SHAREWORLD OPEN UNIVERSITY

FACULTY OF BUSINESS ADMINISTRATION

DEPARTMENT OF BUSINESS ADMINISTRATION

Subject Name : Business Ethics

Subject Code : 402

Assignment No : 2

To : Mr. Francis Ungapembe

From : Mphatso C. Magombo

BSc (Bachelor of Business Administration)

Intake : September Intake

Due date : 2nd November, 2013

Date submitted : 2nd November, 2013

Question :
For a business to be pro-active in ethics, they need to adopt a broader code
of ethics in business emphasizing on their function, limitations and
remedies to such limitations and justify your stand.

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Introduction

For every business to become successful, it must have broader codes of business practice.
The law is the most obvious source for ensuring that consumers receive a fair deal in business
(Chrysside, George, 1996) A code of business conduct, sometimes called a code of ethics, is
a management tool for setting out an organizations values, responsibilities and ethical
obligations which provides employees guidance for handling difficult ethical situations
related to the business. Businesses develop their own codes, based on their core values.
This paper will explain in a broader way, moral codes in business while emphasizing on its
functions, limitations and remedies.

According to Rossouw & Vuuren (2004:215) define a code of ethics as a document or

agreement that stipulates morally acceptable behaviour within an organisation. This involved
the moral standards or guidelines that need to be respected by all members of an organisation
or business in their decisions and actions. However, Chryssides & Kaler, (1996) describes a
code of ethical as ethical code sets out the company's values, ethics, objective and
responsibilities. He continued to state that a well-written code of ethics should also give
guidance to employees on how to deal with certain ethical situations. Every code of ethics is
different and should reflect the company's ethos, values and business style. Some codes are
short, setting out only general guidelines, and others are large manuals, encompassing a huge
variety of situations (Oniango, 1994)

Purposes of ethical Codes

The first decision that needs to be made in designing or revising a code of ethics is to
determine what purpose the code is to serve. (Rossouw et.al.,2002) code of ethics can serve
different purposes in an organisation and are divided into internal, external and cultural
purposes. Internally, the code of ethics can used to achieve the internal goals of an
organisation. For every organisation to work effectively and efficiently, they need to work
toward a goal which is profit maximisation. Code of conduct can also raise ethical awareness
and expectations by establishing standards of morally acceptable behaviour within an
organisation. It can also prevent unethical behaviour by stipulating that specific conduct will
not be tolerated by the organisation. Externally, the main purpose of moral code of conduct

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is adopted to satisfy external stakeholders by sending messages that will egg on their trust in
the organisation. (Jamal &Bowie, 1995) they can also promote a reputation of the
organisation amongst its external stakeholders in the sense that if organisation portrays good
image, a lot of investors will flock to invest into that organisation. It can also used to deflect
state interference in the internal affairs of the business or even an industry, pre-empt legal
action against a company. Through this, organisational can demonstrate its intention to avoid
moral malpractice.

Moral Codes of Conduct

Business scandals involving financial irregularities, exploitation of foreign workers,

discrimination, environmental damage or misleading customers on a grand scale can be
enough to sink a company. Whatever the size of your business, drawing up a code of ethics
can help you avoid any moral slips and let your customers and trading partners know you
take the way your company behaves seriously as Nickels, (2005) express some of the moral
code of ethics in the business as;

Treat Customers Fairly - A Business must always be fair and completely transparent
with your customers. Pledge to go above and beyond what is legally required of the business.
Make sure .customers have access to all the information they need prior to making a purchase
or signing a contract with your organisation and offer continued support throughout a
relationship with them. State a clear returns policy i.e. if it is a shop and make any additional
charges, such as credit card processing fees or shipping costs, clear on itemized invoices or
receipts. All these if done well, may increase profit maximisation at the same time increase
market share. To stakeholders in that organisation, can improve and maintain good working
relationship and they will definitely feel recognised and motivated as D. McClelland put it in
his theory of motivation. (Cole, 1995) However, if customers are not treated fairly, it will
lead to loss of royal customers, first class customers who might need special treatment, for
example, in banks where they mostly use the profitability Tier Theory where customers are
grouped as Platinum Tier, Gold and Iron. The Platinum Tier describes the company’s most
profitable customer typically those who heavily users of product, are not overly price
sensitive, are willing to invest in and try new offerings. There is also this Theory of Pareto
Theory Rule where there is a setup of as diagram of 80% of the profits that the company
make comes from the 20% of the customer that the company have. For example, NBS Bank.

