CHAPTER II

The Importance of Ethics in Business

Definition of Ethics

 The word ethics is derived from the Greek word ‘ethos’, which means character.

 Ethics is a branch of philosophy concerned with human character and conduct. It is the
discipline dealing with ‘what are good and bad’ and with moral duty and obligation.

 Ethics is the embodiment of moral values, which describes what, is ‘right’ and what is
‘wrong’ in human behavior and what ‘ought to be’.

 Ethics is a “consideration and application of frameworks, values and principles for

developing moral awareness and guiding behavior and action”.

 Commonly, ethics is also referred to as “moral, good, right, just and honest. Ethical
standards are referred to as the principles or ideals of human conduct.” Thus, ethics
implies good character and morality and refers to generally accepted human character and
behavior considered as a desirable by contemporary society.

Relationship between Business & Ethics

The relationship between business and Ethics has long been debated. If Classical
economists like Adam Smith and Milton Friedman were of the opinion that the only objective of
business was profit maximization and business had no right to ‘meddle’ with ethics, the Church,
in pre-medieval times, was the spokesman and judge for all spheres of the society, including
business.

The Unitarian View:

 Business is only a subset or sub-structure of the moral structure of the society.

 Business and morality cannot be separated and business must play by the rules of
morality and ethics of the community which guides the activities of the community.
 Business must conduct its affairs purely through altruist motives and that profit was a
dirty word.

The Separatist View:

 Opposite to the Unitarian view which asserted that the only goal of business should be
profit maximization; and that ethics and morality plays no part in business conduct.
  Business should go on with the business of producing goods and services efficiently, and
leave the solution of social problems to government agencies and concerned
individuals.
 In short, managers should focus on what they know best—that is how to make profits.

The Integration View:

 States that business is an economic entity and it has the right and the need to make
profits, but, it must also discharge its obligations to the society where it exists and
operates.
 States that society consists of a number of subsystems, and business and morality are
just two of these subsystems. Since all subsystems within the society are interlinked and
interdependent, so also are business and morality interlinked.

Nature of Ethics in Business

1. In business activities, most ethical questions could be of two types – Overt and Covert.
 Overt ethical problems like bribery, theft, sabotage, collusion, etc. are clear for
everyone to see and are generally considered reprehensible. Most people deplore it
and most businesses take care not to be so openly unethical. Hence, most problems
in the business sphere are covert ethical problems.
 Covert ethical problems are more complex, not so transparent and generally defy
ethical solutions. These types of problems occur in corporate acquisitions, marketing
and personnel policies, capital investment, market war, etc. They are difficult to
locate, to eliminate and are consequently much more dangerous and threatening to
business.

2. For a decision to be ethical, it should possess the following characteristics. It should be –

 Right – that which is morally correct and due;
 Equitable – that which is just and equal;
 Good – that which brings in the highest good for all concerned;
 Proper – that which is appropriate and acceptable;
 Fair – that which is honest and due;
 Just – that justice is not only done, but is also seen to have been done.

3. Ethics is unstructured; it does not have a structured format or framework. It is abstract in

concept. Hence, it does not have universal acceptance, mainly because-
 Ethics depend upon our moral standards;
 Moral standards depend upon our value system;
  The value system of people depend upon their background and childhood
experience; and
 The background and experience of people are vastly different. Hence the ethical
practices of people are also different.

4. Ethical decisions should express some obligations to others. If a decision merely results
in benefits only to oneself, then that is not an ethical decision. The very concept of being
ethical means that it results in some good for the larger society and not just for oneself.

The Morality of Profit

Frequently the impression of most people is that ethics and profits are mutually opposed
to one another, and that if a company is ethical, it can forget about making profits. People also
frequently seem to believe that a profitable company must necessarily be unethical. This is like
saying that a company can make profits only through unethical means. Nothing can be more
further from the truth.
But the first and foremost ethical obligation of every business is to make profits for its
shareholders, for its employees, for its creditors and most importantly, for itself, so that it can
discharge its social responsibilities and welfare commitments. But, how much profits to make,
the means and methods of making it, and at what cost-that is the ethical question.

