Business Ethics as

Applied Ethics
402 IEBE Unit 3
Business Ethics
● Ethics means the set of rules or principles that the organization should follow. While in
business ethics refers to a code of conduct that businesses are expected to follow while doing
business.
● Through ethics, a standard is set for the organization to regulate their behavior. This helps
them in distinguishing between the wrong and the right part of the businesses.
● The ethics that are formed in the organization are not rocket science. They are based on the
creation of a human mind. That is why ethics depend on the influence of the place, time, and
the situation.
● Code of conduct is another term that is used extensively in businesses nowadays. It is a set of
rules that are considered as binding by the people working in the organization.
Business Ethics
● Business ethics comprises of all these values and principles and helps in guiding the behavior
in the organizations. Businesses should have a balance between the needs of the stakeholders
and their desire to make profits.
● While maintaining these balances, many times businesses require to do tradeoffs. To combat
such scenarios, rules and principles are formed in the organization.
● This ensures that businesses gain money without affecting the individuals or society as a
whole. The ethics involved in the businesses reflect the philosophy of that organization.
● One of these policies determines the fundamentals of that organization. As a result,
businesses often have ethical principles. There is a list of ethical principles involved in the
businesses.
Example of Business Ethics

Consider an employee who is told in a meeting that the company will

face an earnings shortfall for the quarter. This employee also owns
shares in his firm. It would be unethical for the employee to sell his
shares, since he was subject to insider information. Alternatively, if
two large competitors came together to gain an unfair advantage,
such as controlling prices in a given market, this would raise serious
ethical concerns.
 (i) A Discipline:: Business ethics are the guiding principles
Characteristics of business function. It is the knowledge through which
of Business human behaviour is learnt in a business situation.

Ethics (ii) Ancient Concept:Business ethics is an ancient concept.

It has it origin with the development of human civilization.

(iii) Personal Dignity: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.
Characteristics
(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 accepts the principles of “Pure goals inspire for pure means” and “Means justifies the end”. It is essential that goals and means
should be based on morals.

(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.
 ● Long term growth
● Cost reduction
● Risk mitigation
Importance of ● Limited resources
● Protection of society
Business Ethics ● Credibility
● Improved employee retention
● Stronger collaborations
Types of
Business
Ethics
1. Transactional Ethics
2. Participatory Ethics
3. Recognition Ethics
Transactional Ethics
Transactional Ethics The domain of ethics covering transactions
that are performed on the basis of simultaneous or connected
interests and that are general by the principles of Equality,
Honesty and, Reciprocity is indicated as the domain of
transactional ethics.
 Example: I need vegetables from vegetable vendor.
Example of The vendor want customers like me for survival, so
we both are dependent on each other.as long as we
Transactional both contribute appropriately, together with generate
Ethics a surplus that one of us on his own is able to
produce.

In order to let things run smoothly, again adherence

to two specific moral principle is required

1. Principle of honesty, i.e, one should

operate in good faith fairly and equitably,
not be trained the confidence received.
2. Principle of reciprocity, i.e, one should
avoid free riding on somebody else effort.
Participatory Ethics

Participatory ethics is a privileged part of business ethics.within the category of

other including actions, guided by common interest, we find another type of action
(not by simultaneous are connected interest) but by shared interest. Parties
corporate in order produce a more distant common good that has three
characteristic features.
Participatory Ethics

1. Participation voluntary, guided by the social relations and on two particular

moral principles
2. Principle of Decency-A real opportunity to contribute to the general welfare
presents itself and no insurmountable obstacles arise, one should have solid
moral reasons not to go for it.
3. Principle of Emancipation- Special attention is given to the least powerful in
order to defend those, who,by themselves, are defenceless
Recognitional ● Recognition, in some more detail, means noticing
people, their views, and their actions; understanding
Ethics their objectives and the ways in which they pursue them;
and taking them into account in all ethical decisions.
● The ‘taking into account’ element of recognition can lead
in two opposite directions.
● The first is resolving to bring about changes in people,
their codes of behaviour, or their thinking – this ‘pulling
element’ flowing from recognition is responsibility.
● The second is resolving to keep away from people, their
codes, or their thinking; and to not bring about changes
– this ‘pushing element’ flowing from recognition is
respect
Factors influencing
business ethics
Business leaders today are well aware of the ethical issues and
hence they want to improve the ethical standards of the business.
Self-regulation is, of course, better and produce impressive results.
Besides, there are also a number of factors, which significantly
influence the managers to take ethical decisions.
1. Personal Code of Ethics