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The second drawback which arises if customers are not treated fairly, is low production , bad
image of the business, as well as lack of trust and confidence.

Diversity – All business must develop an equal opportunities policy to make sure they have a
diverse work force and foster a culture that welcomes contributions from people of different
backgrounds. Take a zero-tolerance approach to discrimination on the grounds of race,
religion, gender, sexual orientation and disability in every aspect of your business. This
involves giving equal opportunity to employees regardless of race. This may improve the
organisation standard as well as the business will benefits on skilled workforce which is rich
in skills, and different cultures. When trying to diversity, it can, however, become a
challenge to the organisation as they will have difficulties to manage different cultures.

Avoid Exploitation - As well as making sure as a business is paying direct employees a

living wage as opposed to the minimum wage, you should make sure that they are not
dealing with any suppliers or contractors who could be exploiting workers in other countries.
Pledge to fully investigate any business deal with a foreign soil. It is not ethical to just accept
a company's word that it adheres to local laws and minimum wage legislation. Organisations
must send a team to visit the premises of any firm it deal with to make sure its workers are
not being exploited. This will motivate employees especially when they are given reward on
the other hand, the business needs more resources to motivate and sustain employees.

Gifts, Gratuities and Kickbacks – An organisation should make it a major offense for any
of your staff up to and including board level to accept any form of gift or payment over a
certain value from clients, customers or suppliers. Any gift below the level you set should be
declared in writing to human resources department. The level which is set is a matter for a
business own discretion. It should also be an offense warranting dismissal for any of workers
to offer a payment to any policy-maker that has influence in your industry area. However,
the giving and receiving of gifts is a common business practice. Appropriate business gifts
and entertainment are welcome courtesies designed to build relationships and understanding
among business partners. However, gifts and entertainment should never compromise, or
appear to compromise, but ability to make objective and fair business decisions.
Consequently, it is inappropriate and prohibited to give any gift.

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It is the organisations obligation to use good judgment in this area. As a general rule,
organisation may give or receive gifts or entertainment to or from customers or suppliers only
if the gift or entertainment could not be viewed as an inducement to or reward for any
particular business decision. It is inappropriate and prohibited to give any gift or recreational
item at any time, regardless of the item’s value. All gifts and entertainment expenses must be
properly accounted for on expense reports.

Sustainability – the organisation must as much as they can avoid dealing with other
businesses that engage in activities that could be damaging to the environment. As an
organisations, should also commit to reducing firm's carbon footprint and a recycling
programs for these might affect stakeholders. According to Rossouw &Vuuren (2004:67),
stated that the utilitarian moral theory claims that the morality of actions should be judged by
their consequences. Stuart Mill (1863) stated that actions are right in proportion as they tend
to promote happiness, wrong when they tend to produce the reverse of happiness. By
happiness intended pleasure, and the absence of pain, by unhappiness, pain or the privation of
pleasure. It is all about the decision on what do by considering the consequences of that
action, meaning that as people we should act in ways that produce better consequences than
the alternatives we are considering. In short, the business must follow environmental rules
effectively and efficiently so as to make good decisions to bring happiness to its stakeholders
not pain in an environmental manner.

Limitations of Codes of Ethics

According to (Rossouw &Vuuren, (2004:224) stated that a well developed and properly
implemented code of ethics can be available assets to a company. It is also a powerful
instrument of moral behaviour in an organisation. However, a code of ethics can play a vital
role, but it should not be regarded as the sole instrument for managing the ethical
performance of an organisation. Here are some of the limitations of codes of ethic.

Codes of ethics might hinder the development of moral autonomy – this involves the ability
to think independent and originally about moral matters. Members of an organisation are
expected to obey a code of ethics. Such obedience can be a very good thin, especially if the
codes offer sound ethical guidelines. It may however, blunt people towards issues not
covered by the codes. This can mean simply mean that people do not develop moral

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sensitivity on their own initiatives should be taken to keep moral debate alive in an
organisation, such as such as regular discussions of case studies or debate about new moral
issues as they arise.
Other limitation is that one needs skills to use a code of ethics – In this, although it can
provide valuable guidance, code cannot ensure that people will be able to apply codes in
situations that require ethical decisions-making. To make proper moral decisions one needs
to develop the relevant skills and knowledge. Once more we see that the codes of ethics on
its own are not enough. Training moral ethics can moral decision making must complement
it.

