Unit: 3

What Is Business Ethics?

Understanding Business Ethics

Business ethics ensure that a certain basic level of trust exists between consumers and
various forms of market participants with businesses. For example, a portfolio
manager must give the same consideration to the portfolios of family members and small
individual investors as they do to wealthier clients. These kinds of practices ensure the
public receives fair treatment.

The concept of business ethics began in the 1960s as corporations became more aware of
a rising consumer-based society that showed concerns regarding the environment, social
causes, and corporate responsibility. The increased focus on "social issues" was a
hallmark of the decade.

Since that time, the concept of business ethics has evolved. Business ethics goes beyond
just a moral code of right and wrong; it attempts to reconcile what companies must do
legally vs. maintaining a competitive advantage over other businesses. Firms display
business ethics in several ways.

Business ethics ensure a certain level of trust between consumers and corporations,
guaranteeing the public fair and equal treatment.

Principles of Business Ethics

It's essential to understand the underlying principles that drive desired ethical behavior
and how a lack of these moral principles contributes to the downfall of many otherwise
intelligent, talented people and the businesses they represent.

There are generally 12 business ethics principles:

● Leadership: The conscious effort to adopt, integrate, and emulate the other 11
principles to guide decisions and behavior in all aspects of professional and
personal life.
● Accountability: Holding yourself and others responsible for their actions.
Commitment to following ethical practices and ensuring others follow ethics
guidelines.
● Integrity: Incorporates other principles—honesty, trustworthiness, and reliability.
Someone with integrity consistently does the right thing and strives to hold
themselves to a higher standard.
● Respect for others: To foster ethical behavior and environments in the
workplace, respecting others is a critical component. Everyone deserves dignity,
privacy, equality, opportunity, compassion, and empathy.
● Honesty: Truth in all matters is key to fostering an ethical climate. Partial truths,
omissions, and under or overstating don't help a business improve its
performance. Bad news should be communicated and received in the same
manner as good news so that solutions can be developed.
● Respect for laws: Ethical leadership should include enforcing all local, state, and
federal laws. If there is a legal grey area, leaders should err on the side of legality
rather than exploiting a gap.
● Responsibility: Promote ownership within an organization, allow employees to
be responsible for their work, and be accountable for yours.
● Transparency: Stakeholders are people with an interest in a business, such as
shareholders, employees, the community a firm operates in, and the family
members of the employees. Without divulging trade secrets, companies should
ensure information about their financials, price changes, hiring and firing
practices, wages and salaries, and promotions are available to those interested in
the business's success.
● Compassion: Employees, the community surrounding a business, business
partners, and customers should all be treated with concern for their well-being.
● Fairness: Everyone should have the same opportunities and be treated the same.
If a practice or behavior would make you feel uncomfortable or place personal or
 corporate benefit in front of equality, common courtesy, and respect, it is likely
not fair.
● Loyalty: Leadership should demonstrate confidentially and commitment to their
employees and the company. Inspiring loyalty in employees and management
ensures that they are committed to best practices.
● Environmental concern: In a world where resources are limited, ecosystems
have been damaged by past practices, and the climate is changing, it is of utmost
importance to be aware of and concerned about the environmental impacts a
business has. All employees should be encouraged to discover and report
solutions for practices that can add to damages already done.

Importance of Business Ethics

There are several reasons business ethics are essential for success in modern business.
Most importantly, defined ethics programs establish a code of conduct that drives
employee behavior—from executives to middle management to the newest and youngest
employees. When all employees make ethical decisions, the company establishes a
reputation for ethical behavior. Its reputation grows, and it begins to experience the
benefits a moral establishment reaps:

● Brand recognition and growth

● Increased ability to negotiate
● Increased trust in products and services
● Customer retention and growth
● Attracts talent
● Attracts investors

When combined, all these factors affect a business' revenues. Those that fail set ethical
standards and enforce them are doomed to eventually find themselves alongside Enron,
Arthur Andersen, Wells Fargo, Lehman Brothers, Bernie Maddoff, and many others.

Types of Business Ethics

There are several theories regarding business ethics, and many different types can be
found, but what makes a business stand out are its corporate social
responsibility practices, transparency and trustworthiness, fairness, and technological
practices.

Corporate Social Responsibility

Corporate social responsibility (CSR) is the concept of meeting the needs of stakeholders
while accounting for the impact meeting those needs has on employees, the environment,
society, and the community in which the business operates. Of course, finances and
profits are important, but they should be secondary to the welfare of society, customers,
and employees—because studies have concluded that corporate governance and ethical
practices increase financial performance.