Definition of Business Ethics

What is ethical and unethical in general society may not be the same in business as the latter
operates in different environments.

 Business ethics is “concerned primarily with the relationship of business goals and
techniques to specific human needs. It studies the impact of acts on the good of the
individual, the firm, the business community and the society as a whole.

 “Business ethics study the special obligations that a man and a citizen accept when he
becomes a part of the world of commerce”.

 Business ethics are the norms and moral values of human behavior desired by the
contemporary society exclusively and inclusively dealing with commercial transactions.
  Business Ethics is an art and science for maintaining harmonious relationship with
society, its various groups and institutions as well as recognizing the moral responsibility
for the Tightness and wrongness of business conduct”.( Wheeler.)

 According to Rogene A Buchholz, Business ethics refers to right or wrong behavior in

business decisions.

Importance of Business Ethics

Studying business ethics can give us better understanding the concepts of right and wrong
actions and how they practice this conducts to the business and its effect to other people or
institutions. And we know the business is a dynamic activity. Because of constant changes,
there’s always going to the right path or wrong path as the human conduct dictates it. Ethics is
the principle of understanding good to bad.

Through ethics in business, we enable to analyze one’s activity if we are following the
right way in business. We are reflected through the proper guidelines of the business ethics in
proper examination and confrontation several ethical issues and problems affecting the business
activities or transactions. Through business ethics we can resolve these issues and prevent the
possible repetition of the said ethical issue or problem.

Main Characteristics of Business Ethics

There are several characteristics or features of business ethics. Some of them are discussed
here:
1. Business ethics are based on social values, as the generally accepted norms of good or
bad and ‘right’ and ‘wrong’ practices.
2. It is based on the social customs, traditions, standards, and attributes.
3. Business ethics may determine the ways and means for better and optimum business
performance.
4. Business ethics provide basic guidelines and parameters towards most appropriate
perfections in business scenario.
5. Business ethics is concerned basically the study of human behavior and conducts.
6. Business ethics is a philosophy to determine the standards and norms to make mutual
interactions and behavior between individual and group in organization.
7. Business ethics offers to establish the norms and directional approaches for making an
appropriate code of conducts in business.
 8. Business ethics are based on the concepts, thoughts and standards as contributed as
well as generated by Indian ethos.
9. Business ethics may be an ‘Art’ as well as ‘Science’ also.
10. Business ethics basically inspire the values, standards and norms of professionalism in
business for the well-being of customers.
11. Business ethics is to motivate and is consistently related with the concept of service
motives for the customers’ view point.
12. Business ethics shows the better and perspective ways and means for most excellences
in customization.
13. Business ethics aims to emphasize more on social responsibility of business towards
society.

Important Principles of Business Ethics

Business ethics refers to basic guidelines to study and analyze a sense of right and wrong
and goodness and badness of our tasks. In context of business performance, there are certain
principles and guidelines, based on ethical conducts.

 Principle of Conscience – This principle is based on inner-feeling of persons to analyze

the sense of right and wrong. On this basis the businessman can determine different roles
and behavior at their levels.

 Principle of Wishless Work – This principle emphasize that there is no need to perform
the entire task to be self-centered or self-interest. Accordingly, we should perform all the
role and behavior to another person’s for their esteemed interest. We should be devoted
to our efforts to do the work for others.

 Principle of Esprit – According to this principle businessmen should give due attention
to make best possible services and try to develop the feelings of devotion and truthfulness
in services. All the behavior and activities should be based on values and service motive
in business.

 Principle of Publicity – According to this principle, all the activities and performance as
conducting in business houses, should be well informed to every person or organization
that are directly or indirectly attached with business. It aims to remove the doubtfulness
and misunderstanding among people.
 Principle of Purity – It is most needful that every businessman should follow the
politeness, truthfulness and tolerance for developing the feelings of mental peace. At the
same time, the mental peace and purity also becomes the ways for politeness and
tolerances etc.

 Principle of Humanity – It is needful that every businessman should follow the human
values, human decorum and human aspects within their policies, programs and different
working areas. The ethical behavior may determine the path of humanity.

