerned with the actions which a person is obliged to perform in a
particular situation.

Thus, ethics are the well-defined standards that impose obligations to refrain human beings from
any misconduct, which could be harmful to the self as well as for the society.

Teleological Ethical Theories

Definition: The Teleological Ethical Theories are concerned with the consequences of actions
which means the basic standards for our actions being morally right or wrong depends on the
good or evil generated.

Types of Teleological Ethical Theories

1. Ethical Egoism: The ethical egoism is a teleological theory that posits, an action is good
if it produces or is likely to produce results that maximize the person’s self-interest as
defined by him, even at the expense of others. It is based on the notion that it is always
moral to promote one’s own good, but at times avoiding the personal interest could be a
moral action too. This makes the ethical egoism different from the psychological egoism
which holds that people are self-centered and self-motivated and perform actions only
with the intention to maximize their personal interest without helping others, thereby
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denying the reality of true altruism (sacrificing one’s personal interest in the welfare of
others).
2. Utilitarianism: The Utilitarianism theory holds that an action is good if it results in
maximum satisfaction for a large number of people who are likely to get affected by
the action. Suppose a manager creates an annual employee vacation schedule after
soliciting the vacation time preferences from all the employees and honor their
preferences, then he would be acting in a way that shall maximize the pleasure of all the
employees.
3. Eudaimonism: Eudaimonism is a teleological theory which posits, that an action is good
if it results in the fulfillment of goals along with the welfare of the human beings. In
other words, the actions are said to be fruitful if it promotes or tends to promote the
fulfillment of goals constitutive of human nature and its happiness. Suppose manager
enforce employee training and knowledge standards at work, which are natural
components of human happiness.

Thus, a moral theory that maintains that the rightness or wrongness of actions solely depends on
their consequences is called as a teleological theory.

Virtue Ethical Theories

Definition: The Virtue Ethical Theories hold that ethical value of an individual is determined
by his character. The character refers to the virtues, inclinations and intentions that dispose of a
person to be ready to act ethically.

Major Types of Virtue Ethical Theories

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1. Individual Character Ethics: The individual character ethics hold that the identification
and development of noble human traits help in determining both the instrumental and
intrinsic value of human ethical interactions. These noble traits are courage, self-
discipline, prudence, gratitude, wisdom, sincerity, understanding, benevolence, etc.
2. Work Character Ethics: The identification and development of reflective, practitioner,
noble traits at works such as creativity, honesty, loyalty, honor, trustworthiness, civility,
dependability, shared work pride, empathy, etc. determine the intrinsic and instrumental
ethical quality of work life.

For example, Suppose a manager is facing global competition, huge productivity

expectations and requires an effective teamwork, then his work character behavior should
be such that he is considered as a role model for task accomplishment and his considerate
relations with everyone at the workplace.
3. Professional Character Ethics: The professional character ethics hold that self-
regulation, loyalty, impartial judgment, altruism, truthfulness, public service determine
the intrinsic and instrumental ethical quality of an individual associated with some
communities.

For example, if a business manager of a firm of doctors detects the double billing for the
OT’s services, then his ethical professional behavior will enforce him to inform about this
to the doctors-in-charge to get the problem solved. And in case the problem still persists,
then he will act as a whistleblower and inform about this to the public outside and will
not be silent until the problem is rectified. He does all this because of his loyalty towards
the professional code of ethics.

Thus, the Virtue Ethical Theories are based on the notion that developing a sound character is
what the life is all about. The character builds a substantive moral foundation for one’s actions.

It is believed that a person with the strong character has imbibed emotional, intellectual, moral
and social virtues to achieve the self-discipline and do the right thing or want what is actually
good for him. Whereas, the person with weak character finds himself doing all the wrong things,
wanting what is truly harmful and making excuses for all his ill doings.

System Development Ethical Theories

Definition: The System Development Ethical Theories state that the extent to which
organization system is sensitive to the need to develop a work culture supportive of ethical
conduct determines the ethical value of actions.

Major Types of System Development Ethical Theories

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1. Personal Improvement Ethics: The personal improvement ethics posits that the action
is good if it is intended to promote the individual’s personal responsibility for the
continuous learning, improvement, holistic development and moral excellence.

For example, the employees in order to gain expertise in their work enroll in the
company’s training programmes with a view to improving themselves as well as the
organization’s functioning.

2. Organizational Ethics: The organizational ethics hold that the action is right if it
confirms the development of the formal and informal organizational processes which in
turn enhances the procedural outcomes, respectful caring, innovation in ethical work
culture and systematic justice.

For example, If there is no employee complaints Redressal system in the organization

and also the employees do not have a voice system for feedback then it is the
responsibility of the manager to implement such system and give a voice to the
employee. By doing so, the manager supports individual and organizational moral
development and reduce the intense resistance to the overall moral development.

3. Extraorganizational Ethics: The extra organizational ethics asserts that the action is
right if it promotes or tends to promote the collaborative partnerships and respect the
global and domestic constituencies representing the diverse political, economic, legal,
social ecological and philanthropic concerns that affect the firm.

For example, it is the social responsibility of a manager to consider all the factors
external to the organization such as political, legal, social, environmental, etc. that can
affect the organizational business processes.

Thus, the managers who cautiously assess the moral conduct of his employees and retribute
(punish) their wrong doings then he is said to have successfully developed the system of ethics.
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In case, the manager relies exclusively on the character of his employees and do not implement
morally supportive Intra-organizational systems and stable processes; then the organization is
exposed to the future ethical risk.