ETHICS of business management definition

Business ethics

1. Business Ethics Dr. Palki Sharma Associate Professor MBA Ist Semester Chandigarh Group of Colleges

2. Ethics Ethics , also called  moral philosophy , the discipline concerned with what is morally good and bad and morally right and wrong. The term is also applied to any system or theory of moral values or principles. Ethics are concerned with standards and principles for human behaviour within the organizational structure  to avoid harmful behaviour and to promote those behaviors which ensure an ambiance/ feeling of fairness, trust, honesty and respect.

3. Meaning The word ‘ETHICS’ has been derived from the ancient Greek word ‘ETHIKOS’ which means arising from habit and also Morality . ETHICS describes a set of principles that provide a framework for conduct. Ethics is all about rules governing the way in which we determine what is ‘right’ or ‘wrong’, ‘good’ or ‘bad’. In other words , Ethics is about our actions and decisions.

4. Why are ethics important? Ethics create good relationship among various stakeholders(Investors, employees, customers, suppliers). Ethics is an index/key for development. Ethics reduces the corruption level and mistrust. Ethics creates investor friendly atmosphere and minimizes risk. Ethics corresponds to basic human needs. Ethics and profit go together. Law can’t protect society, while ethics can.

5. Characteristics of Business Ethics ( i ) A Discipline: Business ethics are the guiding principles of business function. It is the knowledge through which human behaviour is learnt in a business situation. (ii) Ancient Concept: Business ethics is an ancient concept. It has it origin with the development of human civilization/ urban development. (iii) Personal Dignity: (calm/respect) The principles of ethics develop the personal dignity. Many of the problems of ethics arise due to not giving dignity to individual. All the business decisions should be aimed by giving dignity to the customers, employees, distributors, shareholders and creditors, etc. otherwise they develop in immorality in the business conducts.

6. Characteristics of Business Ethics (iv) Related to Human Aspect: Business ethics studies those activities, decisions and behaviours which are concerned with human aspect. It is the function of the business ethics to notify those decisions to customers, owners of business, government, society, competitors and others on good or bad, proper or improper conduct of business. (v) Study of Goals and Means: Business ethics is the study of goals and means for the rational selection of sacred objects and their fulfillment. It is essential that goals and means should be based on morals.

7. Characteristics of Business Ethics (vi) Different from Social Responsibility: Social responsibility mainly relates to the policies and functions of an enterprise, whereas business ethics to the conduct and behaviour of businessmen. But it is a fact that social responsibility of business and its policies is influenced by the business ethics. (vii) Greater than Law: Although the law approves various social decisions, but the law is not greater than ethics. Law is usually related to the minimum control of social customs whereas ethics gives importance to individual and social welfare actions.

8. Characteristics of Business Ethics (viii) Universal applicability: It has universal applicability because it exists in all over world. (ix) Code of conduct  : Business ethics is a code of conduct. It tells what to do and what not to do for the welfare of the society. All businessmen must follow this code of conduct. (x) Based on moral and social values  : Business ethics is based on moral and social values. It contains moral and social principles (rules) for doing business. This includes self-control, consumer protection and welfare, service to society, fair treatment to social groups, not to exploit others, etc

9. Characteristics of Business Ethics (viii) Gives protection to social groups  : Business ethics give protection to different social groups such as consumers, employees, small businessmen, government, shareholders, creditors, etc. (ix) Provides basic framework  : Business ethics provide a basic framework for doing business. It gives the social cultural, economic, legal and other limits of business. Business must be conducted within these limits. (x) Voluntary  : Business ethics must be voluntary. The businessmen must accept business ethics on their own. Business ethics must be like self-discipline. It must not be enforced by law.

10. Characteristics of Business Ethics (xi) Requires education and guidance  : Businessmen must be given proper education and guidance before introducing business ethics. The businessmen must be motivated to use business ethics. They must be informed about the advantages of using business ethics.  (xii) Relative Term  : Business ethics is a relative term. That is, it changes from one business to another. It also changes from one country to another based on their culture. (xii) New concept  : Business ethics is a newer concept. It is strictly followed only in developed countries. It is not followed properly in poor and developing countries.