 Principle of Universal Values – It is required that every businessman should conduct

and perform the task and different business activities to be based on universal
assumptions, customs and overall accepted norms and principles by society.
 Principle of Commitment – According to this principle, every businessman should be
able to fulfill their commitments and assurances as given to other persons. The
implementation of commitments should be based on honesty and responsiveness.

 Principle of Rationality – On the basis of the ethical code of conduct, every

businessman should analyze and evaluate the good or bad, right or wrong, ethical or
unethical aspects within their business transaction and day to day working of the business
houses. They must follow the rational attitudes and behavior.

 Principle of Communicability – According to this principle, there is a need to make

effective means of communication with the internal and external persons as engaged with
business houses. The communication should be in cleared, open and justified manners.

 Principle of non-Cooperation in Evils – It is needful that businessmen should try to

make non-cooperation or discourage the evils, misconduct and unethical behavior not
only with different customers but with society also.

 Principle of Cooperation with Other – Ethical norms motivates the feeling of

collaboration and team spirit. It is required that on the basis of capacity and available
resource, the businessmen should make full cooperation to different other persons as per
their good conduct and value based behavior.
  Principle of Satisfaction – Every businessman are required to create and develop their
role and behavior to establish pleasure and happiness with other persons and the society
at large. Fore mostly, in business as per their products and services, the customers should
be satisfied at every stage.

 Principle of Coordinate Ends and Means – The businessmen should try to make a
coordinating or balancing form between their ends and means within their work
performance and its allied activities. They should develop their ventures within the
limitations of resources and capacities.

 Principle of Due Process – All the persons and different employees, as engaged in
business are required to involve in decision making process and different important
task. Businessmen should follow a reasonable and justified working process in their
organization.
 Principle of Liking in Expectations – In order to establish the ethical norms and
conducts in business, it is required to follow all these good and acceptable behavior by
businessmen. They must give and perform some excellence examples as per the
expectations of others.

 Principle of Transparency – Ethics denotes the concept of purity and truth. All the
business activities and transactions should be well informed with justified manners with
their different stakeholders and society.

Importance of Ethics in Finance, Human Resource Development, Marketing and

Production
Business ethics comprises various traits, such as trustworthiness and transparency in
customer services. Ethical business practices strengthen customer relationship that is of prime
importance for long-term organizational success. It deals with retaining and creating a long-
lasting impression in the minds of customers. Such impressions help the enterprise to win the
trust of customers and get more business.
Business ethics plays a very crucial role in various management functions, which
are given as follows:
1. Ethics in Finance:
It deals with various ethical dilemmas and violations in day-to-day financial transactions.
An example of ethical violations is data fudging in which enterprises present a fabricated
statement of accounts and other records, which are open to investigation. Ethics in financial
transactions gained importance when due to their insufficiency nations suffered massive
economic meltdowns.
The following are the ethics in finance:
 Following truthfulness and authenticity in business transactions
 Seeking the fulfillment of mutual interests
 Getting the economies and financial units freed from greed-based methodologies.

2. Ethics in Human Resource Management:

It deals with the enforcement of the rights of employees in an enterprise.
Such rights are as follows:
 Having a right to work and be compensated for the same
 Possessing a right for free association and participation
 Enjoying a right for fair treatment in an enterprise
 Holding a right to work in a hazard-free environment
 Blowing whistle (an activity where an employee can raise voice against any wrong
practice of anyone in an enterprise)

3. Ethics in Marketing:
Deals with a number of issues, which are as follows:
 Misinforming the customers about the products or services
 Deciding high prices for the products and services
 Creating false impression on the customers/consumers about the features of products
 Promoting sexual attitudes through advertising; thus, affecting the young generation
and children.

4. Ethics in Production:
It deals with the responsibility of an organization to make sure that product and processes of
production is not causing harm to the environment.
It throws light on the following issues:
 Avoiding rendering services or producing products that are hazardous to health. For
example, tobacco and alcohol
  Maintaining ethical relations with the environment and avoiding environmental
pollution.

Major Determinants of Business Ethics:

Determinant # 1 - Family, School and Religion:

The formation of ethics begins early in life. As a child one learns about what is
good and bad from parents. Through their reinforcing actions, (rewarding good
behaviors), parents inculcate high or low ethical standards among children. Schools and
Religion also greatly influence the formation of ethical values (such as truthfulness,
honesty, sincerity, tolerance, etc.) at an early age.

