Unit 1 Introduction of Business Ethics and Moral Values

Part A Business Ethics

❖Introduction
When we go towards business ethics, we need to know about ethics. Ethics is based on well-
founded standards of right and wrong that prescribe what humans ought to do, usually in terms
of rights, obligations, benefits to society, fairness, or specific virtues.
If we can think of ethics as the principles that guide our behavior toward making the best choices
that contribute to the common good of all. Ethics is what guides us to tell the truth, keep our
promises, or help someone in need. Ethics guides us to make the world a better place through
the choices we make.

❖Meaning of Business ethics

Ethics in business is just as important as ethics in personal life. Business leaders have a unique
role and a great responsibility in shaping the ethical culture of their businesses, and thereby
influence their broader communities as well.
In business, decision-making is an essential part of daily operations. From determining pricing
strategies to managing employee relations, every choice made by a company can have far-
reaching consequences. However, the true mark of a successful and reputable business lies not
only in its profitability but also in its adherence to ethical principles. Business ethics is a concept
that guides companies to operate in a manner that is morally and socially responsible, ensuring
that their actions benefit not just themselves but also their stakeholders and society as a whole.
 ❖Definitions of Business Ethics
Business ethics can be defined as the set of moral principles and values that govern the conduct
of individuals and organizations in the business world. It encompasses a wide range of issues,
including corporate governance, fair trade practices, environmental responsibility, employee
rights, and consumer protection, among others. At its core, business ethics aims to promote
honesty, integrity, and transparency in all business dealings, fostering an environment of trust
and accountability.
“Business ethics is the study of standards of business behaviour that promote human welfare and
the good.”- Kirk O. Hanson
“Business ethics is an art and science for maintaining a harmonious relationship with society, its
various groups and institutions.”- Wheeler

❖Nature of Business Ethics

1. 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.
2. 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.
3. Gives protection to social groups
Business ethics give protection to different social groups such as consumers, employees, small
businessmen, government, shareholders, creditors, etc.
4. 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.
5. 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.
6. 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. Trade Associations and Chambers of Commerce must also
play an active role in this matter.
7. 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. What is considered as good in one country may be taboo in another
country.
 8. 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.

❖Importance of Business Ethics

1. Corresponds to basic human needs
The basic need of every human being is that they want to be a part of the organization which
they can respect and be proud of, because they perceive it to be ethical.
2. Credibility in public
Ethical values of an organization create credibility in the public eye. people will like to buy the
products of a company if they believe that the company is honest and is offering value for money.
The public issues of such companies are bound to be success.
3. Credibility with employees
When employees are convinced of the ethical values of an organisation they are working for,
they hold the organisation in high esteem. It creates common goals, values and language.
4. Better decision making
Respect for ethics will force a management to take various economic, social and ethical aspects
into consideration while taking decisions. Decision making will be better if the decisions are in
the interest of public, employees and company's own long term good.
5. Profitability
Being ethical does not mean not making any profits, every organisation has a responsibility
towards itself also i.e., to earn profits. Ethical companies are bound to be successful and more
profitable in the long run though in the short run they can lose money.
6. Protection of society
Ethics can protect the society in a better way than even the legal system of the country. Where
law fails, ethics always succeed. The government cannot regulate any the activities that are
harmful to the society.

❖Factors influencing business ethics

1. Company Culture:

The collective values, beliefs, and norms inside a company play a crucial role in determining
ethical conduct. Leadership sets the bar for what is acceptable or not acceptable behaviour.
 2. Legal and regulatory environment:

Laws serve as the most basic level of ethical behaviour in society; however, organizations can
choose to rise above the legal standards set forth the law is very important; therefore, you need
to follow this.

3. Leadership & Management:

The ethical behaviour of executives and managers also influences the climate at lower levels.
Employees are more likely to behave ethically if they follow a leader that earnestly models
ethical behaviour.

4. Social Expectations:

Public sentiment, and social norms can affect the way a company handles ethical considerations.
Businesses are under constant pressures to be responsible, particularly surrounding issues related
to the environment or social justice.

5. Balancing Stakeholder Interests:

Companies need to balance the expectations of a wide range of stakeholders: shareholders,

employees, customers, suppliers and the community. Potential Conflicts: When these interests
conflict, ethical dilemmas can be created.

6. Globalisation:

Conducting business across multiple countries can mean exposure to a wide variety of cultural
and ethical norms. These are all things that companies need to learn just how to operations
around yet still keep ethical standards consistent.

7. Individual Employee Values:

The ethical convictions and beliefs of individual employees can influence organizational
conduct, particularly in circumstances where policies are vague.

