Lecture No.

3 – Types of Ethics
Academic Script

The ethics are a set of moral rules that have the function of regulating the relations or the
conduct of men in a given context or scope. Note that ethics is precisely that part of
philosophy that just deals with the morality of the acts of human beings and therefore
according to a moral standard established and agreed enables us to determine the actions
as good or as bad. Meanwhile, business ethics is a branch within the ethics that special
care and exclusive manner of moral questions that arise or are raised at the request of the
business world towards companies. Business ethics are also known as corporate ethics.
They are so many and varied issues regarding discipline of business ethics, among which
are the following: the inherent business moral principles, the predominant values in the
environment in general and then in each case, in particular, development of policy
guidelines that are based on moral precepts to help guide and govern both the company’s
business and that of its members, by promoting and establishing the values to be adopted
among others.
It should be noted that the behavior they see the directors or individuals who display a
leadership role or command in the organizations is vital as it will have a lot to do in
building business ethics. Because when company directors observe attitudes and
behaviors that are ethically consistent infect and motivate its employees to act in the
same way. You putting it in simpler terms, when practiced from above business ethics
example, they absorb the lower strata that ideal and respond in the same direction.
Then, as in any Endeavour raw respect for ethical values it is almost, a sine quean anyone
proceed in order to corrupt, meantime those organizations in which the economic benefits
are the only ones in charge, there they will tend to forget the respect for moral principles.
However, when the economic issue is dominating an additional problem that is the staff
suffers a kind of contradiction between the moral principle that follows and pressure to
achieve the economic goals that are sent from the address adds.
If the aim is to have a lasting, solid company that arouses confidence is essential to assign
him time and space to the cultivation of moral values.
Key components of a Business Ethics Management:
While they may be countless, but following below key components would result in the
strong foundation of an organizational ethics:
1. Living by the five core values of ethics. I.e. Trustworthiness, Respect, Responsibility,
Fairness and Caring.
2. An executive culture with common importance for its members.
3. Fight for achieving the satisfaction of all parties included in the company:
shareholders, directors, employees, suppliers, and customers.
4. Taking social responsibility for their actions.
5. Outweighs the moral contract between the company and its members and partners
rather than a legal contract.
When you manage to incorporate these building blocks you get to generate greater
economic value, since relationships, not only labor, but between supplier and company,
customer and company, etc., improve and the time and resources invested in improving
inefficiencies that appeared in these relations, may be invested in those areas that
demand it. Business ethics usually improves the performance of the company through
various routes:
 Reduce conflicts of the members that comprise it.
 Improving the external image of company or an organization.
 It is an essential component of the concept of total quality, for a company.