Determinant # 2 - Peers, Colleagues and Superiors:

In the company of good friends, the child realizes the importance of high ethical
standards in life. If he wishes to make friends with peers who steal, smoke and use drugs,
he will probably accept those behaviors as ethical. Colleagues in an organization, too,
shape the value system of an individual. He adopts the attitudes, beliefs and values of the
group to which he belongs. Likewise, most people yield to pressure from superiors in
doing things that many consider unethical otherwise.

Determinant # 3 - Experiences in Life:

Experiences in life teach many lessons. These could be bitter or sweet, depending
on the ability of a person to reach goals. If a person is not given a ‘pat on the back’ for
good behavior while others earn rewards for bad behavior, the person will probably alter
both, ethical standards and behavioral responses, in future.

Determinant # 4 - Values and Morals:

People who value material possessions in life may not have strong ethical
standards regarding behaviors that lead to accumulation of personal wealth. On the other
hand, people who place a premium on quality of life will probably have strong ethics
while competing with others for various things in life.

Determinant # 5 - Threatening Situations:

An employee threatened with losing a permanent job may resort to unethical acts
to save his job. To meet pre-determined targets, many Bank managers sanction loans to
individuals with practically no creditworthiness. A housewife may practically beat a thief
to death, when threatened with the prospect of losing her ornaments or child. Situations
like these, force people to change their ethics and respond in an unexpected manner.

Determinant # 6 - Organizational Demands:

There is growing research evidence to show that managers at top, middle and first
level have compromised their personal principles to meet an organizational demand.
Corporate goals are paramount and exert considerable pressure on executives to change
their ethical views.

Determinant # 7 - Legislation:
Laws are generally passed in response to social demands. Factors, such as low
ethical standards, corruption in public life, absence of social responsibility, exploitation,
sexual harassment, etc., often force people to demand legislative protection. A practice
can be made illegal, if society views it as being unethical. For example, if contributions to
political parties by companies are being viewed as excessive and unethical, the practice
can be banned.

Determinant # 8 - Government Rules and Regulations:

Government regulation regarding product safety, working condition, statutory
warnings (on cigarettes and other harmful products), etc., are all supported by laws.
These offer guidelines to managers in determining what are the acceptable standards and
practices.

Determinant # 9 - Industry and Company Ethical Codes of Behaviors:

Many times specific guidelines are provided to managers by the company’s
ethical codes of behavior. One important question in such cases is whether individuals
within the organizations are really governed by the code of ethics or provide only lip
service to the guidelines.

Determinant # 10 - Social Pressures:

Social forces and pressures have considerable influence on ethics in business.
Society, in the recent past, has demonstrated how a special status can be conferred on
backward castes; boycotted products, and severe action to prevent the construction of
nuclear power plants. Such actions by different groups in society may, in fact, force
management to alter certain decisions by taking a broader view of the environment and
the needs of society.
 The Different Normative Ethical Theories Commonly Used in Business Decision Making

Theories
1. Kohlberg’s 6-Stage Theory of Moral Development
A comprehensive stage theory of moral development based on Jean Piaget’s
theory of moral judgment for children (1932) and developed by Lawrence Kohlberg in
1958. Cognitive in nature, Kohlberg’s theory focuses on the thinking process that occurs
when one decides whether a behavior is right or wrong. Thus, the theoretical emphasis is
on how one decides to respond to a moral dilemma, not what one decides or what one
actually does.

Theoretical Framework
Level 1: Pre-conventional level
At the pre-conventional level, morality is externally controlled. Rules imposed by
authority figures are conformed to in order to avoid punishment or receive rewards. This
perspective involves the idea that what is right is what one can get away with or what is
personally satisfying. Level 1 has two stages.
Stage 1: Punishment/obedience orientation- Behavior is determined by consequences.
The individual will obey in order to avoid punishment.
Stage 2: Instrumental purpose orientation - Behavior is determined again by
consequences. The individual focuses on receiving rewards or satisfying personal needs.

