Module 1

Ethics, Business Ethics, Unethical Business Practices,

Kohlbergs Theory of Moral Judgment,
Morals/Ethics/Values, Types of Ethics, Nature of
Business Ethics & Values, Importance of Ethics in
Business, Ethical Principles of Business, Utilitarianism
Justice, Business Values, Corporate Culture

BUSINESS ETHICS

ETHICS

Ethics or ethical behavior is used commonly when people talk of

what is desirable behavior from society.

Ethics is a set of moral principles about what human

conduct ought to be. In other words what is good or bad, fair
or unfair, right or wrong.

Ethics involved in each area (business ethics, corporate

ethics, medical ethics, or legal ethics) must still refer to
the value-oriented decisions and behavior of individuals.

Garrat: Ethics is a science of judging specifically human ends

and the relationship of means of those ends.

BUSINESS ETHICS

Business ethics refers to the moral principles which should

govern business activities. It provide a code of conduct for the
managers. Business ethics are moral principles that guide the way a
business behaves. The same principles that determine an individual's
actions also apply to business.
Acting in an ethical way involves distinguishing between right and
wrong and then making the right choice. The purpose of
business ethics is to regulate both objectives of business and
the means adopted to achieve the objectives.
A few examples of ethics are
To charge fair price from the customer
To use fair weights for measurement of commodities.
To pay taxes to the Government honesty
To earn reasonable profits
To give fair treatment to the workers.

UNETHICAL BUSINESS PRACTICES

A business practice which is against the moral principles laid down by the
society is termed as unethical.
1. Against the Employee
Paying salaries lower than those fixed by the government
Poor working condition (non-availability of pure drinking water, poor
lighting, etc.)
Lack of safety measures for workers and lack of provision for welfare
facilities.
2. Against the Government
Evasion of excise duty, sale tax ,income tax.
Smuggling of goods (the illegal transportation of objects, information
or people, such as out of a house or buildings, into a prison, or across
an international border, in violation of applicable laws or other
regulations)
Offering bribes to government officials and politicians for getting

UNETHICAL BUSINESS PRACTICES

3. Against the Consumers and Society

Adulteration of goods (coloring of wood pieces and selling as

turmeric, etc.)
Sale of spurious (fake) products (e.g. plain water in injections,
contamination of glucose bottles, etc.)
Sale of duplicate products under popular brands names
Sale of products injurious to public health (heroine, LSD,
charas, etc.)
Deceptive advertisement and false claims in advertisement.
Pollution of environment

KOHLBERGS THEORY OF MORAL JUDGEMENT

Ethical Judgement

Level 1
PreConventional
Thought

STAGE 1:
Obey Rule
to Avoid
Punishmen
t

STAGE 2:
Follow
rules only if
it is in self
interest

Level 2
Conventional
Thought

STAGE 3:
Conform to
meet the
expectation
of others
(Good
Boy/Good
Girl Image)

STAGE 4:
Doing right
is ones
duty. Obey
the law.
Uphold
social
contract
and order

Level 3
Principle Level

STAGE 5:
Current laws
and values
are relative
laws and
duty. Obey on
rational
calculations
to serve the
greatest
number.

STAGE 6:
Follows
self
chosen
universal
ethical
principles
over laws

MORALS, ETHICS AND VALUES

Ethics is concerned with dealing with moral judgments regarding

voluntary human conduct. Ethics is mainly for highest good for highest
number of people.
Morals are duties or rules that govern behavior of persons. Moral rules
Dont kill
Dont cause pain
Dont disable
Dont deprive of freedom
Dont deprive of pleasure
Dont deceive
Keep your promise
Dont Cheat
Obey the Law
Do your duty with honesty
Values are ends or goals sought by individuals.

TYPES OF ETHICS

Ethics is the theory of morality where morality is the quality of being in

accord with what is right and wrong. A moral person knows why decisions
have been taken and can explain his actions.

Moral standards change depending on value system. Ethical standards

depend on moral standards. Value system is built by in family, upbringing,
background and experience. Experiences in turn alter ethical practices.

There are four ethical categories:

- Descriptive ethics : How to describe ethical problems and ethical
standards
- Normative ethics : Theories about what is right and wrong
- Applied ethics : ethics that address practical questions and helps in
making decisions
- Meta ethics : Reasoning about ethics

NATURE OF BUSINESS ETHICS AND VALUES

Ethical Issue

Overt
Open ,Can be Seen
Overt practices are generally deplored
(strongly condemned). The business
avoids overt unethical practices.
Examples
1. Bribery
2. Theft
3. Sabotage (deliberately destroy,
damage, or obstruct something,
especially for political or military
advantage)
4. Collusion (secret or illegal
cooperation or conspiracy in order
to deceive others)

Covert
Hidden ,Cant be Seen
Most of the business activities are
covert. Examples
1. Corporate Acquisition
2. Marketing Policies
3. HRM Policies
4. Capital Investments
5. Industrial Espionage The theft
of trade secrets by the removal,
copying or recording of confidential
or valuable information in a
company for use by a competitor. It
is conducted for commercial
purpose rather than national
security.