11. Business Ethics Vs Social Responsibilty Business Ethics Definition : Ethics refers to the principles and standards of right and wrong that guide an individual's behavior. Focus : Individual or organizational behavior and decision-making. Scope : Includes honesty, integrity, fairness, respect, and justice . Social Responsibilty Social responsibility refers to the obligation of an organization to act in ways that benefit society at large, beyond its own interests and compliance with the law. The impact of an organization’s actions on society and the environment . Includes sustainable development, community engagement and environmental protection .

12. CASE STUDY Pawan is pursuing MBA and shares a room with you in the private hostel. He desperately needs a job after completing his course because of educational loan and weak economic background. In his last two semesters, he couldn’t secure good grades due to serious illness. In current semester he has to secure good marks at any cost to satisfy minimum criteria for placements. Few days before the final semester exam, he comes to you and asks for money. He is stressed and nervous. He tells you about his plan to purchase semester papers to clear the exam and convinces you for the same by giving reference to his bad health, family status and his education loan.

13. Questions: In such circumstances, would it be right to lend money to him? (a) Identify the moral dilemma faced by you. (b) Analyse your role and duties as a friend, also suggest your course of action.

14. Solution: Pawan should adhere to the correct means by not cheating for the sake of passing the exam. Also, one can only expect short term gains by following incorrect means. But in the long run, it is always one’s righteousness/morally correct & justifiables , ideal conduct, and truth which lead to a successful life. Hence, Pawan should be made to realize that excellence is a way of life and in his long career ahead, it will always be his ‘ethical conduct’ which would allow him to steer the path towards success.

15. Principles of Business Ethics 1 . HONESTY.  Ethical executives are honest and truthful in all their dealings and they do not deliberately mislead or deceive/mislead others by misrepresentations, overstatements, partial truths, selective omissions(something that is not included), or any other means. 2. INTEGRITY.  Ethical executives demonstrate personal integrity/honesty/truth and the courage of their sincerity by doing what they think is right even when there is great pressure to do otherwise; they are principled, honorable and upright; they will fight for their beliefs. 3. PROMISE-KEEPING & TRUSTWORTHINESS.  Ethical executives are worthy of trust. They are candid/ HONEST and forthcoming in supplying relevant information and correcting misapprehensions of fact, and they make every reasonable effort to fulfill the letter and spirit of their promises and commitments . 4. LOYALTY.  Ethical executives are worthy of trust, demonstrate faithfulness and loyalty to persons and institutions by friendship , support and devotion to duty; they do not use or disclose information learned in confidence for personal advantage. 

16. Principles of Business Ethics 5. FAIRNESS.  Ethical executives and fair and just in all dealings; they do not exercise power arbitrarily, and do not use overreaching nor indecent means to gain or maintain any advantage nor take undue advantage of another’s mistakes or difficulties. Fair persons manifest a commitment to justice, the equal treatment of individuals, tolerance for and acceptance of diversity, the they are open-minded ; they are willing to admit they are wrong and, where appropriate, change their positions and beliefs. 6. CONCERN FOR OTHERS.  Ethical executives are caring, compassionate , benevolent/ caring and kind; they like the Golden Rule, help those in need, and seek to accomplish their business objectives in a manner that causes the least harm and the greatest positive good. 7. RESPECT FOR OTHERS.  Ethical executives demonstrate respect for the human dignity, autonomy, privacy, rights, and interests of all those who have a stake in their decisions; they are courteous and treat all people with equal respect and dignity regardless of sex, race or national origin.

17. Principles of Business Ethics 8. LAW ABIDING.  Ethical executives abide/ stand for by laws, rules and regulations relating to their business activities. 9. COMMITMENT TO EXCELLENCE.  Ethical executives pursue excellence in performing their duties, are well informed and prepared, and constantly endeavor/ TRY/EFFORTS to increase their proficiency/skill in all areas of responsibility. 10. LEADERSHIP.  Ethical executives are conscious of the responsibilities and opportunities of their position of leadership and seek to be positive ethical role models by their own conduct and by helping to create an environment in which principled reasoning and ethical decision making are highly prized.