Level 2: Conventional level

At the conventional level, conformity to social rules remains important to the
individual. However, the emphasis shifts from self-interest to relationships with other
people and social systems. The individual strives to support rules that are set forth by
others such as parents, peers, and the government in order to win their approval or to
maintain social order.
Stage 3: Good Boy/Nice Girl orientation - Behavior is determined by social approval.
The individual wants to maintain or win the affection and approval of others by being a
“good person.”
 Stage 4: Law and order orientation - Social rules and laws determine behavior. The
individual now takes into consideration a larger perspective, that of societal laws.
Moral decision making becomes more than consideration of close ties to others. The
individual believes that rules and laws maintain social order that is worth preserving.

Level 3: Post-conventional or principled level

At the post-conventional level, the individual moves beyond the perspective of his
or her own society. Morality is defined in terms of abstract principles and values that
apply to all situations and societies. The individual attempts to take the perspective of all
individuals.
Stage 5: Social contract orientation - Individual rights determine behavior. The individual
views laws and rules as flexible tools for improving human purposes. That is, given the
right situation, there are exceptions to rules. When laws are not consistent with individual
rights and the interests of the majority, they do not bring about good for people
and alternatives should be considered.
Stage 6: Universal ethical principle orientation - According to Kohlberg, this is the
highest stage of functioning. However, he claimed that some individuals will never reach
this level. At this stage, the appropriate action is determined by one’s self-
chosen ethical principles of conscience. These principles are abstract and universal in
application. This type of reasoning involves taking the perspective of every person or
group that could potentially be affected by the decision.

Lawrence Kohlberg’s Six Stages of Moral Development Applied to Business

Level 1 (Pre-Conventional) and Your Employees
In a business setting, the pre-conventional level represents the behavior of many
new employees when they are first hired in to a new company. These new employees are
often afraid of pleasing their new boss and work hard to complete their duties without
causing problems for their new coworkers. As a new hire, many employees may be afraid
of overstepping boundaries and of accidentally breaking a rule, especially if they are still
in a probationary period.
 Stage 1 of level 1 corresponds to those employees who may be overly concerned
with avoiding punishment, especially when they are new to a company. There is some
overlap here with stage 2 of level 1, in which new employees try their best because they
know it is in their best interest to present themselves as reliable early on in their new
position.

Level 2 (Conventional) and Your Employees

As employees become more comfortable in their role, they will move on to the
conventional level. Employees at this level are still highly motivated by their own career
goals, but they also start to care more about the overall good of the company. At stage 3
of level 2, employees will also start to value their place in the social framework of the
company, and how their work contributes to the goals of the organization. In this stage,
employees start to become more motivated to help coworkers out of a desire to meet the
company’s goals, rather than purely out of self-interest.
As an employee progresses into stage 4 within level 2, they become more invested
in company culture. They will become more concerned with respecting their boss and
higher-ups within the company, and with maintaining their social standing within the
company and within their department.

Level 3 (Post-Conventional) and Your Employees

It is possible that some of your employees may have reached level 3, the post-
conventional level. These employees are usually those who have been with the company
the longest and are often found in managerial roles. These employees are highly valuable,
as they are just as concerned with the overall good of the company as they are with their
own personal career goals. These employees can help to set the pace for company culture
and help to make your company a workplace that attracts the best talent.
Those employees in stage 5 of level 3 can recognize when company policies may
not best serve all of their coworkers, but overall, they will diligently uphold company
policies. Employees who reach stage six may become the best advocates for your other
employees. They are highly concerned with the well-being of their coworkers, as well as
 the well-being of the company. These employees are a valuable asset to your team if you
are lucky enough to have them with your company.

2. Utilitarianism
Utilitarianism for classical utilitarian such as Jeremy Bentham (1748-1832) and
John Stuart Mill (1806-1873) are defined in terms of happiness/unhappiness and
pleasure/pain. On this view, actions and inactions that cause less pain or unhappiness and
more pleasure or happiness than available alternative actions and inactions will be
deemed morally right, while actions and inactions that cause more pain or unhappiness
and less pleasure or happiness than available alternative actions and inactions will be
deemed morally wrong.

