Business Ethics

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Business Ethics

  1. 1. A.15 Ethics Ethics refers to a system of moral principles a sense of right and wrong, and goodness and badness of actions and the motives and consequences of these actions. As applied to business firms, ethics is the study of good and evils, right and wrong and just and unjust actions of businessmen. Ethics is a body of principles or standards of human conduct that govern the behavior of individuals and groups. Ethics arise not simply from man's creation but from human nature itself making it a natural body of laws from which man's laws follow. Ethics is a branch of philosophy and is considered a normative science because it is concerned with the norms of human conduct, as distinguished from formal sciences such as mathematics and logic, physical sciences such as chemistry and physics, and empirical sciences such as economics and psychology. Ethics is seen as an individual’s own personal attitude and a believe concerning what is right or wrong, good or bad. It is important to note that ethics reside within individuals and that organization doesn’t have ethics. People have ethics. Consequently, its definition and understanding varies from person to person. These are not absolute, but are relative. Ethical behaviors are in the eye of beholder. What is right or wrong is a personal individual matter, but is still influenced by socially accepted norms. Right, and proper and fair are the ethical terms. It expresses a judgment about behavior towards people they felt to be just. Ethics are useful tools for sorting out the good and bad components within complex human interactions. Business ethics does not differ from generally accepted norms of good or bad practices. If dishonesty is considers to be unethical and immoral in the society, then any business man who is dishonest his or her employees, customer’s shareholders, or competitors is unethical and immoral person. Businessmen should not try to evolve their own principles to justify ‘what is right and what is wrong’ A.16 Formation of ethics
  2. 2. An individual’s ethics are formulated through the operation of forces in the individual’s environment. These are discussed in the succeeding paragraphs.  Family influences The formation of ethics begins when the individual is a child. Thus the family environment has a significant influence in determining what the child learns about good and bad, right and wrong.  Peer influences As the child develops contacts outside the home through home, school, play and work, peers exert considerable influence on the individual’s ethical beliefs.  Experiences As a person matures and develops as a human being, he or she will be exposed to many critical experiences that will be affect his or her ethical standards.  Values and morals One’s ethical standards are also greatly influenced by values and morals. People who place high value on money and material possessions may not have strong ethical standard regarding behaviors that facilitate the accumulation of that wealth.  Situation Factors People often change their ethics in response to unknown situational factors. An employee, who is threatened with loosing a job that has been held for years, may commit unethical acts in order to save the job.  Religion One of the oldest sources of ethical inspiration is religion. More than 1,00,000 different religion exist across the globe .Despite doctrinal differences, the major religion coverage on the believe that ethics is an expression of divine
  3. 3. will that reveals the nature of right and wrong in business and others walks of life.  The legal system Laws are rules of conduct, approves by legislatures, that guide human behavior in any society .They codify ethical expectations and change as new evils emerge. But law cannot cover all ethical expectation of society. Whenever ethics the law codifies, it is binding on businesses. The society expects businesses to abide by the law. Obeying the law is presumed to be ethical behavior .Law breaking in business is common. Taxes are evaded, hundred of employees die because of occupational disease, many perish because of industrial accidents, and million others receive disabling injuries on the job. The blame for these death and injuries had to be shared by employees and employers who fail to adhere to occupational health and safety laws. Consumer suffer because of poor quality and high priced products by the supplied by the businessmen .Businesses that degrade the environment by disregarding environment protection laws cause misery to the society. A.17 IMPORTANCE OF BUSINESS ETHICS Ethics is important to business in general and HR in particular, for several reasons as stated below:
  4. 4. Ethics corresponds to basic human needs. It is men basic nature that he desires to be ethical, not only in his private life but also in his business affairs where, being a manager he knows that his decisions may affect the life of thousands of employees. Moreover, most people want to be the part of organization which they can respect and be proud of, because they perceive its purpose activities to be honest and beneficial to society. Most HR manager would like to respond to this need of their employees and, they (managers) themselves feel an equal need to be genuinely proud of the company they are directing. These bases ethical needs compel the organizations to be ethical oriented. Values create credibility with the public. A company perceived by the public to be ethical and socially responsive will be honored ands respected even by those who have no intimate knowledge of its actual working. There will be an instinctive prejudice in favour of its products, since people believe that the company offers value for money. Its public issues will attract an immediate response. Valued give the management credibility with its employees. Values are supposed to be a common language to bring the leadership and its people together.Organisational ethics, when perceived by employee as genuine, create common goals, values, and language. The HR management can have credibility with its employees simply because it has credibility with the people. Neither a sound business strategy, nor a generous compensation policy and fringe benefits can win employee credibility, but perceived moral and social uprightness can. Values help better decision making. Another point of great importance is that an ethical attitude helps the management make better decisions, that is ,decision which are in the interest of the public, their employees, and the company’s own long-term good, even though the decision making is slower. This is so because respect for ethics will force a management to take various aspect- economic, social and ethical-in making decision.
