Module-1: Introduction to Ethics: Meaning & Nature - Business Ethics

The subject of ethics is often considered abstract orrelative by those who believe that rules do not always apply to them. Rules and laws apply to everyone, as do standards of right and wrong behavior. Each individual's actions within the company affects both the individual and the entire organization. When an employee acts ethically and responsibly, it helps the entire organization.


The art and discipline of applying ethical principles to examine and solve complex moral dilemmas arising in day to day business decisions is what is depicted as Business ethics. Business ethics focuses on what constitutes right or wrong behavior in the world of business. Ethics that applies to business (business ethics) is not a separate theory of ethics; rather, it is an application of ethics to business situations.

A business is considered to be ethical only if it tries to reach a trade off between pursuing economic objective and its social obligations. Corporate business executives have a responsibility to their shareholders and employees to make decisions that will help their business make a profit. But in doing so, businesspeople also have a responsibility to the public and themselves to maintain ethical principles.

Business Ethics in short can be defined as systematic study of ethical matters pertaining to the business , industry or related activities , institutions and beliefs. Business ethics is systematic handling of values in business & industry. John Donaldson(1989). An ‘oxymoron’! – bringing together of two contradictory concepts (Collins 1994) is true because  business looks at making profit where as Ethics tells about standards in what is right & wrong in business decisions which might at times turn out to be very dear to the firm’s profit objective.

 “Business Ethics is an art and science for maintaining harmonious relationship with society, its various groups and institutions as well as recognizing the moral responsibility for the tightness and wrongness of business conduct” –Wheeler(2002). Business ethics is the study of business situations, activities, and decisions where issues of right and wrong are addressed’ (Crane & Matten 2004). Business Ethics deals with ‘principles of conduct within organizations that guide decision making and behavior’ (David 2008).

The concept has come to mean various things to various people, but generally it’s coming to know what it right or wrong in the workplace and doing what’s right — this is in regard to effects of products/services and in relationships with stakeholders Carter McNamara(2010)















Adam Smith said in 1776, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” Governments use laws and regulations to point business behavior in what they perceive to be beneficial directions. Ethics implicitly regulates areas and details of behavior that lie beyond governmental control. The emergence of large corporations with limited relationships and sensitivity to the communities in which they operate accelerated the development of formal ethics regimes


Business ethics refers to moralprinciples and social values that business should adopt in its code of conduct. These are rules that business must accept and follow in its day to day operations for the welfare of society and all its stakeholders. Business is termed as social organ and therefore it should not indulge in any activity that is harmful to the interest of all its stakeholders.


Although ethics provides moral guidelines, individuals must apply these guidelines in making decisions. Although all people have ethical responsibilities, higher ethical standards are imposed upon professionals who serve as social models, such as physicians, attorneys, and businesspeople. Good business ethics is a prerequisite for good strategic management

  Ethical Values, Issues and Choices

Before proceeding further, one needs to clearly understand the terms ‘Ethical Values’, “ Issues’ and ‘Choices’ so that the term ‘Business Ethics’ is getting its due attention.

Ethical Values: are shared beliefs about right and wrong, good and bad in the given organisation

q  Govern the behaviour of a person or a group

Ethical Issues are the problems or dilemmas which present a conflict of values to the decision maker.

q  Pay a ‘living wage’ or personal financial gain

Ethical Choices are the decisions about which option to take in response to a dilemma by the manager.

q  Difficult decisions, because each option has its own drawbacks

Values are stable long-lasting beliefs about what is important to a person. They become standards by which people order their lives and make their choices. Values are core concepts and ideas of what we consider good or bad, right or wrong, or what is worth the sacrifice. Our values are central to our self-image, what makes us who we are. Like beliefs, our values may not be based on empirical research or rational thinking, but they are even more resistant to change than are beliefs. To undergo a change in values, a person may need to undergo a transformative life experience.

A belief will develop into a value when the person's commitment to it grows and they see it as being important. It is possible to categorise beliefs into different types of values – examples include values that relate to happiness, wealth, career success or family. Beliefs are ideas based on our previous experiences and convictions and may not necessarily be based on logic or fact. You no doubt have beliefs on political, economic, and religious issues. These beliefs may not have been formed through rigorous study, but you nevertheless hold them as important aspects of self. Beliefs often serve as a frame of reference through which we interpret our world. Although they can be changed, it often takes time or strong evidence to persuade someone to change a belief.

A person must be able to articulate their values in order to make clear, rational, responsible and consistent decisions.

Attitudes are the mental dispositions people have towards others and the current circumstances before making decisions that result in behaviour. People primarily form their attitudes from underlying values and beliefs. An attitude is your immediate disposition toward a concept or an object. Attitudes can change easily and frequently. You may prefer vanilla while someone else prefers peppermint, but if someone tries to persuade you of how delicious peppermint is, you may be willing to try it and find that you like it better than vanilla. A frame of mind in favor of or opposed to a person, policy, belief, institution, topic, etc.


 

Some business practices always considered unethical and often illegal are listed below:

q  Misleading advertising

q  Misleading labeling

q  Poor product or service safety

q  Harming the environment

q  Insider trading

q  Padding expense accounts

q  Dumping flawed products on foreign markets

But in many other cases, the law is unclear and all choices have elements of both ‘right’ and ‘wrong’

Classification of business ethics problems

The major classification of Business ethics issues faced by modern organisations are as follows:

1.       Ethics of the Economic system

·         Profit vs. service

2.       Ethical issues in the boardroom

·         Values, Governance, Environment etc..

3.       Ethical issues facing managers

·         People issues, privacy, incentives etc..

4.       Ethical dilemmas of the employees

·         Speaking up, bullying work/home








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