Importance of Ethics in Business

Here, I am explaining the important reasons why an organizational ethic becomes
necessary to have been highlighted by studies of corporate improvement in the time of
multitude. Business ethics is that pressure on companies and circumstances which lead
them to adopt global and proactive responses. Large organizations today are subject to
traditional demands that we call ‘internal agents’ as workers and shareholders are
transformed. Applying business ethics is pressed to the organizations from internal and
external forces because they have great influence on the lives of many people and a great
capacity for effective power in a globalized world. Multinational organizations often have
more influence, capacity, and power to the States.
That they are the object of the pressures and demands of those who feel in some way
affected or erected in spokespersons for those affected by their activities or the
consequences thereof. Responsible for consequences because they often can prevent
certain results or, if it has already happened, repair them. And for profit making
companies the consequences of primary benefit could result in others growth.
That an organization must take responsibility for their actions is not new. In developed
countries, there is legislation detailed in civil, criminal, labor, administrative, commercial,
which specifies responsibilities of individuals and corporations. In developed countries,
there are also sufficiently reliable court systems seeking to impose legal responsibilities
when necessary. What is new is the social conscience of corporate responsibilities that
should be effective even when the law fails to impose it. For example, when concerning
acts performed outside the borders of the country of nationality of the corporation, when
no law protects the affected property or when the procedure of judicial service is so slow
it is useless. In these cases, and many bulls, external and internal agents pressure directly
to the organization, to extend their responsive actions, to the margin of whether they
have or not a legal obligation to do so. These pressures, which in anyway imply recognition
of the powerless state against the organizations, can lead, when they accumulate, which
we can call moral bankruptcy of these same organizations. At one point, an organization
that has neglected their responsibilities can be found before a bankruptcy of this kind,
which leads to an accounting bankruptcy and ending by eroding the confidence of
consumers, governments, and financial markets. Organizations with a strong ethical
culture are characterized by anticipating these demands assuming their responsibilities
until they are raised as complaints, or before the damage is done. This is what we can call
a proactive attitude, to distinguish it.
The characteristics that make a business decision ethical are:
1. Equitable: The decision be just and equal
2. Right: Morally correct and due.
3. Proper: That which is appropriate to the situation and generally acceptable.
4. Good: Which highest good for highest number of concerned people.
5. Fair: Which is honest and due.
6. Just: Justice is done to all and it should appear that justice is given to due.
Ethics means different meaning to different people. It is abstract and does not have
universal standards or acceptance due to the fact that ethics depend on morals and morals
on value system of people.
1. Moral standards change depending on value system.
2. Ethical standards depend on moral standards.
3. Value system is built by in family, upbringing, background and experience.
4. Ethical practices differ in different organizations. Experiences in turn alter ethical
practices.
Many business men do not agree that ethics is necessary in his business dealings. They
also say that business and ethics are opposite terms and hence, combining them is not
proper. In the keep competition in the market place earning money is most important and
how it is done is of secondary or no importance.
The golden rule is that a person should have gold to rule. There is lot of misconceptions or
myths about business ethics and business should be done with ethics in mind. Myths are
popular unexplained beliefs but not truths.
There are some important myths of business ethics:
1. Business and ethics do not go together: Business runs on scientific management
principles whereas ethics is religious.
2. Ethics in business is relative: Ethics is in the thinking and eyes of the man who sees
business. One customer see business ethically excellent other customer see it is
poor. The experiences are contradictory and cannot be measured as so many kilos.
3. Good business makes good ethics: Ethical means may be or may not be always in
the interest of business or better profits. Whatever the profit or business of a
company, CEO of the company has to act ethically. The company should be
prepared to pay costs for instituting and maintaining ethical values in the company.
4. MIS is amoral: Management information systems (MIS) is neither immoral nor
moral. While MIS is good management productive tool and positive dimensions,
there are dark usage areas. MIS may be misused. Information and computing can be
put to bad use. There are violations of privacy and questionable use of data or
putting the MIS in wrong perspective.
5. Ethics is an individual matter: The right or wrong thinking is based on religious belief
of individuals. Business ethics is not for individuals. Individuals make ethical choices
for their individual or own family life as well as for business. The choices in
 organizational decision making are based on data, discussions, purpose and
directions in the organization.

Factors Influencing Business Ethics:

Business Ethics is quality of being useful or desirable. It is commonly used to all things
which people regard as good, desirable and just. We generally make value judgments on
many matters like good, skilled, unskilled, bad etc. The statements are comparative. We
have few terms generally used with different meaning at times not correctly.
These words and their meaning are:
1. Norms: Norms of expectations of a proper behavior in a society. These are not
requirements or must. Example: We in India treat elder with respect. When we
address our teacher we say ‘Sir’.
2. Beliefs: Ethical codes of thought. Belief is an abstract thinking process. Here there is
no action as in norms. Beliefs support norms. Example: Thinking saving money, or
energy.
3. Ethos: Characteristics of a community or of a culture. Code of values by which a
group or a society lives. Example: Generosity of a group.
4. Moral: Concerns regarding principles of right and wrong. Example: It is always right
to tell truth.
5. Morality: It is the standard that an individual or a group that knows that is good,
what is right and which is proper. Example: Since last decade political morality is
decreasing in India.
6. Moral norms: Are expectations of society a level of morals in the society. Example:
Do not harm innocent man.
7. Moral values: Are desired level of morals. Usually these are statements, regarding
describing moral features. Example: Honesty is best policy.
8. Moral behavior: Moral behavior is a study of right and wrong in human behaviors.

Values of Managers
Business is driven by values. Values guide what a business manager should do and how the
stakeholder reaction to these action. Following a set of good values, a value system can be
built in the organization business thus can create good, services, employment of larger
value.
A manager while accepting the values, the considerations are:
1. The values should be universal.
2. Maximum good to greatest number of people.
The manager should be pragmatic in his approach. This comes by his experience and skill
in knowing as to how a decision works in a given situation. Manager should have a feel of
what is good for highest number. Manager should also evaluate the value built up in his
control.
The manager has to choose values in his day to day business decisions. Basic values cut
across culture time and type of industry.