Transparency and Trustworthiness

It's essential for companies to ensure they are reporting their financial performance in a
way that is transparent. This not only applies to required financial reports but all reports
in general. For example, many corporations publish annual reports to their shareholders.

Most of these reports outline not only the submitted reports to regulators, but how and
why decisions were made, if goals were met, and factors that influenced performance.
CEOs write summaries of the company's annual performance and give their outlooks.

Press releases are another way companies can be transparent. Events important to
investors and customers should be published, regardless of whether it is good or bad
news.

Technological Practices and Ethics

The growing use of technology of all forms in business operations inherently comes with
a need for a business to ensure the technology and information it gathers is being used
ethically. Additionally, it should ensure that the technology is secured to the utmost of its
ability, especially as many businesses store customer information and collect data that
those with nefarious intentions can use.

Fairness

A workplace should be inclusive, diverse, and fair for all employees regardless of race,
religion, beliefs, age, or identity. A fair work environment is where everyone can grow,
be promoted, and become successful in their own way.

How to Implement Good Business Ethics

Fostering an environment of ethical behavior and decision-making takes time and

effort—it always starts at the top. Most companies need to create a code of
conduct/ethics, guiding principles, reporting procedures, and training programs to enforce
ethical behavior.

A pipeline for anonymous reporting can help businesses identify questionable practices
and reassure employees that they will not face any consequences for reporting an issue.

What is ethics in organization and management?

Ethics refers to the principles, rules and standards of moral behaviour that are accepted
by society as right or wrong. It tells the difference between the right and wrong. It guides
the employees of the organization to decide on the best course of action in situations
where it is difficult to make the right choice, or at least the best choice from among
competing alternatives.

Organizational ethics is also known as corporate or business ethics. It is a form of applied

ethics or professional ethics that examines ethical principles and morals or ethical
problems that arise in an organizational environment. It applies to all aspects of
organizational conduct and is relevant to the conduct of its management and employees
as well as the organization as a whole. It can be both a normative and a
descriptive discipline. The range and quantity of ethical issues reflects the degree to
which organizational working is perceived to be at odds with non economic social values.

Organizational ethics lay emphasis on commitment of the organization in promoting non

economic social values. They are tied to the ethics of the society as well as the ethics of
the individuals who work for, and buy products from, the organization.

Ethics is not a recent phenomenon. Ethical codes have been prepared along with the
development of human civilization. The word ethics is derived from the Greek word
‘Ethikos’ and Latin word ‘Ethicus’. The word means custom, norm, ideal, or character. In
the words of Peter.F.Drucker, ‘Ethics deals with right actions of individuals’. The term
‘business ethics’ came into common use in the USA in the early 1970s. Organizations
started highlighting their ethical stature in the late 1980s and early 1990s, possibly trying
to distance themselves from the business scandals of the day.

According to Wallace, “A credo generally describes the highest values to which the
company aspires to operate”. It contains the `thou shalts.’ A code of ethics specifies the
ethical rules of operation. It’s the `thou shalt nots’, in the latter 1980s.

The concept has come to mean different things to different people, but generally it
consists of knowing what is right or wrong in the workplace and doing what is right with
regards to the effects of products/ services and in relationships with the stakeholders.
Wallace and Pekel explain that attention to organizational ethics is critical during times of
fundamental change which is the times much like those faced now by organizations. In
times of fundamental change, values that were previously taken for granted are now
strongly questioned. Many of these values are no longer followed.

Ethics can be defined as a set of principles of right conduct. It can also be defined as a
theory or a system of moral values. Organizational ethics is the application of moral
standards to the situations under which the organization is operating.
Organizational ethics are developed by the passage of time and custom. A custom differs
from one organization to another. If a custom is adopted and accepted by the organization
and public, then that custom becomes an ethic. Organizational ethics is applicable to
every type of organization. The social responsibility of the organization also requires that
the organization must observe ethics in its operations.

Organizational ethics express the values of an organization to its employees and/or other
entities irrespective of governmental and/or regulatory laws. Ethics are the principles and
values used by an individual to govern his or her actions and decisions.
Core values of organizational ethics

Ethical behaviour is based on values such as trustworthiness, respect, responsibility,

caring, fairness and justice, and good citizenship. It also depends on the adherence to
moral rules Organizational valuestell what is important and this, in turn, helps in making
decisions about right and wrong. Moralsare the rules for deciding what is good and what
is bad. The following are the six core ethical values of the organizational ethics which
influences the ethical behaviour.