Some time codes of ethics can also be counterproductive - this happen when the disagreement
between the professed and actual behaviour of an organisation. If the code of ethics is
perceived by external stakeholders, for example, to be nothing but a ploy intended to impress,
they are likely to react with greater cynicism towards the organisation. The same can happen
within an organisation, when employees perceived the code of ethics to be an insincere effort
at manipulations by management.

In conclusion, these businesses should develop a code which focuses on establishing and
maintaining their core business values especially in ensuring that consumers receive a fair
deal in business and the ethical code should be developed based on its core values for the
successful of the business.

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References

Cole G.A., (1996), Organisation Behaviour: Theory and Practice, South-western,

CENGAGE Learning, Hampshire, SP10 5BE, UK.

Chryssides G, & Kaler J, (1996) Essentials of Business Ethics, McGraw-Hill, Book

Company, London

Nickels W.G, McHugh J.M & McHugh,(2005), Understanding business, 7th edition, New
York, Mc Graw Hill/Irwin

Rossouw D. & Vuuren L,(2004) Business Ethics, 3rd edition, Cape Town , South Africa,
Oxford University Press.

Rossouw D. (2002) Business Ethics in Africa, 2nd edition, cape town, Oxford University
Press.

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Utilitarian Ethics

According to Rossouw &Vuuren (2004:67), stated that the utilitarian moral theory claims that
the morality of actions should be judged by their consequences. Stuart Mill (1863) stated that
actions are right in proportion as they tend to promote happiness, wrong when they tend to
produce the reverse of happiness. By happiness intended pleasure, and the absence of pain,
by unhappiness, pain or the privation of pleasure. It is all about the decision on what do by
considering the consequences of that action, meaning that as people we should act in ways
that produce better consequences than the alternatives we are considering. The utilitarian is
more of better consequences which are those consequences that promote human well- being ,
the happiness, health, dignity, integrity, freedom, respect of all people affected. If all these
elements are basic human values, then an action which promotes more of them than the
alternative action does is more of them than the alternative action does more reasonable from
an ethical point of view. A decision promotes the greatest amount of these values for the
greatest number of people is the most reasonable decision from an ethical point of view.

According to Hartman & Desjardins (2011:101), stated that this philosophy is commonly
identified with the principle of maximizing the overall good or in a slightly different
description’ the greatest good for the greatest number’’. The ethical goal according to
utilitarian is to produce the best consequences for all parties affected by the decision.
Decisions that accomplish this goal are the right decisions to make ethically, those that are
not ethically wrong. The emphasis on the overall good , and upon producing the greatest
good for the greatest number , make utilitarianism a social philosophy that opposes policies
that aim to benefit only the small social , economic, or political minority. In this way,
utilitarianism provides strong support for democratic institutions and policies.

While the utilitarian tradition contributes much too responsible ethical decision making, it is
not without problems. The first action is that it concerns the need for utilitarian reasoning to
count, measure, compare and quantify consequences. If utilitarian advises that we make
decisions by comparing of alternatives actions, whereby in reality there must be a method for
making such comparison. However, some comparisons and measurements are difficult. The

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second challenge goes directly to the core of utilitarianism. The essence that its reliance on
consequences. Ethical and unethical acts are determined by their consequences and most
people now use the immoral utilitarianism ethics. In short, the end justifies the means. This
challenge can explained in terms of ethical principles. When we say that the ends do not
justify the means, there are certain decisions that should make or certain rules to follow no
matter what the consequences (Hartman & Desjardins, 2011:104). There are certain duties or
responsibilities that we ought to obey even when doing so does not produce a net increase in
overall happiness. For example, such duties are those required by such principles as justice,
loyalty, and respect as well as the responsibility which flow from our role as a parent, spouse,
friend, or professional.

The utilitarian ethics does not contribute to responsible decision making in several important
ways. Firstly, the significance of the consequences. Responsible decision making requires
that there should be a consideration of the consequences of the acts. But, the short coming of
utilitarianism reasoning must be kept in mind. It is difficult to know everyone who will be
affected by our decision and how they are impacted. Utilitarian reasoning demands rigorous
work to calculate all the benefits and harmful consequences of our actions. Perhaps more
importantly, utilitarian reasoning does not exhaust the range of ethical concerns.
Consequences are only a part of the ethical landscape. Responsible ethical decision making
also involves matters of duties, principles, and personal integrity.

