chapter 1 introduction to business ethics.pdf

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1. ETHICS AND
GOVERNANCE
CHAPTER 1
INTRODUCTION TO ETHICS AND BUSINESS ETHICS

2. MEANING OF ETHICS
The word “Ethics” which is coined from the Latin word “Ethics” and Green
word “Ethikos” which means to character. Ethics is said to be science of
conduct which deals with certain standards of human conduct and morals.
The term ethics refer to a code of conduct that guides an individual while
dealing with others. It is a moral principles or set of values about what is right
or wrong, true or false, fair or unfair, proper or improper what is right is ethical
and what is wrong is unethical.
Thus, the study of ethics helps us study the goodness in human action.

3. DEFINITION OF ETHICS
According to Mackenzie define Ethics as “the study of what is right or good in human
conduct”.
According to Peter F Drucker, “There is only one ethics, one set of rules of morality,
one code that of individual behaviour in which the same rules apply to everyone
alike”.
Philip Wheel Wright says, “Ethics is the branch of philosophy which is the systematic
study of selective choice, of the standards of right and wrong and by which it may
ultimately be directed”.
Thus, ethics is the study of good and bad, right and wrong, moral and immoral, true
and false in the conduct of business.

4. OBJECTIVES OF ETHICS
The primary objective is to define the highest good of man and set a standard for the same. Ethics
should be guided by virtues like: Truthfulness, Accuracy, Objectivity, Impartiality, Fairness and Public
accountability
1.Objectivity for life
2. Standards for life
3.Fairness and judging actions
4.Accuracy
5.Truthfulness
6. Impartiality and equality
7. Public accountability

5. IMPORTANCE OF ETHICS
• Basic need
• Decision makings
• Harmony and teamwork
•Image and credibility
• Legality
• Organising
•Success

6. ETHICS AND RELATED TERMS
• Ethics and morality
• Ethics and law
• Ethics and religion

7. ETHICS AND MORAL
Morals are the social, cultural and religious beliefs
or values of an individual or group which tells us
what is right or wrong. They are the rules and
standards made by the society or culture which is
to be followed by us while deciding what is
right.Some moral principles are:
•Do not cheat
•Be loyal
•Be patient
•Always tell the truth
• Be good to others
Ethics is a branch of philosophy that deals with the
principles of conduct of an individual or group. It
works as a guiding principle as to decide whatis
good or bad. They are the standards which govern
the life of a person. Ethics is also known as moral
philosophy. Someethical principles are:
•Truthfulness
•Honesty
•Loyalty
•Respect
•Fairness
•Integrity

8. ETHICS AND MORALITY
BASIS FOR COMPARISON MORALS ETHICS
Meaning Morals are the beliefs of the individual
or group as to what is right or wrong.
Ethics are the guiding principles which
help the individual or group to decide
what is good or bad.
What is it? General principles set by groupResponse to a specific situation
Root word Mos which means custom Ethikos which means character
Governed By Social and cultural norms Individual or Legal and Professional
norms
Deals with Principles of right and wrongRight and wrong conduct

9. Applicability in BusinessNo Yes
Consistency Morals may differ from society
to society and culture to
culture.
Ethics are generally uniform.
Expression Morals are expressed in the
form of general rules and
statements.
Ethics are abstract.
Freedom to think and chooseNo Yes

10. ETHICS AND LAW
•The law is described as the set of rules and regulation, created by the government
to govern the whole society. The law is universally accepted, recognized and
enforced. It is created with the purpose of maintaining social order, peace, justice in
the society and to provide protection to the general public and safeguard their
interest. It is made after considering ethical principles and moral values.
•The law is made by the judicial system of the country. Every person in the country
is bound to follow the law. It clearly defines what a person must or must not do. So,
in thecase of the breach of law may result in the punishment or penalty or
sometimes both.
.

11. BASIS FOR COMPARISON LAW ETHICS
Meaning The law refers to a systematic body of
rules that governs the whole society
and the actions of its individual
members.
Ethics is a branch of moral philosophy
that guides people about the basic
human conduct.
What is it? Set of rules and regulationsSet of guidelines
Governed By Government Individual, Legal and Professional
norms
Expression Expressed and published in writing.They are abstract.
Violation Violation of law is not permissible
which may result in punishment like
imprisonment or fine or both.
There is no punishment for violation
of ethics.
Objective Law is created with an intent to
maintain social order and peace in the
society and provide protection to all
the citizens.
Ethics are made to help people to
decide what is right or wrong and how
to act.
Binding Law has a legal binding. Ethics do not have a binding nature.