● Trustworthiness – It is the broadest and most complicated of the core ethical

values. It is a broad value concerned with all the qualities and behaviour that
makes a person worthy of trust especially integrity, honesty, promise keeping, and
loyalty.

● Respect – Respect focuses on the moral obligation to honour the essential worth
and dignity of the individual. It is expressed in terms of positive qualities such as
civility, courtesy, dignity, autonomy, tolerance, and acceptance. It also involves
prohibitions against such conduct as violence, humiliation, manipulation, and
exploitation etc.

● Responsibility – It speaks of the moral obligations to be accountable, perusal of

excellence, and exercising of the self restraint.

● Fairness and justice – Fairness and justice embodies concern with equity, equality,
impartiality, proportionality, openness, and due process.
 ● Caring – It is the central value relating to sincere and abiding concern for the well
being of others. Concepts of charity, kindness, compassion, empathy, and sharing
are included under caring.

● Citizenship – The concept of citizenship includes civic virtues and duties that
prescribe how the organization ought to behave as part of a community. The
exercise of good citizenship requires doing one’s share to make society work and
demonstrating a concern for future generations. A good citizen, for example,
respects the law, reports crimes, serves on juries, votes, pays taxes and protects
the environment.

Relationship between business ethics and technology

Technology enables companies to have greater oversight over the ethical practices of
their employees. Some companies include clauses in employment contracts that grant
them the authority to monitor the electronic activity of their staff. By doing do, some
ethical violations become readily apparent.
Technology ethics is the application of ethical thinking to the practical concerns of
technology. The reason technology ethics is growing in prominence is that new
technologies give us more power to act, which means that we have to make choices we
didn't have to make before.
Social media platforms can serve us content that enrages or depresses us, making it more
(or less) likely we will take immoral actions based on our feelings. These platforms also
can be used by bad actors to take immoral actions more easily.

Why is technology important in ethics?

Ethics in technology, simply put, refers to moral principles that govern how technologies
should be used. These principles include accountability, digital rights, privacy, freedom,
data protection, online behaviour, and more.
Ethical issues related to implementation and use of ICT (Information and Communication
Technology) is important since these issues constitutes the conditions for human attitudes
and values specifying human actions and behavior, and implying conditions for
usefulness and maintenance of such systems.
Ethical technology refers to a set of values that addresses how you use technology in your
business operations and corporate strategy. Ideally, your use of tech fits with your
company's goals and core values. This doesn't replace your general business ethics or
legal compliance requirements, but it should connect with them.
A company that uses AI or predictive algorithms might include probability estimates with
their conclusions: Is the AI's estimate of 90 percent likely to be correct or a mere 15
percent. This information builds confidence in users and avoids potential errors.
A company that works in the cloud can alert customers when they're going over their
budgeted usage rather than blindsiding them with higher fees.
You should have a customer data collection policy. How much information gathered from
customers do you need? If you don't need some of the information, delete it or don't ask
for it. Be completely transparent about how you use data.
Be transparent with employees too. Plenty of employees worry that tech will take their
jobs; if you're introducing new technology, make it clear to your employees how it affects
them.
Be aware of different cultural norms. Information that might be shared safely with
authorities in the U.S. might be used to crack down on dissidents or activists in some
parts of the world.
Protect customer and employee data. Every day, hackers come up with newer, nastier
ways to steal information. Shielding the information in your files should be a top priority.
Tech companies are thinking about these concerns more than they used to. Companies
that use tech but don't define themselves as part of the tech industry may let ethical
questions slide, according to Digital Agenda. If a company has just begun to incorporate
AI into its operations, the focus is usually on leveraging the technology and learning how
to use the systems. Management may not think about ethics and potential abuses until
after the problems rear their heads.
Topics of the unit:
⮚ Define Business Ethics with suitable example.

⮚ Elaborate various Principles of Business Ethics.

⮚ Explain Importance of Business Ethics.

⮚ Discuss various types of Business Ethics

⮚ Explain practice of good ethics.

⮚ What is ethics in organization and management?
⮚ Write a short note on Core values of organizational ethics.
⮚ Is there any Relationship between business ethics and technology? Discuss in detail
with suitable example.