A man’s personal code of ethics that is what one considers moral

is the foremost responsible factor influencing his behavior.
2. Legislation

It is already stated that the Government will intervene and enact laws only when the
businessmen become too unethical and selfish and totally ignore their responsibility to
the society. No society can tolerate such misbehavior continuously. It will certainly exert
pressure on the Government and the Government consequently has no other
alternative to prohibit such unhealthy behavior of the businessmen.
3. Government Rules and
Regulations

Laws support Government regulations regarding the

working conditions, product safety, statutory warning etc.
These provide some guidelines to the business managers
in determining what are acceptable or recognized
standards and practices.
4. Ethical Code of the Company

When a company grows larger, its standard of ethical conduct tends

to rise. Any unethical behavior or conduct on the part of the company
shall endanger its established reputation, public image and goodwill.
Hence, most companies are very cautious in this respect. They issue
specific guidelines to their subordinates regarding the dealings of the
company.
5. Social Pressures

Social forces and pressures have considerable influence on ethics in

business. If a company supplies sub-standard products and get involved in
unethical conducts, the consumers will become indifferent towards the
company. Such refusals shall exert a pressure on the company to act
honestly and adhere strictly to the business ethics. Sometimes, the society
itself may turn against a company.
6. Ethical Climate of the Industry

Modern industry today is working in a more and more competitive atmosphere.

Hence only those firms, which strictly adhere to the ethical code, can retain its
position unaffected in its line of business. When other firms, in the same industry
are strictly adhering to the ethical standards, the firm in question should also
perform up to the level of others. If the company’s performance is below than other
companies, in the same industry, it cannot survive in the field in the long run.
Categories of Ethics
1. Personal
2. Professional
3. Managerial
Personal Ethics

Includes your personal Influenced by family, friends,

values and moral qualities. culture, religion, education
and many other factors.

Examples: I believe racism Personal ethics can change

is morally wrong. and are chosen by an
individual
Common ● Ethics that the majority of people agree on.
● Many philosophers argue there is no such
Ethics ethics.
● Do we have the same ethics in the world? Do
we have the same ethics in the U.S.? Does
everyone in your family share the same ethics?
● Examples: Murdering people for the sake of
murder is wrong.
● Notice how this would change in the context of
self-defense.
● Common ethics have to be very general to
avoid disagreement.
 ● Rules imposed on an employee in a
company, or as member of a profession.
For instance, journalists, doctors,
lawyers, etc.
● Imposed when you are a part of a
professional setting or when you are
Professional Ethics being trained or educated for working for
a specific profession.
● Examples: no gossiping, time
management, punctuality, confidentiality,
transparency.
● Not adhering to these may harm your
professional reputation.
Managerial Ethics
Managerial ethics is a set of principles and rules dictated by upper
management that define what is right and what is wrong in an
organization. It is the guideline that helps direct a lower manager's
decisions in the scope of his or her job when a conflict of values is
presented.
 Approaches of Management Ethics

1 2 3

Immoral Management Moral Management Amoral Management

 Immoral Management
Immoral management not only lacks ethical principles but also is actively
opposed to ethical behaviour. This perspective is characterized by
principal or exclusive concern for company gains, emphasis on profits and
company success at virtually any price, lack of concern about the desires
of others to be treated fairly, views of laws as obstacles to be overcome,
and a willingness to "cut corners".
 Moral Management
In contrast to immoral management, moral management strives to follow
ethical principles and percepts. While moral managers also desire to
succeed, they seek to do so only within the parameters of ethical
standards and the ideals of fairness, justice, and due process. As a result,
moral managers pursue business objectives that involve simultaneously
making a profit and engaging in legal and ethical behaviours.
Amoral Management
● The amoral management approach is neither immoral nor moral but, rather, ignores or is oblivious to ethical

considerations. There are two types of amoral management:

● Intentional: A moral managers do not include ethical concerns in their decision -making, or behaviour, because

they basically think that general ethical standards are more appropriate to other areas of life than to business.