12. ETHICS AND RELIGION
•Religion: "A religion is an organized collection of beliefs, cultural systems,
and world views that relate humanity to an order of existence."
•Ethics: "Ethics (also moral philosophy) is the branch of philosophy that
involves systematizing, defending, and recommending concepts of right and
wrong conduct."

13. TYPES OF ETHICS
1.Transactional ethics
2. Participatory ethics
3. Recognition ethics

14. TRANSACTION ETHICS
Man is a social animal. He has to act and react with others through different transactions. The
practices of ethics in all these transactions is called as transactional ethics.
Example: I need vegetables from vegetable vendor. The vendor wants customer like me for
survival, as we both are dependent on each other, as long as both of us contribute
appropriately, together we generate surplus that none of us on our own are able to produce. In
order to let things run smoothly, again adherence to two specific moral principles is required:
•Principle of honesty
•Principle of reciprocity

15. PARTICIPATORY ETHICS
It provides idea about how to mediate between business goals and moral
demands and how to serve the society in moral ethical way and gain corporate
excellence.
It is guided by common goal, all the participations follow some ethical
practices.

16. RECONGITION ETHICS
As human beings, people are endowed with the ability to understand the problems of
others. This quality leads to the recognition of individuals, institutions and societies.
Conflicting situations can be solved by the correct recognition of the situation.
Example:
1.The employees aged 57-60 years morally obliged to retire to give way to some
younger colleagues.
2. The strong is helping the weak ; the learned is helping the lesser learned ;
experienced is helping the new entrant

17. SCOPE OF ETHICS
1.Normative ethics:
Normative ethics is the study of what you should or should not do. Normative Ethics deals
with “norms” or set of considerations how one should act. Thus, it’s a study of “ethical
action” and sets out the rightness or wrongness of the actions. It is also called prescriptive
ethics because it rests on the principles which determine whether an action is right or wrong.
Based on this reasoning, anything such as harassing, victimising, abusing or assaulting
someone is wrong. Normative ethics also provides justification
Examples of normative ethical claims would include: “Murder is wrong”, “Giving to charity is
good, but not ethically mandatory.”

18. 2. Descriptive Ethics
Descriptive ethics deals with what people actually believe (or made to believe) to be
right or wrong, and accordingly holds up the human actions accepts the human actions
acceptable or not acceptable or punishable under a custom or law.
However, customs and laws keep changing from time to time and from society to
society. The societies have structured their moral principles as per changing time and
have expected people to behave accordingly. Due to this, descriptive ethics is also
called comparative ethics because it compares the ethics or past and present; ethics of
one society and other. It also takes inputs from other disciplines such as anthropology,
psychology, sociology and history to explain the moral right or wrong.

19. 3. Meta Ethics
Meta-ethicsis the branch ofethics that seeks to understand the nature of
ethicalproperties, statements, attitudes, and judgments. Meta-ethics is one of
the three branches of ethics generally studied by philosophers, the others
beingnormative ethicsanddescriptive.
meta-ethics addresses questions such as "Whatisgoodness?" and "How can we
tell what is good from what is bad?", seeking to understand the nature of
ethical properties and evaluations.

20. NATURE OF ETHICS
1.Personal ethics
2. Professional ethics
3. Managerial ethics

21. 1. Personal ethics
Personal ethics refer to a person’s personal or self-created values and codes of
conduct. From the very beginning, these ethics are instilled in an individual,
with a large part having been played by their parents, friends and family.
Common examples may include honesty, openness, commitment, unbiased
behaviour and sense of responsibility.
Personal ethics is a category of philosophy that determines what an individual
believes about morality and right and wrong

22. 2. Professional ethics
Professional ethics are those values and principles that are introduced to an individual in a professional
organisation. Each employee is meant to strictly follow these principles. They do not have a choice. Also, this
approach is imperative in professional settings as it brings a sense of discipline in people as well as helps to
maintain decorum in offices. Some examples may include confidentiality, fairness, transparency and
proficiency. These ethics make employees responsible. There are certain basic principles professionals are
expected to follow in their professional career. These are the following:
• Impartial and objective
•Openness: full disclosure
•Confidentiality: trust
•Duty of care
• Fidelity to professional responsibilities; and
•Avoid potential or apparent conflict of interest

