Colleges of Business Administration
and Entrepreneurship
Business Ethics
Week 5:
PRAYER
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1. Explain what business ethics is
2. Discuss the purpose of business ethics
3. Describe the scope and impact of business ethics
on, the economy, the society, the environment and
the business managers
4. Explain the ethical challenges in today’s world
BASIC CONCEPT BUSINESS ETHICS
Business ethics refers to
standards of moral
conduct, behavior and
judgement in business.
Business ethics is an area of
corporate responsibility
where businesses are legally
bound and socially obligated
to conduct business in an
ethical manner.
BASIC CONCEPT BUSINESS ETHICS
It involved making the
moral and right decisions
while engaging in such
business activities as
manufacturing and selling
a product and providing a
service to customers.
It helps maintain better
and harmonious relations
with society, customers,
employees and concerned
industry sector.
BASIC CONCEPT BUSINESS ETHICS
Ethics adopted by the
business should be
followed strictly by each
and every person working
with the business.
There should be a reward-
punishment system linked
with business ethics for
those violating these ethics
and one who properly
abide.
PURPOSES OF BUSINES ETHICS
The main purpose of business
ethics is to help business and
would-be business to determine
what business practices are right
and what are wrong.
Another purpose of business
ethics is to enable you to make
responsible decisions. Maintaining
highly ethical behavior when
running a business can provide
benefits to all your stakeholders.
PURPOSES OF BUSINES ETHICS
Special Purpose
• To make businessmen realize that they cannot double
standards to the actions of other people and to their own
actions.
• To show businessmen that common practices which they
have thought to be right because they see other
businessmen doing it, are really wrong.
• To serve as a standard or ideal upon which business
conduct should be based.
IMPORTANCE AND SIGNIFICANCE
OF BUSINESS ETHICS
1. Positive Prominence
Business is an earning factor
which depends on the approval of
the society, their rules, mutual
trusts, and coordination.
A professional writer says- “when
an ethical process is revealed, it
puts some kind of confidence and
mutual trusts in a relationship.”
So, that is the reason, business
ethics always leads to positive
consequences.
Image: Weber Shandwick report 2019 – “The State of
Corporate Reputation in 2020”. Executive Summary.
IMPORTANCE AND SIGNIFICANCE
OF BUSINESS ETHICS
2. Goodwill of the Business and
Businessman
Goodwill is an intangible asset
that is associated with the
purchase of one company by
another.
Good and moral-ethical
behavior will enhance the
goodwill of both business and
as well as the businessman.
They said if an image of a
business is good in front of the
public, it will leads higher.
IMPORTANCE AND SIGNIFICANCE
OF BUSINESS ETHICS
3. Protection-Both Sides
In business activities, the
persons dealing with their
customers for the purpose of
achieving its sales volume.
They protect them ethically
and follow the procedure of
code of conduct.
IMPORTANCE AND SIGNIFICANCE
OF BUSINESS ETHICS
4. Self-satisfaction
In this business changing
environment, a businessman is
focusing on self-satisfaction, free
from eagerness, release tension.
Some businessman tries to
improve their inner satisfaction
level to promote good ethics
because ethics is a moral factor by
which an individual can easily
identify its good and bad things
IMPORTANCE AND SIGNIFICANCE
OF BUSINESS ETHICS
5. Encourage others
When a few individuals start
following ethics side by side to
profit maximizing, they facilitate,
motivate, others and set perfect
examples for them.
They follow the procedure of the
code of conduct so that they can
easily understand the basics and
helps to motivate others also.
IMPORTANCE AND SIGNIFICANCE
OF BUSINESS ETHICS
6. Success, Growth and
Development
A perfect or legal business or
businessman works ethically
to lead our business
development or success
because an ethical work
accelerates the acceptance
of opportunities.
IMPORTANCE AND SIGNIFICANCE
OF BUSINESS ETHICS
7. New Management
In the era of the world
economy, new principles of
management are required in
new balanced management.
They focus on to follow the
book of code of conduct so
that they can easily
understand the aspects of
humanity
SCOPE OF BUSINESS ETHICS
1. Ethics in Compliance
An ethical climate in an
organization ensures that
compliance with law is
fueled by a desire to abide by
the laws.
Organizations that value high
ethics comply with the laws
not only in letter but go
beyond what is stipulated or
expected of them.
SCOPE OF BUSINESS ETHICS
2. Ethics in Finance
The ethical issues in finance
that companies and employees
are confronted with include:
***Related party transactions
Insider trading, securities fraud
manipulation of the financial
markets, Executive
compensation, bribery and
kickbacks, over billing of
expenses and fake
reimbursements
SCOPE OF BUSINESS ETHICS
3. Ethics in Human Resource
• Discrimination issues
• Sexual harassment
• Affirmative Action
• representation of
employees and the
democratization of the
workplace
• privacy of the employee
• Occupational safety and
health
Costco Wholesale (NASDAQ: COST) is one of the biggest successes in
American retail. Impressively, reported $34.74 billion in quarterly
revenues that grew at a rate of 7.35% on 12 May 2019. Moreover,
Costco’s stock was trading at an impressive $269.14 a share on 3 July
2019.