The Three Generally Accepted Axioms of Utilitarianism State That

 Pleasure, or happiness, is the only thing that has intrinsic value.
 Actions are right if they promote happiness, and wrong if they promote unhappiness.
 Everyone's happiness counts equally.

Utilitarianism Applied to Business

Utilitarianism holds that the most ethical choice is the one that will produce the
greatest good for the greatest number. In business, utilitarianism is the most common
approach to business ethics because of the way that it accounts for costs and benefits.

The theory asserts that there are two types of utilitarian ethics practiced in the business
world, "rule" utilitarianism and "act" utilitarianism.
 Rule utilitarianism helps the largest number of people using the fairest methods
possible.
 Act utilitarianism makes the most ethical actions possible for the benefit of the
people.
 "Rule" Utilitarian Ethics
An example of rule utilitarianism in business is tiered pricing for a product or
service for different types of customers.
In the airline industry, for example, many planes offer first-, business-, and
economy-class seats. Customers who fly in first or business class pay a much higher rate
than those in economy seats, but they also get more amenities—simultaneously, people
who cannot afford upper-class seats benefit from the economy rates. This practice
produces the highest good for the greatest number of people.
And the airline benefits, too. The more expensive upper-class seats help to ease
the financial burden that the airline created by making room for economy-class seats.

3. The Principle of Rights and Virtues: The Kantian Ethics

Immanuel Kant (1724-1804). Kantian ethics is deontological, meaning that the
actions rather than the consequences matter in ethical decision making. For Kant, the
essence of morality is the goodwill, and, reason is at the centre of morality. This means
that goodwill must overcome emotion. Moreover, duty is a crucial element to the doctrine
as it provides the moral motivation. The core tenant of Kantian ethics is the Categorical
Imperative which has three formulations:
 Universal law,
 Respect principle,
 Kingdom of ends.
Ultimately, under Kantian ethics one must think of how one’s fully rational self would
act. 

The Kantian Ethics Applied to Business

Applied to business, Kantian ethics is too rigid as the principle of duty stifles
progress. For example, in a family run business, they may be partial to choose employees
based on who they know and so are motivated by personal interest. However, such sort of
partiality is essentially cronyism and cannot be accepted under a Kantian ethical
framework. Yet, for the family run business, this system may deliver reliable and
beneficial results, vastly improving the quality of the services they provide. This shows
 that a direct application of Kantian principles is too optimistic impractical and not always
straight forward.

4. John Rawls’ Theory of Justice (1971)

John Rawls (1921–2002) wanted to change the debate that had prevailed
throughout the 1960s and 1970s in the West about how to maximize wealth for everyone.
He sought not to maximize wealth, which was a utilitarian goal, but to establish justice as
the criterion by which goods and services were distributed among the populace.
Justice, for Rawls, had to do with fairness—in fact, he frequently used the
expression justice as fairness—and his concept of fairness was a political one that relied
on the state to take care of the most disadvantaged. In his justice theory, offered as an
alternative to the dominant utilitarianism of the times, the idea of fairness applied beyond
the individual to include the community as well as analysis of social injustice with
remedies to correct it.
In A Theory of Justice (1971), Rawls introduced a universal system of fairness
and a set of procedures for achieving it. He advocated a practical, empirically verifiable
system of governance that would be political, social, and economic in its effects. Rawls’s
justice theory contains three principles and five procedural steps for achieving fairness.

Principles for Achieving Fairness

 Original position - the state of nature, a hypothetical situation in which rational
people can arrive at a contractual agreement about how resources are to be
distributed in accordance with the principles of justice as fairness. This agreement
was intended to reflect not present reality but a desired state of affairs among
people in the community.
 Veil of Ignorance - is a condition in which people arrive at the original position
imagining they have no identity regarding age, sex, ethnicity, education, income,
physical attractiveness, or other characteristics. In this way, they reduce their bias
and self-interest.
  Unanimity of acceptance - is the requirement that all agree to the contract before
it goes into effect.