  5. 5. Ethics and profit go together. A company which is inspired by ethical conduct is also profitable. Value-driven companies are most likely to be successful in long run, though in the short run, they may lose money. Law can’t protect society, ethics can. Ethics is important because, law and lawyer cannot do every thing to protect society. Technology develops faster than the government can regulate. People in an industry know the dangers in the particular technology better than the regulatory agencies.Futher; the government cannot always regulate all activities which are harmful to the society. Where law fails, ethics can succeed. An ethically-oriented management takes measures to prevent pollution and protect workers health even before being mended by law .An ethically sound HR manager, who can reach out to agitated employees, will quell a trouble more effectively than the police. A.18 Code of ethics Code of ethics has become popular .Nearly 95 percent of the Fortune 500 companies have codes, and a trend is visible in the corporate sector in India also. Industry association have evolved codes of conduct their own. For example, the council of fair business practices (CFBP) established in 1916, by leading private sector industrialist in western India, and adopted a code of fair business practices. The code constitutes a primary level, self regulation character for enlighten citizenship among business entities. The CFBP has initiated a set of prizes
  6. 6. and awards called ‘Jamnalal Bajaj Uchit Vyavahar Puraskar’ or(Jamnalal Bajaj prize for fair Business Practices) to promote exemplary application of the above norms .The CFBP president claimed that sustained pressure from his council has resulted in creation of Advertising standards Council of India (ASOI) and in promulgation of the consumer protection act (CPA) ,1986.The Federation of Indian chambers of commerce industry (FICCI,which includes the MNCs)has recently issued a declaration on Norms of business consisting of ten points. The Punjab, Haryana and Delhi chamber of commerce has also lately formulated a code of ethics. Whoever evolves the code, its purpose is to provide guidance to manager and employees when they face ethical dilemma. The most effective codes are those drawn up with the cooperation and widespread participation of employees. An internal enforcement mechanism, including penalties for violating the codes, adds teeth to the code. Code of ethics is guidelines to steer the conduct of both the organizations and its employees in all business activities. These are intra and inter organizational in nature and relate to all activities of an organization and its environment. They provide positive and productive orientation and direction to the code of business, besides giving an individual identity to that organization. Code of ethics provide general guidelines with respect to the values and ethical standards of the company Business ethics is concerned with truth and justice and has a variety of aspects, such as expectation of society, fair completion, advertising, public relations, social responsibilities, consumer autonomy, and corporate behaviors with in and with out. A code is a statement of policies, Principles, or rules that guide behaviors. A.19 Objectives of code of ethics A code of ethics aims at the following:
  7. 7.  Guidance: It provides direction to the most important element of an organization namely the “People”, so that they know how to conduct themselves in terms of ethical behavior and give them a sense of common identity.  Confidence: It inspires public confidence besides enhancing the reputation of the organization.  Initiative: it provides initiative and stimulation to the suppliers and customers for proper conduct by creating a sense of moral obligation  Ethical culture: It promotes a culture of excellence by not just formally teaching ethics, but by demonstrating through leaders the commitment of the organization to ethical behavior. A.20 Business ethics Companies, led by top management, are increasingly adopting ethical codes of conduct. Modern ethics codes aren't just some simple platitudes set in a break-room plaque. Companies now commit considerable time and money to illustrate their reliance on ethical behavior. Ethical behavior starts at the top. Before a company can expect to be viewed as ethical in the business community, ethical behavior within its own walls-to and by employees-is a must, and top management dictates the mood. Ethical behavior by the leaders of an organization will inevitably set the tone for the rest of the company-values will remain consistent. Further, a well- communicated commitment to ethics sends a powerful message that ethical behavior is considered to be a business imperative.