Much of Costco’s success comes from the high level of customer service
offered by satisfied employees. One reason why Costco can attract high-
quality employees is its willingness to pay higher than average wages.
For example, Costco raised its base wage from $13 an hour to $14 an
hour in 2018 to $15 per hour in 2019, Fortune reports. In contrast,
the average retail worker in America makes between $7.25 and $9 an
hour, job-applications.com reports. Meanwhile, the average US retail
department manager makes $11 to $12 an hour.
Costco succeeds because it can attract the best workers. Additionally,
Costco avoids labor trouble, high turnover, and conflict because its
employees are happier.
SCOPE OF BUSINESS ETHICS
4. Ethics in Marketing
• Pricing: price fixing, price
discrimination, price
skimming.
• Anti-competitive practices
• Misleading advertisements
• Content of
advertisements.
• Children and marketing
• Black markets, grey
markets
SCOPE OF BUSINESS ETHICS
5. Ethics in Production
• Defective, addictive and
inherently dangerous
products and
• environment include
pollution
• Ethical problems arising out
of new technologies
• Product testing ethics
Clothing retailer H&M is committed to supply chain transparency.
They publish a list of 98.5% of their suppliers’ names and addresses
on their website, and update it on a quarterly basis. This ensures they
can be held publicly accountable for the conduct of their suppliers,
and that anyone can verify whether their suppliers are living up to the
standards set by the company. In addition to sharing its supply chain
information, H&M also has a responsible sourcing goal of using only
100% recycled or sustainably sourced materials by the year 2030.
This makes H&M a trendsetter, and an ethical leader in clothing
retail.
The fashion industry is viewed by
many as problematic in terms of
sustainable and ethical sourcing. If a
leading clothing retailer like H&M
can demonstrate its dedication to
ethical practices and sustainability
while maintaining profits, there is a
potential to change this reputation as
other retailers follow this example.
IMPACT OF BUSINESS ETHICS
Economic Impact
A business has an economic impact
on society through the wages it pays
to its employees, the materials that it
buys from their suppliers and the
prices it charges its customers.
It would have a positive social
impact on its employees if they are
paid fair living wages and benefits. It
will have a positive effect on its
suppliers that they paid fairly and on
time for their supplies.
IMPACT OF BUSINESS ETHICS
Social Impact
The social impact of corporate
governance contributes to the
ethical climate of society.
If businesses offer bribes to
secure work for other benefits,
engage in accounting fraud or
breach regulatory and legal
limitations on their operations,
the ethics of society suffer.
TOMS was founded by Blake Mycoskie in 2006 following
a trip to Argentina. During his visit, Mycoskie saw first hand how
people living in impoverished areas of Argentina had to live without
shoes, a challenge that many of us likely give little thought. Inspired
by his trip, Mycoskie decided to establish his company with giving in
mind.
Since 2006, TOMS’ footwear business has donated more than 60
million(!) pairs of shoes to children in need all over the world. As if
that weren’t enough, TOMS’ eyewear division has given more than
400,000 pairs of glasses to visually impaired people who lack access
to ophthalmological care.
The company has further
diversified its operations to
include clean water initiatives
through its coffee business,
and its line of bags has helped
support projects to expand
access to birthing kits to
expectant mothers in
developing nations as well as
training for birth attendants. To
date, TOMS has helped more
than 25,000 women safely
deliver their babies.
IMPACT OF BUSINESS ETHICS
Environmental Impact
Environmental protection is a key
area of business influence on
society.
Businesses that implement good
environmental policies to use
energy more efficiently, reduce
waste and in general lighten their
environmental footprint can
reduce their internal costs and
promote a positive image of their
company.
Starbucks is committed to 100% sustainably sourced coffee, and uses a
system called C.A.F.E. (Coffee and Farmer Equity Practices) in order
to optimize its sustainable sourcing. There are four ideas at the heart of
Starbucks’ C.A.F.E. sourcing system: quality, economic transparency,
social responsibility, and environmental leadership. Starbucks strives to
always buy coffee at fair prices and ensure each step of the coffee
planting, harvesting, processing and purchasing is always done
ethically. The coffee giant even uses third parties to verify that its
sourcing is ethical.
The standards set by
Starbucks are now
recognized as the industry
standard for ethical sourcing.
Starbucks works with over
170,000 farmers and
generates billions of dollars
in revenue every single year.
Its ability to remain both
profitable and set the
industry standard for
sustainability has been a
shining example for North
America’s coffee industry.
IMPACT OF BUSINESS ETHICS
Impact on Business Managers
The concepts and principles for the
ethical conduct in business are
relegated to the managers of the
business enterprise.
Thus, although the manager is
expected to act in the best interest
of the business, he cannot be
expected to act in a manner that is
contrary to the law or to his
conscience.