8. Economic Factors:

In periods of economic hardship, some companies may feel forced to bypass standards or act
unethically in order to remain profitable.
 ❖ Arguments for business ethics
Introduction:
Changes are happening everywhere around the world on all levels. And in that time, we have
devised and elaborated new ways of living, working and relating. This rapid change is due to the
increased awareness, more technology development, new dimension market growth and attitude
level improvement. This circumstance had also presented as an opportunity for the advancement
of ethical principles and practices.
Here some of the arguments favour to business ethics:
1. Comprehensive nature
2. Leadership
3. Employee commitment
4. Investor loyalty
5. Customer satisfaction
6. Business is a co-operative effort
7. Higher profit
8. Changing mindset of shareholders

1. Comprehensive nature:

For the last two hundred years emphasis was laid on producing goods and services, and
encourages ever more of advancement of knowledge. In the modern century, much importance
is given to the promotion of values and ethical concepts.

2. Leadership:

Therefore, Business Ethics in organization requires a value-based leadership from top

management. Leadership of the organization shall direct openness and efforts to enhance the
ethical performance of the organization. The efficiency of a firm in planning and implementing
ethical business standards relies on the degree to which the leader is involved in these
programmes.

3. Employee commitment:
Ethics significantly boost employee commitment, loyalty, and performance. A positive
environment with trust and honesty in the workplace increases efficiency and enterprise. The
National Business Ethics Survey (USA) shows that employees feel less pressurized to
compromise and contribute more, highlighting the importance of an ethical climate in enhancing
efficiency.
4. Investor loyalty:
Modern investors prioritize ethical practices, social responsibility, and company reputation for
efficiency, productivity, and profits. Negative factors like law suites and fines can lower stock
prices, leading to divestment. Relationships should be based on dependability, trust, and
commitment.
5. Customer satisfaction:
Ethical conduct towards customers is crucial for building a strong competitive position, as
consumers avoid unfair treatment of employees and prioritize social responsibility over brand
reputation.
6. Business is a co-operative effort:
Business, as a cooperative activity, necessitates ethical standards and good practices for its
operations and process with stakeholders like investors, suppliers, customers, and the
government. A lack of ethical values and practices often leads to a lack of cooperation.
7. Higher profit:
Ethical practices benefit all stakeholders, leading to higher profits and consistent growth.
8. Changing mindset of stakeholders:
Stakeholders, including employees, customers, and the environment, hold a significant role in
shaping the success of a business organization. They set standards for working conditions,
consumer rights, environmental issues, and customer care, and provide valuable information and
knowledge in their respective areas.

❖Arguments against Business ethics

1. No need for ethics separately
2. Demand and supply forces only operate
3. Compliance of law
4. Conflicts of interest
5. Profit is the object of business
6. Poor moral standards of society
1. No need for ethics separately:
There is no need to promote ethics in another way if businesses are interested in carrying out
their primary function. A company must create a business plan, carry it out, and meet all
stakeholder needs. Ethics then has no place of its own. Ethical considerations are covered by
every good companies.

2. Demand and supply forces only operate:

Demand and supply are the two market factors that control every market, which is the centre of
any business. These two market forces determine the pricing, output, and many more of other
decisions. As a result, there is relatively limited scope for business ethics.
3. Compliance of law:
Every firm needs to stick to the law of the land. For instance, the Competition Law of India
promotes the development of constructive competition. In addition, labour laws are in place to
safeguard workers' working and service conditions. In the same way, laws are in established to
protect consumers and their welfare. The use of corporate ethics is limited in this situation.
4. Conflicts of interest:
Conflicts of interest between employers and employees, between buyers and sellers, between
owners and the government, and between various competitors promoted by business. There is
little chance of ethical operations in a conflict-dominated environment.
5. Profit is object of business:
Profit is the primary goal of any business, and it indicates progress. However, businesses often
employ exploitation-based techniques, making it difficult to maintain ethical standards in
modern times, as these methods often lead to exploitation.
6. Poor moral standard of society:
Even though high ethical values are spoken and written by a small section of society, the moral
standards of society have fallen down. Frauds are taking place in all areas of business operations
like accounting fraud, marketing fraud and consumer fraud.

Part B: Moral Value

❖ Meaning of moral value

A value is a belief that a person holds about what is good, true, or beautiful. Values are a person's
standards of right and wrong, and they can influence a person's behaviour, motivation, and
perceptions.
The main difference between values and ethics is that values are personal beliefs and principles
that guide a person's thoughts, words, and actions, while ethics are a system of moral principles
that guide a person's behaviour.
Values tell us what we want to do or achieve in our life, whereas ethics helps us in deciding what
is morally correct or incorrect, in the given situation.

