Ethics & Business Ethics

Introduction
Ethics which is a branch of philosophy deals fundamentally with the rules of human conduct
from moral point of view. The word ethics comes from the Greek word ethos, “meaning
character or custom,” writes by Robert C. Solomon, Professor of Philosophy. Today we use the
word ethos to refer to the distinguishing disposition, character, or attitude of a specific people,
culture, or group (as in, for example, the western ethos” or “the business ethos”). According to
Solomon, the etymology of ethics suggests its basic concerns; (1) individual character, including
what it means to be “ a good person,” and (2) the social rules that govern and limit our conduct,
especially the ultimate rules concerning right and wrong, which we call morality.

“Ethics are principles of bahavior that distinguish between right and wrong”.- Skinner S J and
Ivancevich J M

“Ethics is a collection of moral principles and rules of conduct accepted by part or all of the
members of a society”- Bittel L R and Others

The word ethics commonly “refers to principles of behavior that distinguish between what is
good, bad, right and wrong”. - Henderson V E

So, ethics as a set of moral principles or values that govern the actions of an individual or group.
Ethics may also be thought of as the process of clarifying what constitutes human welfare and
the kinds of decision and behaviors necessary to promote it.

Business Ethics

Business ethics is a specialized area of general ethics in which an awareness of ethical issues and
a systematic approach to solving them are particularly important. Like other areas of ethics,
business ethics has to do with the establishment and maintenance of vital and significant
relationships among human beings – specifically, in this case, among employers, employees,
competitors, consumers, suppliers, creditors, community, etc. As in other areas, ethical principles
have the valuing of life, the string for goodness and avoiding of badness, the just and fair
distribution of good and bad, honesty and truth telling, and individual freedom – apply to
business ethics.
“Business Ethics is concerned primarily with the relationship of business goals and techniques to
specifically human ends. It studies the impacts of acts on the good of the individual, the firm, the
business community, and the society as a whole. This means that business ethics studies the
special obligations which a man and a citizen accepts when he becomes a part of the world of
commerce”- Garrett Thomas M

“Business Ethics is the study of what constitutes good and bad human conduct, including related
actions and values, in a business context”- Barry Vincent

“Business Ethics is concerned with truth and justice and has a variety of aspects such as the
expectations of society, fair competition, advertising, public relations, social responsibilities,
consumer autonomy, and corporate behavior in the home country as well as abroad”- Weihrich
H & Koontz H

Principles of Personal Ethics

These are the principles we try to install in our children, and expect of one another without
needing to articulate the exception or formalize it in any way. The principles of personal ethics
are:
1. Concern and respect for the autonomy of others.
2. Honesty and the willingness to comply with the law.
3. Fairness and the ability not to take undue advantages of others.
4. Benevolence and preventing harm to any creature.
Principles of Professional Ethics
A profession is vocation or calling especially on that involves a specific branch of advanced
learning. A professional is one who is a specified activity as one’s paid occupation. There are
certain basic principles people are expected to follow in their professional career. These are the
following:
1. Impartiality: objectivity;
2. Openness: full disclosure;
3. Confidentiality: trust;
4. Due diligence/duty of care;
5. Fidelity to professional responsibility ; and
6. Avoiding potential or apparent conflict of interest.
Why should business act ethically?
 To protect its own interest;
 To protect the interest of the business community;
 To keep its commitment to society to act ethically;
 To meet stakeholder expectations;
 To prevent harm to the general public
 To protect themselves from abuse of unethical employees and competitors;
 To protect their own reputations
 To protect own employees; and
 To create an environment in which workers can act in ways consistent with their values

Characteristics of an Ethical Organization

1. They are ease interacting with diverse internal and external stakeholder groups. The
groups rules of these firms make the good of these stakeholder groups part of the
organization’s own good.
2. They are obsessed with fairness. Their ground rules emphasize that the other persons’
interest count as much as their own.
3. Responsibility is individual rather than collective, with individuals assuming personal
responsibility for action of the organization. These organizations’ ground rules mandate
that individuals are responsible to themselves
4. They see their activities in terms of purpose. This purpose is a way of operating that
members of the organization highly value. And purpose ties the organization to its
environment.