18. Principles of Business Ethics 11. REPUTATION AND MORALE.  Ethical executives seek to protect and build the company’s good reputation and the morale of its employees by engaging in no conduct that might undermine respect and by taking whatever actions are necessary to correct or prevent inappropriate conduct of others. 12. ACCOUNTABILITY.  Ethical executives acknowledge and accept personal accountability for the ethical quality of their decisions and omissions to themselves, their colleagues, their companies, and their communities.

19. Organizational Ethics Organizational ethics are the policies, procedures and culture of doing the right things in the face of difficult and often controversial issues. 1. Builds a Positive Corporate Culture  2. Boosts Consumer Confidence 3. Reduces Financial Liabilities 4. Minimizes Potential lawsuits/ court case.

20. Ethics in organization Participation , involvement and empowerment. Importance of groups and teams. Growth , development and learning. Valuing the whole person. Dialogue & Collaboration. Authenticity/real or true, openness and trust

21. Organizational Ethics No organization should depend on unfair means to earn money. Employees should not indulge in destruction or manipulation of information to get results. There must be absolute fairness in monetary transactions and all kinds of trading and Never ever cheat your client. Organizations must not discriminate any employee on the grounds of Gender, physical appearance, age or family background. Organization must not exploit any of the employees.  Organization must take care of the safety of the employees Never lie to your customers.

22. Case study You have just been appointed as Additional Director General of Central Public Works Department. The Chief Architect of your division, who is to retire in six months, is passionately working on a very important project, the successful completion of which would earn him a lasting reputation for the rest of his life. A new lady architect, Seema , trained at Manchester School of Architecture, UK joined as Senior Architect in your division. During the briefing about the project, Seema made some suggestions which would not only add value to the project, but would also reduce completion time. This has made the Chief Architect insecure and he is constantly worried that all the credit will go to her.

23. Subsequently, he adopted a passive and aggressive behaviour towards her and has become disrespectful to her. Seema felt it embarrassing as the Chief Architect left no chance of humiliating her. He would very often correct her in front of other colleagues and raise his voice while speaking to her. This continuous harassment has resulted in her losing confidence and self- esteem. She felt perpetually tensed, anxious and stressed. She appeared to be in awe of him since he has had a long tenure in the office and has vast experience in the area of her work. You are aware of her outstanding academic credentials and career record in her previous organisations . However, you fear that this harassment may result in compromising her much needed contribution in this important project and may adversely impact her emotional well-being. You have also come to know from her peers that she is contemplating tendering her resignation.

24. Questions: (a) What are the ethical issues involved in the above case? (b) What are the options available to you in order to complete the project as well as to retain Seema in the organization? (c) What would be your response to Seema's predicament? What measures would you institute to prevent such occurrences from happening in your organization?

25. Ethical issues involved in the case  Poor work culture-  as it is clear from the case the relations of the various employees in the office are not cordial and the chief architect is harassing his junior. Compromised dignity - the unnecessary scolding of Seema by the chief architect is hurting her dignity Lack of ethical ecosystem - as it is from the case that one employee is thinking about resignation it shows that there is a lack of ethical ecosystem to regulate the behaviour of the employees.

26. Options available : Taking strict action against the chief architect - Asking Seema to ignore the chief architect as much as possible. Asking the chief architect  to mind his conduct concerning Seema . Response to Seema’s predicament -  As soon as I come to know her predicament, I will apologise to her on behalf of the organisation then I will ask the chief architect to say sorry to Seema to restore her dignity and then I will warn him not to repeat the same in future. Measures to prevent such happening: T aking strict action against such people to warn others. Ethical training of the employees. Arranging occasional get-together parties for the employees so that they can express themselves openly.

27. Presented by: Dr. Palki Sharma Email id: [email protected] Contact no. 9646998835