Ethical Relativism

This belief that there is no objective moral truth or standard. The ethical value judgment that
a person makes should be regarded as an expression of her or his own subjective ethical
values. Consequently ethical judgements only have validity, as they merely express their own
moral prefences. They do not apply to other people as they might have different values and
therefore would make value judgment that differs for ours. Ethical judgements thus do not
have objective value. Ethical relativism is further fuelled by the emergence of the global
village. It is important to address the meta- ethical question of relativism before one can
resume any ethical debate about what is right or wrong. If one grants that ethical judgements
are merely expression of personal moral preference, the question then arises whether it makes
sense to try and resolve conflicting moral judgment.

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Ethical relativism seems to be logic response to the correct situation of moral dissensus
(Rossouw &Vuuren, 2004:91). But it is however a response that has grave implications.
Relativism is unacceptable because of its implications for moral debate. If it is accepted, then
there is no need to continue with moral debate. According to Williams(1997:20) stated that
relativism decrees that no one be allowed to judge the moral conviction of any person or
group and this harbors the internal contradiction. He said that it decrees that no one should
make moral prescription to other while the dogma of relativism is itself a moral prescription,

De George (1999) stated that the proponents of ethical relativism argue that it does not make
sense to engage in moral debate about what is wrong and right if there is no objection on
criterion to decide who is right or wrong. From here they take it one step further and claim
that one should not judge the morality of other people. One is free to hold one’s own moral
views, but not to judge the moral views of others, or saying that one can know what is right
for oneself, but never what is right for others which is an immoral action. Ethical relativism
seems to be a logical response to the current situation of moral dissensus. It is however a
response that has grave implications.

The relativism is unacceptable because of its implications for moral debate. Relativism
sometimes play an immoral act, for example in the issue of sexual harassment whereby
sexual favors is made a condition of employment, whereby a male manager telling a female
job applicant to that she would be hired if she submitted herself to his sexual desires. Now
imagine that our relativism concludes that the criticism of harassment is simply a matter of
opinion, that all opinions are equally valid, and that while the woman may feel the
harassment is wrong, the manager feels that it is right. Like with this from the relativist
perspective, each opinion or feeling is equally valid. Of course, the relativist could argue that
such value as equality and fairness, integrity, self respect and freedom from coercion are all
themselves a matter of personal or social opinion. But in reality it’s not true.

Ethical egoism

According Desjardins (2003:21) Egoism is another important perspective that is relevant to

the study of business ethics. Like ethical egoism relativism, egoism is often raised as a
skeptical challenge to the legitimacy of business ethics. Egoism says that all human beings
act solely out of their own self-interest. It is a normative theory that prescribes how people

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should act. And its major reason for accepting it is the conclusion that psychological egoism
provides an accurate descriptive account of human behavior.

According to Rossouw D. (2002), Ethical egoism accepts the reality of psychological egoism
and argues that we can still arrange social institution in a way that would channel individual
egoism to the social good. For example a social contract tradition in political philosophy
sometimes acknowledges the reality of self interested individuals but argues that cooperative
social behavior is in self interested individuals. Thus self interested egoists should for their
own welfare, restrict their own behavior and participate in cooperative social enterprise.

Egoism argues that our ethical responsibilities will sometimes require us to act in ways that
constrain our own behavior in the interest of other. Kantian ethics gave in its argument by
saying that we are morally only when we act out of a universal good will (Desjardins,
2003:21). And on this view, even if we act in ways that benefit others we have failed to act
morally if our motive for helping other was our own interest, benefit and satisfaction.

In order for egoism to threaten the legitimacy of ethics, some defenders must claim that
humans always and only act out of self – interest (Sharpe –Paine, 2002). If this were true,
then apparently we would need to rewire people to be ethical and this would not be realistic.
But it is not true that humans always and only act out of self interest. On the other hand
egoism claim that when people act in such ways they are still doing what they want and
therefore they are still acting selfishly but if this is intended as an imperial claim about human
behavior , it also seem to be false. People all the time do things that they don’t want to do.
Egoism also work in immoral acts whereby it claims that even in cases of sacrifices and
charity , people derive satisfaction out of ethical acts and this suggest that selfishness
underlies even in the most beneficent act (Desjardins, 2003:22). But this response also fails
because it confuses the intention or purpose for acting with the feeling that or reaction that
follows the act.

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