Recognizing Ethical Organizations

There are certain characteristics by which we will able to identify an ethical organization;
On the basis of Corporate Excellence
Corporate excellence mainly centers on the corporate culture. Values and practice of such values
constitute the corporate culture. Values of the organization give a clear direction to the
employee. Values are found in the mission statement of the organizations. Often they remain as a
principle and are never put into practice. Only the practiced value created the organization
culture. When values act in tune with the goals of the organization we call it as the corporate of
that organization. Often we see conflicting interest between the value and the organization’s
goal. Organizations must eradicate such impediments to be identified as ethical.
In Relation to the Stakeholders
Meeting the needs of stakeholders through the activities of the managers determines whether the
organizations is ethical or not. The top management is the representation of the stskeholders and
every decision taken must satisfy the needs of the stakeholder. Companies have been promoted
to change their way of thinking and working so that ethical issues and corporate responsibility
become an integral part of their business. The management while taking decisions must see that
the stakeholders enjoy the maximum benefit if that decision.
In Relation to Corporate Governance
Managers are only stewards of the owners of the corporate assers. Thus they are accountable for
the use of the assets to the owners. If they perform well in the prescribed manner, then there
would not be much question of corporate governance. Such behavior of the top managers would
generate ethical practices or at least would encourage ethical practices in the organization. If
only the top management is paid as per their performance this approach would work.

Code of Conduct and Ethics for Manger

Having gone through the definitions of what is, and what not ethics is, let us see now how ethics
and values should from the bases of the code of conduct that ought to govern the behavior of
business managers. In the exercise of their duties and responsibility, managers must observe the
following ethical values:
1. Integrity: Integrity is the cornerstone of all values. A business manger should be morally
upright. This characteristic distinguishes a professional manager from a mercenary.
2. Impartiality: A manager should look at and treat all aspects of an issue a fair and
unprejudiced manger.
3. Responsiveness to the public Interest: Though a manger is paid to serve the interest of the
stockholders of the company, public interest is not important. In fact, managers should
consider it is of paramount importance, if they have to be successful in their tasks.
4. Accountability: Business managers are responsible for all their actions and are
accountable to all the stakeholders and stockholders.
5. Honesty: A cardinal ethical value that a manager should possess is this quality. Managers
should be fair, just and sincere both in character and behavior.
6. Transparency: Good business managers should be transparent and set standards for others
to follow. They should be frank and open. Their actions should be easily discussed and
understood by others.
Ethical Study

The field of ethics (or moral philosophy) involves systematizing, defending, and recommending
concepts of right and wrong behavior. Philosophers today usually divide ethical theories into
three general subject areas: metaethics, normative ethics, and applied ethics.

Metaethics investigates where our ethical principles come from, and what they mean. Are they
merely social inventions? Do they involve more than expressions of our individual emotions?
Metaethical answers to these questions focus on the issues of universal truths, the will of God,
the role of reason in ethical judgments, and the meaning of ethical terms themselves.

Normative ethics takes on a more practical task, which is to arrive at moral standards that
regulate right and wrong conduct. This may involve articulating the good habits that we should
acquire, the duties that we should follow, or the consequences of our behavior on others.

Finally, applied ethics involves examining specific controversial issues, such as infanticide,
animal rights, environmental concerns, capital punishment, or nuclear war.

Ethical theory in Business

Egoism

The view that associated morality with self- interest is referred to as egoism. Therefore, it can be
said that egoism is an ethical theory that treats self-interest is the foundation of morality. Egoism
contest that an act is morally right if and only if it is best promotes an agent’s long-term interests.
Egoists make use of their self-interest as the measuring rod of their actions.

Utilitarianism

It is an ethical theory that hold that an action is right if it produces, or if tends to produce, the
greatest amount of good for the greatest number of people affected by the action. Otherwise, the
action is wrong. The utilitarian principle assumes that we can somehow measure and add the
quantities of benefits generated by an action and deduct from it the measured quantities of harm
that act produce, and determined thereby which action produces the greatest total benefits or the
lowest total cost.

Kantianism

Immanuel Kant is regarded as the most important ethician in the rationalistic school in modern
times. For Kant ethics is based on reason alone and not on human nature. In Kant’s perspective,
the imperatives of morality are not hypothetical but categorical imperative is that an action is
right if and only if we can will it to become a universal law of conduct. This means that we must
never perform an action unless we can consistently will that it can be followed by everyone.