● Unintentional: Amoral managers also do not think about ethical issues in their business dealings, but the reason

is different. These managers are basically inattentive or incentive to the moral implications of their

decision-making, actions, and behaviour. Overall amoral managers pursue profitability as a goal and may be

generally well meaning, but intentionally or unintentionally they pay little attention to the impacts of their

behaviours on others.
Business Code of Conduct

The code of business conduct is also referred to as the code of ethics, depending
on the company. It is a set of principles designed to guide workers to conduct
themselves with honesty and integrity in all actions representing the company.
Large companies such as Coca-Cola, have two code of business conduct rules;
one for global employees and one for non-employee directors, who still represent
the company. Think about your company's mission and how you want to the public
to perceive you and the business.
Value-Based Code

Think about the values you want to permeate in all aspects of your company.
The value-based code of ethics sets the tone for how things are done. For
example, a plumbing company might require employees to wear a uniform to all
house calls, which demonstrates professionalism. They might further require
courteous interactions, and to use specific language when speaking with clients.

Another company might focus on reducing a carbon-footprint and might require

office workers to move to digital environments.
Compliance-Based Code

● A compliance-based code of ethics requires that employees follow

the rules and regulations set forth by the state and the industry
you're in. The entire mortgage industry was transformed after the
financial crash in 2008; a major part of the transformation had to
do with a compliance-based code of ethics, and to make certain
that people really could afford the loans they were getting.
Similarly, the investment industry has a "know your customer" rule,
which is a regulatory requirement that is weaved into the
company's code of business conduct.
Approaches to Business Ethics

1. Consequentialist &
2. Non- Consequentialist
Consequentialism
● Consequentialism is a theory that suggests
an action is good or bad depending on its
outcome.
● An action that brings about more benefit than
harm is good, while an action that causes
more harm than benefit is not.
Consequentialism
● Consequentialism is an attractive ethical approach because it provides clear and
practical guidance – at least in situations where outcomes are easy to predict. The
theory is also impartial. By asking us to maximise benefit for the largest number of
people (or, for Peter Singer and other preference utilitarians, any creature who has
preferences), we set aside our personal biases and self-interest to benefit others.
● One problem with the theory is that it can be hard to measure different benefits to
decide which one is morally preferable. Is it better to give my money to charity or spend
it studying medicine so I can save lives? Consequentialism can struggle to compare
different moral values.
Non Consequentialist
approach

A non-consequentialist theory of value judges the

rightness or wrongness of an action based on
properties intrinsic to the action, not on its
consequences.
 A consequentialist theory of value judges the rightness
or wrongness of an action based on the consequences
that action has. The most familiar example would be
utilitarianism--``that action is best that produces the
greatest good for the greatest number''

Consequentialist vs. A non-consequentialist theory of value judges the

non-consequentialist rightness or wrongness of an action based on
properties intrinsic to the action, not on its
consequences.Libertarianism--People should be free to
theories of ethics do as they like as long as they respect the freedom of
others to do the same

Contractarianism -- No policy that causes

uncompensated harm on anyone is permitted
Teleological Theories

Consequential Theories

1. Egoism /outcome for individual

2. Act Utilitarianism /CBA
3. Rule Utilitarianism
4. Altruism/selfishness
Deontological Theories
Non-Consequential

● Kantian- Categorical Imperative/duty based

● Right based ethics
Teleological & Deonatial Theory
https://www.youtube.com/watch?v=4KVqUKXRQPw
Kohlberg's Six stage moral
development

https://www.youtube.com/watch?v=bounwXLkme4
 , Chris Moon's Ethical fitness: a
Four-Step Workout (Moral Awareness,
Values Definition, Ethical Analysis,
Dilemma Resolution)
Thanks
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