23. Difference between Personal and Professional
Ethics
Personal Ethics Professional Ethics
Include personal values and moral qualitiesRules imposed on an employee in a company or as
member of a profession eg. Doctor or lawyer
Incorporated by family, friends and surroundings
since childhood
Learnt when individual is a part of a professional
setting or when individual is being trained or
educated for working there
Not confirming to these may harm or hurt othersNot adhering to these may harm his professional
reputation
Personal needs are satisfied by following theseProfessional needs are satisfied by following these
Example : Honesty, Sincerity Examples: No gossiping, time management,
Punctuality, confidentiality and transparency

24. 3. Managerial Ethics
Managerial ethics is a set of principles and rules dictated by upper management that
defines what is right and what is wrong in an organisation. Managerial ethics is a major
factor affecting how socially responsive an enterprise will be in the long term. The
ethics of an enterprise’s managers are a key factor in decision-making and may be
formed by many forces. The poor managerial ethics has the following consequences:
1.Can generate negative publicity
2. Brings down the company’s stock price
3. Put the company out of business

25. SCOPE OF ETHICS
• Meta ethics
• Descriptive ethics
• Normative ethics

26. EVOLUTION OF ETHICS
• Conceptual bridges between biology and human behaviour
• Cybernetic ethics: refers to informational feedback in dynamic system (such
as social system) that sustains or redirects behaviour.
• Wrong and right behaviour
• Good rules and bad rules
• Social rules

27. INTRODUCTION TO BUSINESS ETHICS

28. Meaning of Business Ethics
Business ethics are the application of general ethical rules to business
behaviour.
Business ethics is the systematic study of ethical matters pertaining too
business industry or related activities, institutions and beliefs.
Business ethics or ethical standards are the principles, practices and
philosophies that guide the business people in the today’s business decisions.

29. Characteristics/Features of Business Ethics
• Code of conduct * Universal application
• Based on moral and social values * Specialised study of moral right or wrong
• Gives protection to social groups * Based on reality
• Provides basic framework
• Voluntary
• Requires education and guidance
• Relative term
• New concepts
• Both science and art
• Based on principles like sincerity, good behaviour, service etc

30. Objectives of Ethics
• Analysis and evaluation: Ethical analysis and ethical diagnosis of past
events, happenings, clarifying the standards uncover the moral values and
habits of thought.
• Approaches to resolve ethical dilemmas :

31. Importance/Purpose of Business Ethics
1. Positive consequences 10. Improves customers confidence
2. Goodwill of the business and businessman 11. Survival of business
3. Protection – both sides 12. Safeguarding consumers rights
4. Self-satisfaction 13. Protecting employees and shareholders
5. Encourage others 14. Develops good relations
6. Success and development 15. Creates good image
7. New management 16. Consumer satisfaction
8. Good business ethics promotes good business
9. Stop business malpractices

32. Three C’s of Business Ethics
COMPLANCES
(The need for compliance with
the rules including laws of the
land, principles of morality,
customs and expectations of
community )
• the laws of land
• the principles of morality
• the customers and
expectations of the
community
• the policies of the company
• such general concerns as
fairness
CONTRIBUTION
The contribution business can
make to society through :
•the value of quality of
ones product and services
• Job performance which
results in firms prosperity
• usefulness of one’s
activities to the
surrounding community
CONSEQUENCE
The consequences of business
activity - internal and external,
intended and unintended
•Towards environment
inside and outside the
organisation
• Social responsibility
towards shareholders,
customers, bankers and
employees of organisation
• Good public image, sound
activity.

33. Principles of Business Ethics
• Sacredness of means and ends * Human dignity
• Not to do any evil * Non violence
• Principle of proportionality
• Non-cooperation in evils
• Cooperation with others
• Publicity
• Equivalent price
• Universal value

34. Scope/Area/Types/Issues of Business Ethics
SCOPE OF ETHICS
Ethics in Marketing
EthicEth in Production
Ethics
in Human Resources
Ethics in Finance
Ethics in Compliance
Ethics in Production

35. ETHICS IN COMPLIANCE
• It about obeying and adhering to rules and authority
• Following laws, rules and regulations set by government as well as
companies for smooth functioning of the business
• Organisations that value high ethics comply with the laws not only in letter
but go beyond what is stipulated or expected of them.