Objectives of Business Ethics:

The Objectives of Ethics are to evaluate the human behaviors and calling up on the moral
standards. The ethical standards also prescribe how to act morally in specified situations.
The objectives of business ethics are:
1. Personal Level: At personal level the policy should be set that not to misuse the
properties of the others or of the organization keeping the promises and extending
the mutual help, not to seek quick gains and not to indulge in politics to gain power.
2. Internal policy Level: The business organization should follow fair practices in
dealing with employees and other stakeholders. The organization should have open
and better communication at all levels. The organization leadership should motivate
employees for better productivity and for common good.
3. Societal Level: The social concerns like no discrimination concerned for the down
trodden be the prime concerns of the business organizations. Optimal use of scarce
resources, clean environment and ensuring better quality of life to all the
stakeholders should be stressed in the internal policies.
4. Stakeholder’s Level: The organization should take care of the maximum number of
stakeholders and follow ethical means with shareholders, customers, suppliers,
employees, banks and financial institutions, government and all others that are
connected with the organization.
Let us now discuss the various types of ethics followed in the business organization. Before
we go ahead with understanding the types of ethics, let us discuss the important
moralities followed in the organization. The moralities are as under:
1. Personal responsibility: It refers to a man's personal code of ethics. If a man behaves
in honesty, he will behave in a very honest and straight forward manner. According
to Walton, "A morally responsible executive is one who knows the various kinds of
value systems that may be employed in a particular situation and has a rather clear
idea of what values hold ascendancy (precedence or priority) over others in a
conflict ". This definition of Walton is rather an over-simplification. A business man
may think he is acting ethically but others may not consider his behavior as ethical.
2. Representative or official responsibility: A manager's action often represents the
position he holds or the office he occupies rather than his personal beliefs. This is so
because the manager represents the business. He has to follow the rules and
regulations of the business, e.g. a manager may want to do something but the
regulations may forbid him from doing it and therefore his hands are tied and he
may not do it.
The following are the types of business ethics:
1. Personal loyalties: Sometimes personal loyalties are so strong that ethical standards
may not be applied when acting towards a particular individual. Personal loyalties
include the loyalties of a subordinate to his superior and superior's loyalty towards
his subordinate.
a. Loyalties of a subordinate to his superior: If a subordinate has strong personal
loyalty towards their superior, they turn a blind eye towards the blunders
committed by their superiors and attempt to defend their omissions and
commissions. For example, if the branch manager of a bank is sanctioning
loan without any security and this act on his part may bring disastrous
financial troubles to the organization, his subordinates who were men of high
moral character and who had close connections with the head office did not
inform them of the financial irregularities because of strong personal loyalty
towards their branch manager.
b. Superior’s loyalty towards his subordinate: If a superior has strong personal
loyalty towards their subordinates, they turn a blind eye towards the mistakes
committed by their subordinates. This is done because the superior does not
want to hurt the feeling of his subordinates because of their close personal
 contact. For example, if the subordinates who are close to the manager do
not do their work properly, the manager may not reprimand (rebuke or scold)
them for their poor performance. He may rather defend their poor quality
work with his superiors because of his personal attachment towards his
subordinates.
c. Corporate responsibilities: Every individual living in society has a moral
obligation towards it. Corporations are entities which are "artificial persons";
therefore, they too have moral responsibilities towards the society. There
moral responsibilities are not necessarily identical with the personal moral
codes of the executives who run them. Every corporation must have moral
codes which help it in deciding matters connected with shareholders,
employees, creditors, customers, government and society.
d. Organizational loyalties: Some employees have a deep sense of loyalty to the
organization. Their loyalties to their organization are so strong that they even
neglect their own self-interest for the sake of the organization.
e. Economic responsibility: According to Milton Fried man, "there is one and
only one social responsibility of business – to use its resources efficiently and
engage in activities designed to increase profits without deception or fraud".
Therefore, every business must contribute to the general welfare of the
society by making efficient and economical use of resource at their command.
This type of morality guides individual action towards economy in the use of
resources put at his disposal.
f. Technical morality: In any country, the state of technology plays an important
role in determining what products and services will be produced.
Technological environment influences organizations in terms of investment in
technology, consistent application of technology and the effects of
technology. A manager having technical morality will refuse to compromise
with quality. Every organization which is actively engaged in technological
advancement will create more challenging situations for the organizations
because they are not prepared to accept lower standards.
g. Legal responsibility: Legal environment provides the framework within which
the business is to function. The viability of business depends upon the ability
with which a business can meet the challenges arising out of the legal
framework. However, it must be observed here that legal responsibility is
