BUSINESS ETHICS

Application of Ethics in Business

Business Ethics concentrates on Moral
Standards as they apply to Business
Institutions, Organisations and Behaviour
CASE STUDY

Business Organisations are the primary economic
institutions through which people of modern
societies carry on the task of producing and
distributing goods and services

Resources Business Goods & Services

Land Production Consumer Products
Labour > Distribution > Investors Return
Capital Employees Salaries
Technology Government Taxes
BUSINESS ORGANISATIONS
CORPORATIONS
Modern Business Organisations exist in the
form of Corporations. The law treats them as
immortal fictitious persons who have the
right to sue and be sued, own and sell
property and enter into contracts all in their
own name.
Modern Corporations
Consist of
(a) Stockholders & Shareholders Contribute capital, own
(b) Directors, Officers, Managers Administer, run
(C) Employees Provide labour, work
Co-ordination and control by
- Organisation structure
- Rules and Regulations
- Authority and Responsibility
Interlinked with
(a) Suppliers
(b) Consumers
And
ECONOMIC, POLITICAL, LEGAL AND OTHER SOCIAL SYSTEMS
WITHIN WHICH BUSINESS OPERATES
ALL THE ABOVE ARE STAKEHOLDERS IN BUSINESS
ETHICAL ISSUES IN BUSINESS
SYSTEMIC Ethical questions raised about the
economic, political, legal and other social
systems within which business operates
e.g. Question of Displacement,
Environment

CORPORATE-Ethical questions raised about a
particular organisations activities,
policies, practices or structure e.g.
Promotion, Transfer policy

INDIVIDUAL-Ethical questions raised about a particular
individual or group within an organisation
and their actions, decisions, behaviour,
character etc.
WHETHER CORPORATIONS ACT OR ARE
MORALLY RESPOSIBLE IN THE SAME
SENSE THE HUMAN INDIVIDUALS ARE ?
YES- Because of Rules that tie the
organisations so that they act as individuals
and have intended objectives
But- Organistions do not have feelings, they
cannot act except through human beings
NO- Organisations are like machines,
members blindly follow the Rules
But- At least some members usually know
what they are doing and are free to choose
whether to follow the Organisations Rules or
even to change these Rules
BALANCED VIEW

WHO IS RESPONSIBLE ?
Corporation exists when there exists a
properly qualified group of individuals who
have agreed among themselves to
incorporate and have legally incorporated
Corporation acts when properly qualified
members of the corporation carry out their
assigned duties within the scope of their
assigned authority
This is true at all levels
Because corporate acts originate in the
choices and actions of human individuals it
is the individuals who must be seen the
primary bearers of moral duties and Moral
Responsibility.
Corporate organisations have moral duties
and responsibilities in the secondary sense.
Central point is we must always keep before
our eyes as we apply the standards of ethics
to business activities and we must not

the fiction of corporation obscure that
human individuals underlie the corporate
organisation.
Corporate policies, corporate cultures,
corporate norms and corporate designs can
and do have influence on the choices,
beliefs and behaviour of corporate
employees. They provide the world and the
subject matter. But ultimately the individuals
in the corporation act and so are morally
responsible for their action.

NATURE OF BUSINESS ETHICS
1. In Business activities ethical questions
are of two types
Overt- Open like bribery, theft, tax evasion etc.
Covert-Complex corporate acquisition, personnel
policy etc.
2. For a decision to be ethical it should
possess characteristics like
(a) Right (b) Equitable (c) Good
(d) Proper (e) Fair (f) Just
3. Ethics is unstructured
(a) Ethics depends upon moral standards
(b) Moral standards depend on our value system
(c) Value system depends upon our background
and experience
(d) Since background and experience are different
for different individuals ethical practices are
different.
4. Ethical decisions should express
some obligation to others

CHARACTERISTICS OF BUSINESS
ETHICS
1. Ethical Decisions differ with the individual
perspective of different persons.
2. Ethical Decisions are not limited only to
themselves but affect a wide range of other
situations as well. Similarly unethical
decisions have wide ramifications.
3 Ethical Decisions involve a tradeoff between
cost incurred and benefits accrued- profits
against social responsibilities.
4. Consequences of most Ethical Decisions
are not clear. The only certainty is that
somewhere, sometime, somehow,
something positive will result from an
Ethical Decision
5. Every person is individually responsible for
the Ethical or unethical decision or action
that he or she takes.
6. Ethical Decisions are voluntary human
action, not forced by others or situations
beyond the control.

ETHICAL PRACTICES
IN
MANNAGEMENT
Ethical Decisions are much more difficult to make
when a person is directly involved in the situation.
It is easier to state what is right or wrong when a
person is not directly involved in the situation i.e.
to make decisions for others.
Ethical Decisions are much more complex than
merely deciding between right and wrong or
between good and bad.
There are certain amount of risk taking involved in
making an ethical decision. There is also the
responsibility to follow ones own Ethical
Decision.