Five Procedural steps for Achieving Fairness

1. Entering into the contract,
2. Agreeing unanimously to the contract
3. Including basic conditions in the contract such as freedom of speech,
4. Maximizing the welfare of the most disadvantaged persons
5. Ensuring the stability of the contract.

Rawls’s Justice Theory Applied to Business

Although no ethical framework is perfect or fits a particular era completely,
Rawls’s justice theory has distinct advantages when applied to business in the twenty-
first century.
 Justice theory provides a seamless way of engaging in corporate social
responsibility outwardly and employee development inwardly. Fairness as a
corporate doctrine can be applied to all stakeholders and define a culture of trust
and openness, with all the corresponding benefits, in marketing, advertising,
board development, client relations, and so on.
 It is also an effective way of integrating business ethics into the organization so
ethics is no longer seen as the responsibility solely of the compliance department
or legal team.
 Site leaders and middle managers understand fairness; employees probably even
more so, because they are more directly affected by the lack of it.
Fairness, then, is as much part of the job as it is an ongoing process of an ethics
system. It no doubt makes for a happier and more productive workforce. An organization
dedicated to it can also play a greater role in civic life and the political process, which, in
turn, helps everyone.
5. Divine Command Ethics
 Divine Command Theory is the view that morality is somehow dependent upon
God, and that moral obligation consists in obedience to God’s commands.
  Divine Command Theory includes the claim that morality is ultimately based on
the commands or character of God, and that the morally right action is the one
that God commands or requires.
 The specific content of these divine commands varies according to the particular
religion and the particular views of the individual divine command theorist, but
all versions of the theory hold in common the claim that morality and moral
obligations ultimately depend on God. 

6. Ethical Egoism of Ayn Rand

Ethical egoism is a normative ethical position which holds that moral agents
ought to act in their own self-interest.
Ethical egoism, at least within the field of business ethics, is one of the most
influential and debated ethical theories. The immediate attraction of ethical egoism within
the field of business ethics seems to be that ethical egoism focuses on what is in the
company’s best interest. Companies focusing solely on profit maximization seem thus to
be acting in accordance with ethical egoism.
In this entry we focus solely on ethical egoism; however, it is important to
understand that this kind of egoism differs from (a) psychological egoism and (b) rational
egoism. Psychological egoism claims that people always act only with a view to their
own self-interest, i.e., we are always motivated..
 Teaching and Learning Activities

Identification. Write the correct answer on the space provided before the number.
1. It denotes the concept of purity and truth.
2. Businessmen should follow a reasonable and justified working process in their organization.
3. Businessmen develop their ventures within the limitations of resources and capacities.
4. It is required that on the basis of capacity and available resource, the businessmen should
make full cooperation to different other persons as per their good conduct and value based
behavior.
5. It is needful that businessmen should try to make non-cooperation or discourage the evils,
misconduct and unethical behavior not only with different customers but with society also.
6. According to this principle, there is a need to make effective means of communication with
the internal and external persons as engaged with business houses. 
7. On the basis of the ethical code of conduct, every businessman should analyze and evaluate
the good or bad, right or wrong, ethical or unethical aspects within their business transaction
and day to day working of the business houses.
8. According to this principle, every businessman should be able to fulfill their commitments
and assurances as given to other persons. The implementation of commitments should be
based on honesty and responsiveness.
9. It is required that every businessman should conduct and perform the task and different
business activities to be based on universal assumptions, customs and overall accepted norms
and principles by society.
10. It is needful that every businessman should follow the human values, human decorum and
human aspects within their policies, programs and different working areas.
11. It is most needful that every businessman should follow the politeness, truthfulness and
tolerance for developing the feelings of mental peace.
12. According to this principle, all the activities and performance as conducting in business
houses, should be well informed to every person or organization that are directly or indirectly
attached with business
13. According to this principle businessmen should give due attention to make best possible
services and try to develop the feelings of devotion and truthfulness in services.
14. This principle emphasize that there is no need to perform the entire task to be self-centered or
self-interest
15. This principle is based on inner-feeling of persons to analyze the sense of right and wrong

Essay:

1. How will you solve specific ethical situations you think you will encounter in the future
as a businessman/ woman or manager?