Ethical Dilemmas

An ethical dilemma is a complex situation that often involves an apparent mental conflict
between moral imperatives, in which to obey one would result in transgressing another.
Sometimes called ethical paradoxes in moral philosophy, ethical dilemmas are often invoked in
an attempt to refute an ethical system or moral code, or to improve it so as to resolve the
paradox. The definition of ethical dilemma is a choice between two options, both of which will
bring a negative result based on society and personal guidelines.

Therefore, an ethical dilemma is a moral situation in which a choice has to be made between two
equally undesirable alternatives. Dilemmas may arise out of various sources of behavior or
attitude as for instance, it may arise out of failure of personal character, conflict of personal
values and organizational goals, organizational goals versus social values, etc.

Sources of Ethical Problems

According to Keith Davis and William C Frederick, ethical challenges in business take several
forms and raise different kinds of ethical dilemmas. Ethical challenges and their attendant
dilemmas may arise due to :
 Failure of personal character
 Conflict of personal values and organizational values
 Organizational goals versus social values
 Hazardous, but popular products

How to create an ethical working environment

 Make the decision to commit to ethics
 Recognize that employees are role model by definition, by their action and values
 Assume the responsibility for instilling ethical behavior
 Articulate values
 Training
 Encourage open communication
 Be consistent
 Abide by the laws of the land

How does a company establish ethical standards?

It is very necessary these days for organizations to establish ethical standards so that their
workers have least doubts as to what their company stands for. Most companies in advances
countries and some even in developing countries have developed their own codes of conduct
which provide some ethical standards for their employees. Such codes of conduct may not help
in resolving every ethical issue that arises but they help employees and executives deals with
ethical dilemmas by prescribing or limiting specific activities. It should be emphasized here that
it is not enough for a company to merely have the codes of ethics, but these should be effectively
communicated to employees so that they are aware of them and abide by them. The effectiveness
of the exercise, of course will depend on how serious the top management is in implementing
them, and the good example they set in observing them.

Walton’s Six Models of Business Conduct

1. The Austere Model: It gives almost exclusive emphasis on ownership interest and profit
objectives.
2. The Household Model: Following the concept of an extended family, the model
emphasizes employee jobs, benefits and paternalism
3. The Vendor Model: In this model, consumer interests, tastes and rights dominate the
organization
4. The Investment Model: this model focuses on the organization as an entity and thus on
long term profits and survival. In the name of enlightened self interest, it gives some
recognition to social investment along with economic ones.
5. The Civic Model: Its slogan is “ Corporate Citizenship”. It goes beyond imposed
obligations, accepts social responsibility and makes a positive commitment to social
needs.
6. The Creative Model: This model encourages the organization to become a creative
instrument, serving the cause of an advanced civilization with a better quality of life.
Employees in such organizations behave and perform as artists, building their own
creative ideas into actions, resulting in new contributions not originally contemplated.

How to resolved ethical dilemmas

There are two basic approaches in resolving ethical dilemmas: deontological and teleological.
Under the deontological (action-oriented) approach, an ethical standard is consistent with the fact
that it is performed by a rational and free person. These are the inalienable rights of human
beings and reflect the characteristics and defining features of our nature. These fundamental
moral rights are inherent in our nature and are universally recognized as part of human beings,
defining their very nature.

The other approach to ethical dilemmas and their resolution lies in teleological (result orientated)
ethics. This approach to ethics takes a pragmatic, commonsense .According to this school of
thought, the moral character of actions depends on the simple, practical matter of the extent to
which actions actually help or hurt people. Actions that produce more benefits than harms are
right those that don’t are wrong.
The Centre of Ethics and Business offers a brief three-step strategy in which both the
deontological and teleological approaches converge:
Step 01: Analyze the Consequences

Assuming that the resolution to the ethical dilemma in to be found within the confines of law-
ethical dilemmas that arise in business should be resolved at least within the bare minimum of
law and legal framework.

Step 02: Analyze the action

Once identify the best possible option, concentrate on the actions. Find out how proposed actions
measure against moral principles such as honesty, fairness, equality, respect for the dignity and
rights of others.

Step: 03 Make a Decision

Having considered all factors that lead to choices among various options analyze them carefully
and then take rational decision.

Reference:

Khan A.R. Business Ethics, Dhaka, Brothers Publication

Fernendo A.C, Business Ethics: An Indian Perspective, New Delli, Pearson Publication.
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