36. ETHICS IN FINANCE
• In accounting – window dressing, secret reserves, misleading financial information
• Manipulation of figures
• Insider trading, securities fraud leading to manipulation of the financial markets
• Executive compensations
• Bribery, over billing of expenses
• Fake reimbursement

37. ETHICS IN HUMAN RESOURCES
•Discrimination issue i.e, discrimination on the business of age, gender,
religion, weight etc
• Sexual harassment
• Issues affecting the privacy of the employee
• Occupational safety and health
• Wage discrimination

38. ETHICS IN MARKETING
• Pricing issues – price fixing, price discrimination and price skimming
• Anti-competitive practice like manipulation of supply, exclusive dealing
arrangements etc
• Misleading advertisement
• Content of advertisement
• Misleading information

39. ETHICS IN PRODUCTION
• Defective and inherently dangerous products
• Ethical relations between the company and the environment including
pollution, environmental ethics and carbon emissions trading
• Ethical problems arising out of new technologies
• Product testing ethics

40. Myths about Business Ethics
1.Business ethics is more a matter of religion than management
2. Our employees are ethical so we don’t need attention to business ethics
3. Business ethics is a discipline best led by philosophers and academics
4. Business ethics is superfluous – it only asserts the obvious “do good”
5. Business ethics is a matter of the good guys preaching to the bad guys
6. Business ethics is the new policeperson on the block
7. Ethics cant be managed
8. Business ethics and social responsibility are the same thing
9. Our organisation is not in trouble with the law, so we are ethical
10. Managing ethics in the workplace has little practical relevance

41. Role of Government in Ensuring Business
Ethics
• Legislative role * Reliable after safes services
• Supervisory role * Ensure fair contract deals
• Incentivizing role * Provide testing facilities
•Business holds ultimate responsibility * Ensure availability of redress
• Ensure product safety mechanism
• Ensure hazard warning and recall
• Ensure consumers satisfaction
•Encourage effective and fair competition

42. Role of Indian Government in ensuring Ethical
Practices
In India, the Department of Company Affairs (DCA) , the Ministry of
Finance, the Commerce and Industry Ministries have powers to oversee
corporate activities and take corrective actions against corporate unethical
conduct of business.
Additionally, there are regulators such as SEBI, RBI, TRAI, IRDA, IASB etc,
which as public authorities have the power and responsibilities to monitor and
supervise companies.

43. ETHICAL PERFORMANCES IN BUSINESSES IN
INDIA

44. 8 Rules for Ethical Thinking in Business/Code
of conduct of business
Rule No. 1 : Consider other people’s well-being including the well-being of non-participants
Rule No. 2 : Think as a member of the business community and not as an isolated individual
Rule No. 3: Obey, but not depend solely on the law
Rule No. 4: Think of yourself and your company – as part of society
Rule No. 5 : Obey moral rules
Rule No. 6: Think objectively
Rule No. 7: Ask the question “what sort of person would do such a thing?”
Rule No. 8: Respect the customers of others, but not at the expenses of your own ethics.

45. Five steps to improve Ethical Performance
Developing code of conduct
Senior management taking charge
Engaging staff and other stakeholders
Providing support routes for staff
Measuring effectiveness

46. Companies with Best Ethical Corporate
Policies Worldwide and in India
• Google
• Microsoft
• Intel
• Starbucks
• Wipro
• TATA Steel
• TATA group
• DELL

47. Conclusion
In life and business, Ethical standards must be set and those ethical standards
must be met.
Individual, professional or corporate should have good code of conduct in
order to survival for the long run.
Thus, ethics simply means moral principles or set of values about what is right
or wrong, true or false, fair or unfair, proper or improper what is right is ethical
and what is wrong is unethical.

48. IMPORTANCE QUESTIONS
• Meaning and features of ethics (Oct, 2018)
• Ethics and related terms such as ethics and morality, law and religion ( April, 2018)
• Nature of Ethics ; Personal, professional and managerial ethics (April, 2018)
• Types of Ethics ; Transactional, participatory and recognition (April, 2018)
• Meaning of business ethics, importance and its objectives (April 2018)
• Scope/area/types of business ethics (April 2018)
• Role of government in ensuring business ethics (Oct, 2018)
• 8 Rights for ethical thinking in business ( Oct 2018)
• 5 steps to improve ethical performance