❖Type of values
Moral values are the standards or beliefs which serve as a guide for behaviour, guiding people
in deciding what is good or bad, fair or unfair, and right or wrong. They have an impact on
people's decision-making, relationships, and perceptions of the world around them. The concept
of moral values includes many kinds of values.
1. Moral Values:
These values deal with our sense of right and wrong, fairness, and justice. They guide our actions
towards what we believe is good and ethical. Examples include honesty, integrity, compassion,
respect, and responsibility.
2. Personal Values:
These values are unique to each individual and reflect what's important to us as a person. They
shape our goals, motivations, and priorities. Examples include creativity, independence,
adventure, family, learning, and faith.
3. Social Values:
These values are shared within a group or community and guide how we interact with others.
They promote cooperation, social order, and a sense of belonging. Examples include respect for
authority. cooperation, obedience, patriotism, and tradition.
4. Cultural Values:
These values are shaped by the customs, traditions, and beliefs of a particular culture. They
influence our understanding of the world, our relationships with others, and our overall way of
life. Examples include collectivism vs. individualism, religious beliefs, gender roles, and
environmentalism.
5. Aesthetic Values:
These values relate to our sense of beauty, art, and creativity. They guide our appreciation for
different forms of expression and influence our own creative pursuits. Examples include beauty,
harmony, balance, elegance, and originality.
6. Instrumental Values:
These values are important because they help us achieve other goals or desires. They're not
inherently good or bad, but they're valued for their usefulness in getting us what we want.
Examples include wealth, power, success, status, and security.

❖ Moral responsibilities of employer and employee

❖Responsibilities of
employer:
1. Fair Treatment:
Employers ought to treat every worker with respect and equality, offering them equal chances
for advancement and making sure that harassment and discrimination are not accepted.
2. Honesty & Transparency:
When it comes to corporate rules and regulations, work expectations, performance evaluations,
and other choices that have an impact on employees, employers should be upfront and honest.
3. Ethical Leadership:
Leaders should act morally, establishing an example of integrity and respect that staff members
can adopt.
4. Work-Life Balance:
When possible, employers should provide flexible schedules or assistance networks to
employees in order to take their well-being into account.
5. Employee well-being:
This involves establishing a secure, healthful, and encouraging workplace that supports mental
and physical wellness.
6. Accountability:
Assuming responsibility for actions and how they affect workers, as well as being capable of
listening and acting upon criticism.
7. Respect for employees right:
respecting workers' human rights and dignity, including their right to privacy, reasonable wages,
and good workplace conditions.

❖ Responsibilities of employees:
1. Integrity:
Employees are expected to act honourably in relation to their work and not partake in any
unethical actions such as dishonesty or theft as well as uphold a high level of personal
responsibility.
2. Respect for Others:
Showing regard and esteem to co-workers, superiors, clients and their insights and contributions
being appreciated as different and important in achieving the objectives.
3. Responsibility and Reliability:
Executing job responsibilities to the best of their capabilities, ensuring tasks are completed
within the allocated time, and being reliable in the performance of the job.
4. Constructive Engagement:
Handling issues, disputes or suggestions within the organization in a positive and sincere
manner.
5. Confidentiality:
Safeguarding the sensitive information held by the organization about itself or any of its clients.
6. Collaboration and Teamwork:
Participating in a team and not just working with one but also helping in fostering good practices
in the workplace.
7. Personal Growth:
Being active towards personal development and growth, development in profession and in
ethical behaviour.

❖ Profit maximization vs social responsibility

Profit Maximization Social Responsibility
Profits ensure a company's long-term Prioritizing social responsibility can lead to a
viability. more sustainable business model, reducing
risks and ensuring long-term viability.
Profits fund new ventures, acquisitions, and A strong commitment to social responsibility
market expansion. can improve a company's reputation, attracting
customers and investors.
Shareholders expect profits as a return on Socially responsible companies can build
their investment. stronger customer relationships, leading to
increased loyalty and repeat business.
Profitable companies can hire more A positive social impact can attract top talent,
employees, boosting the economy. improving employee morale and productivity.
Profits fuel research and development, Adhering to social and environmental
leading to new products and services. regulations can help avoid costly fines and
legal issues.
Profits allow companies to give back to the Addressing social and environmental risks can
community through CSR initiatives. help prevent future crises and protect the
company's bottom line.
Higher profits can lead to better pricing, A focus on social responsibility can stimulate
marketing, and customer service. innovation and creativity, leading to new
products and services.
Profitable businesses contribute to overall Socially responsible companies can contribute
economic prosperity. to the development of their communities,
improving quality of life.
Profits act as a buffer against economic Prioritizing social responsibility can establish a
downturns and unexpected expenses. strong ethical culture within the company,
fostering trust and integrity.
Profit-sharing and bonuses can motivate and By addressing social and environmental issues,
reward employees. companies can make a positive impact on the
world, leaving a lasting legacy.