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Recommended learning materials and resources for supplementary

reading Ethics:
Business https://www.youtube.com/watch?v=PTp08MeQCoU

Business Ethics: https://en.wikipedia.org/wiki/Business_ethics

Flexible Teaching Learning Modality (FTLM) adopted

Online (synchronous)

SEDI, Edmodo, Google classroom, Moodle, Schoology, FB Messenger

Remote (asynchronous)

Module
Assessment Task

Case Analysis ( Ethics in Human Resource Management)

As head of the Human-Resource Department, you received a phone call from your boss who was
also the board president and your godfather, asking to determine whether or not you received his
daughter's application for a current job opening. You indicated that it had, indeed, come in, but
that the closing date for the paper- work/filing of applications had passed. "Oh," he said, "You
are not going to let a qualified candidate be excluded because of a closing date, are you?" Then
he added quickly, "but let me not interfere. As you hung up the phone, you replayed the
conversation in your mind and pondered the implications. Later that day, your senior manager
asked to see you. Despite offering him a chair, he chose to stand by the door that he had just
closed and said, I hear that the boss's daughter has applied for the opening. You are going to
consider her, are you? She worked here years ago, and there were problems. The place will be up
in arms if you take her back." He smilingly added, 1just wanted to let you know and to help".
Then he turned on his heel and left
If you were faced with this situation, how are you going to resolve the dilemma?
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Case Analysis (Ethics in Production)
A dam was proposed to be constructed on a particular river in a natural setting that would
produce hydroelectric power and create recreational activities, such as boating, swimming, and
water-skiing. The only problem, as environmentalists see it, is that there is a certain species of
small fish found only in this river that will become extinct if the dam is built. The fish is not used
for food or sport; in fact, no one knows what purpose it serves by being in the river.

Questions:
1. Should the dam be built or not? Why or why not?
2. Would it make a difference to your answer if the small fish were a good food fish or
could be used in some other popular way, or is its extinction sufficient reason not to build
the dam? Explain your answer in detail.
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Case Analysis (Ethics in Finance)
Imagine you are the accountant for Nice Company, a company that produces computer disk
drives, and you are in charge of all accounting functions within the company. The president has
informed you that if the company’s profits grow by 20 percent this year, you will receive a
20,000 bonus, and she will receive a 50,000 bonus. No bonuses will be awarded if profit growth
is less than 20 percent. Because the company’s profits have grown 20 percent annually for the
last 10 years, investors have come to expect significant growth from one year to the next. Near
the end of this fiscal year, the president and you have the following conversation:

President: We are awfully close to hitting our numbers and getting to the 20 percent target. With
two weeks remaining, projections show we will come in at 18 percent for the year. What
can we do on the accounting side to increase current year profits?

Accountant: Well, I’m not sure there is anything we can do. Our accounting is squeaky clean, as
confirmed by our independent auditors. Perhaps our sales will improve next year.

President: There has to be something we can do—I could sure use the bonus money, and our
investors would appreciate an increase in their investment! I know we have a large
customer order to be filled the first week of next year. Why not include that sale in this
year’s numbers?

Accountant: I’m not comfortable recording sales in the wrong fiscal year.

President: We’re only talking about moving sales by a few days! I would like you to consider this
carefully. If you can’t do this, I may have to find an accountant who can! Let’s talk
about our options later this week.

Question:

1. What would you do if asked you are the accountant of the company? Explain your
answer.
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Case Analysis - Rule vs. Act Utilitarianism (Utilitarianism)

Suppose that you were wondering whether you, as a male manager, should hug a female
subordinate who is in tears. Give an ethical analysis of pros and cons from an act
utilitarian point of view. Then give an analysis from a rule utilitarian point of view.
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Essay: (Give you insight on the following characteristics of business ethics)

1. Business ethics are based on social values, as the generally accepted norms of good or
bad and ‘right’ and ‘wrong’ practices.
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2. Business ethics may be an ‘Art’ as well as ‘Science’.

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3. Business ethics may determine the ways and means for better and optimum business
performance.
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4. Business ethics shows the better and perspective ways and means for most excellences
in customization.
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5. Business ethics provide basic guidelines and parameters towards most appropriate
perfections in business scenario
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