more than an intention to conform to laws, orders etc. It is a belief in the
 need for effective co-operation and justice in organized life. It is morality that
transcends conformity to law.
If recent history teaches us anything is that ethics and character count, especially in
business. Huge organizations like Enron, Arthur Andersen and Health South have been
destroyed and others were seriously damaged (AIG, Fannie Mae, Freddie Mac) by
executives with massive ambition and intelligence but no moral compass. In today’s ultra-
competitive, high tech, interdependent business world, charisma without conscience and
cleverness without character is a recipe for economic and personal failure of epic
proportions. As President Theodore Roosevelt said, “To educate the mind without the
morals is to educate a menace to society.”
Competitiveness, ambition and innovation will always be important to success but they
must be regulated by core ethical principles like the ones described below.
Let’s start with a basic definition: ethical principles are universal standards of right and
wrong prescribing the kind of behavior an ethical company or person should and should
not engage in. These principles provide a guide to making decisions but they also establish
the criteria by which your decisions will be judged by others.
In business, how people judge your character is critical to sustainable success because it is
the basis of trust and credibility. Both of these essential assets can be destroyed by actions
which are, or are perceived to be unethical. Thus, successful executives must be
concerned with both their character and their reputation.
Abraham Lincoln described character as the tree and reputation as the shadow. Your
character is what you really are; your reputation is what people think of you. Thus, your
reputation is purely a function of perceptions (i.e., do people think your intentions and
actions are honorable and ethical). While your character is determined and defined by
your actions (i.e., whether your actions are honorable and ethical according to the 12
ethical principles:
 Honesty: Be honest in all communications and actions. Ethical executives are,
above all, worthy of trust and honesty is the cornerstone of trust. They are not only
truthful, they are candid and forthright. Ethical executives do not deliberately
mislead or deceive others by misrepresentations, overstatements, partial truths,
selective omissions, or any other means and when trust requires it they supply
relevant information and correct misapprehensions of fact.
 Integrity: Maintain personal integrity. Ethical executives earn the trust of others
through personal integrity. Integrity refers to a wholeness of character
demonstrated by consistency between thoughts, words and actions. Maintaining
integrity often requires moral courage, the inner strength to do the right thing even
when it may cost more than they want to pay. The live by ethical principles despite
great pressure to do otherwise. Ethical executives are principled, honorable, upright
and scrupulous. They fight for their beliefs and do not sacrifice principle for
expediency.
 Promise – keeping: Keep promises and fulfill commitments. Ethical executives can
be trusted because 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.
 Loyalty: Be loyal within the framework of other ethical principles. Ethical
executives justify trust by being loyal to their organization and the people they work
with. Ethical executives place a high value on protecting and advancing the lawful
and legitimate interests of their companies and their colleagues. They do not,
however, put their loyalty above other ethical principles or use loyalty to others as
an excuse for unprincipled conduct. Ethical executives demonstrate loyalty by
safeguarding their ability to make independent professional judgments. They avoid
conflicts of interest and they do not use or disclose information learned in
confidence for personal advantage. If they decide to accept other employment,
ethical executives 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.
 Fairness: Strive to be fair and just in all dealings. Ethical executives are
fundamentally committed to fairness. They do not exercise power arbitrarily nor do
they use overreaching or indecent means to neither gain or maintain any advantage
nor take undue advantage of another’s mistakes or difficulties. Ethical executives
manifest a commitment to justice, the equal treatment of individuals, tolerance for
and acceptance of diversity. They are open-minded; willing to admit they are wrong
and, where appropriate, they change their positions and beliefs.
 Caring: Demonstrate compassion and a genuine concern for the well-being of
others. Ethical executives are caring, compassionate, benevolent and kind. They
 understand the concept of stakeholders (those who have a stake in a decision
because they are affected by it) and they always consider the business, financial and
emotional consequences of their actions on all stakeholders. Ethical executives seek
to accomplish their business objectives in a manner that causes the least harm and
the greatest positive good.
 Respect for others: Treat everyone with respect. 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. Ethical
executives adhere to the Golden Rule, striving to treat others the way they would
like to be treated.
 Law abiding: Obey the law. Ethical executives abide by laws, rules and regulations
relating to their business activities.
 Commitment to excellence: Pursue excellence all the time in all things. 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.
 Leadership: Exemplify honor and ethics. 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.
 Reputation and morale: Build and protect and build the company’s good reputation
and the morale of its employees. Ethical executives understand the importance of
their own and their company’s reputation as well as the importance of the pride and
good morale of employees. Thus, they avoid words or actions that that might
undermine respect and they take affirmative steps to correct or prevent
inappropriate conduct of others.
 Accountability: Be accountable. 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.