IMPORTANCE OF ETHICS IN
BUSINESS

Part of Society Whatever ethics principle apply in society apply to business. E.g.
tax evasion is considered unethical.
Expectation of Public All stake holder have an eye on the cultural and behavior
of a business organization due to dominance of economics in the society. Doing the
right thing, Do no harm and Good to all are the expectations of general public.
E.g. a company should not make advertisements for pan masalas targeted on
students.
Trust of employees High level of morale and productivity can be easily obtained
in companies that treat their all employees with equality, encourage good team and
work culture, and with ethical practices.
Image (Stakeholders) An ethical organization commands trust and respect of
its stakeholders through an ethical image. All stakeholders stand to gain.
Costs Deterioration of relationships, damage to reputation in reduction of
employee productivity, loyalty that come out of unethical practices cost companies.
Pride of best companies Ethical companies have a brand value and their
policies wrt profit sharing bonuses, social responsibility, work life balance, etc. are
quoted by magazines like Fortune, Business India, etc.
Overall benefit Ethical behavior of an industry or business gives a win-win
situation to all the stakeholders and general public. The governments also
encourage such companies.

ETHICAL PRINCIPLES FOR BUSINESS

HONESTY Be honest in all communications and actions

INTEGRITY
PROMISE-KEEPING Keep promises and fulfill commitments
LOYALTY Be loyal within the framework of other ethical principles
FAIRNESS Strive to be fair and just in all dealings
CARING Demonstrate compassion and a genuine concern for the
well-being of others
RESPECT FOR OTHERS Treat everyone with respect
LAW ABIDING Obey the law
COMMITMENT TO EXCELLENCE Pursue excellence all the time in
all the things.
REPUTATION AND MORALE
ACCOUNTABILITY Responsible for action and expected to explain
them

JUSTICE

Justice is a complex ethical principle, with meanings that range from

the fair treatment of individuals to the equitable allocation of
healthcare dollars and resources. Justice is concerned with the
equitable distribution of benefits and burdens to individuals in social
institutions, and how the rights of various individuals are realized.

Justice concerns what islegallyright or wrong. Ideally, justice is

ethical, and one assumes that doing what is ethical is legal. Justice
cares about peoples rights, and righting wrongs when those rights are
violated

UTILITARIANISM JUSTICE

Utilitarianism - the doctrine that actions are right if they are useful or for the
benefit of a majority; the doctrine that an action is right in so far as it promotes
happiness, and that the greatest happiness of the greatest number should be the
guiding principle of conduct.
Utilitarians tend to be among those who see no major divide between justice
and morality. Utilitarians see justice as part of morality and dont see justice to
have a higher priority than any other moral concern.
Utilitarian ideas of justice connect morality to the law, economic distribution,
and politics.
Utilitarians often advocate for social welfare because everyones well-being is of
moral interest and social welfare seems like a good way to make sure everyone
flourishes to a minimal extent.
Objections
1. Its too simple.
2. Its too demanding.
3. It ignores personal relationships.
4. It fails to account for the need to be respectful.

VALUES

Values are beliefs that guide actions or judgments across a variety of

situations. They represent basic convictions that a specific mode of
conduct is personally or socially preferable to an opposite mode of
conduct.
They are so embedded that they can be inferred from peoples
behavior and their expressed attitudes. They are relatively stable and
enduring. This is because of the way they are originally learnt from the
family, educational institutions, religious organizations and various
social institutions.
Ethics refer to the entire body of moral values that society attaches
to the actions of human beings. Value is considered as the language of
ethics.
Values can be moral (conform to), immoral (go against) or amoral
(are indifferent towards certain norms of morality).

BUSINESS VALUES

Business values consist of the principles which define what

constitutes good business, what objectives should be pursued and
whose interests the business should serve.
E.g. honest dealings, fair treatment of workers and concern for social
welfare.
Values are relatively permanent in nature and so they get reflected in
long-term plans and policies of the business. They help in building the
public image of the business.
Shared Values Business values are influenced by individual
values (individuals that affect their actions), group values,
organizational values, values of constituents of the
environment (customers, suppliers, competitors, government
agencies, etc.), cultural values.

CORPORATE CULTURE

Corporate Culture is the term used to describe the system of shared

values (what is important) and beliefs (how things work) that create
behavioral norms (the way we do things around here) to guide the
activities of the organizational members.
Strong corporate cultures facilitate high performance.
It reflects a climate within which people value the same things and apply
these values to benefit the corporation as a whole.
Impact of Values on Business
1. Business Purpose from single objective of profit maximization to
multi-purpose activity
2. Customers from let the buyer beware to customer is king
3. Workers from a mere factor of production to human resources &
partners in business
4. Government from policy of non-interference to healthy regulation of
business
5. Society from selling to maximization of want satisfaction