  8. 8. Companies are also interested in determining whether ethical behavior can be measured, just as efficiency and productivity companies must innovate ways to measure ethical behavior, which in turn motivates ethical behavior. Once training, measurement and a new ethical code have been developed, companies are also hiring full-time ethical compliance officers, and starting ethics hotlines to report possible policy violations. Hiring a full-time ethics officer is another signal to employees that ethical violations will be taken very seriously. However, this person isn't just a watchdog-they will take a proactive approach to identifying possible violations before they develop. Ethics are important not only in business but in all aspects of life because it is an essential part of the foundation on which of a civilized society is build. A business or society that lacks ethical principles is bound to fail sooner or later. A.21 THE MAJOR PRINCIPLES OF BUSINESS ETHICS:  No discrimination should be done on the basis of caste ,color , and religion,  The polices should be fair and transparent  Proper provision of safety should be provided by the company to the employees.  There should be proper honesty, loyalty, and integrity in the employees.  The company’s resources should not be utilized by the employees for their personal usage  Company should provide better environment condition
  9. 9.  Information about employee’s personal lives, health, and work evaluations should be kept confidential.  Regular measurement of employee satisfaction should by company.  To neither give nor take any illegal payment, remuneration, gift, donation, or comparable, benefits to obtain business or favours.  To comply with all regulations regarding preservation of the environment.  Employee should report to management any actual or possible violation of code or an event that could affect the business or reputation of the employee’s company. Ethics And Law Laws and ethics have common aim- defining proper and improper behaviour. But the two are not quite same. Laws are the society’s attempt to formalize- that is to reduce to written rules- idea about what is right and what is wrong in various walks of like. However, it is rarely possible for written rules to capture all the sublet variations that people give to ethics. Ethical concepts are more complex than writing rules. Ethics deals with human dilemmas that frequently go beyond the formal language of laws and the meanings given to legal rules. Similarities and differences apart, legal rules help promote ethical behaviour in organization. Some of the acts which seek to ensure fair business practices in our country are the followings:  The Foreign Exchange Regulation Act, 1973, now replaced by FEMA.  The Companies Act, 1956.  The Monopolies and Restrictive Trade Practices Act, 1969.
  10. 10.  The consumer Protection Act, 1986.  The Environment Protection Act, 1986.  The Essential Commodities Act, 1955. Social and ethical accountability Social and ethical accounting is a process that can help businesses to stakeholders, and to improve performance, social, environmental and economic. The process typically links a company’s value to the development of policies and performance targets and to the assessment and communication of the performance. In this way and through engagement with stakeholder social and ethical issues are tied into a company’s strategic management and operations. Social and ethical accounting model there is no standard balance sheet or units of currency. Instead, the are defined by company’s value and aims by the interests and expectation of its stakeholders, and by societal norms and deregulations. With the focus on the concerns of society , the social and ethical accounting framework implicitly concerns itself with issues as a wide as economic performance working conditions , environment and animal protection, human rights, fair trade and ethical trade, human resource management and community development , and community development and hence with the sustainability of a company’s activities. Companies have begin to open themselves up to their stakeholders, partly because of the “push” factor of the pressure group activities but also because
  11. 11. the realize that a greater awareness of the impact of their activities and how they are perceived is necessary to improve strategic decision making. More and more companies are now incorporating stakeholder in their decision making processes. Much of this is, of course, standard business practice talking to customers and suppliers to identify the issues as they arise to satisfy new needs and a company realize that it is failing to involve important groups or there is mistrust or misleading in its relations with stakeholder. Principle of social and ethical accounting These principles can be used in designing and managing a process, or in assessing its quality. The dominant principle of social and ethical accounting is inclusively. This principle requires that the aspirations needs of all stakeholder groups are taken into account at all stages of the social and ethical accounting process. Other principles can be put into three broad relating to the:  Scope and nature of the company’s social ethical accounting process.  Meaningfulness of the information created by the process.  Continuous management of the process. Scope and nature of the process  Completeness- The inclusion in the accounting process of all appropriate areas of activity relating to an organization’s social and ethical performance.
  12. 12.  Materiality- The inclusion of significant information that is likely to affect stakeholder groups and their assessment of an organization’s social and ethical performance.  Regularity and timeliness- The need for regular, systematic and timely action of the accountings process to support the decision making of an organization and its stakeholders. Meaningfulness of information  Quality Assurance- The audit of an organization’s process by an independent and competent third party. The audit is concerned with building credibility in the process with all stakeholder groups, and hence developing meaningful stakeholder engagement.  Accessibility – Appropriate and effective communication to an organization’s stakeholders of its accounting process and its performance.  Comparability- The ability to compare information on an organization’s performance with previous periods, performance targets, or external benchmarks drawn from other organizations, statutory regulation or non statutory norms.  Reliability- The characteristic that allows an organization and its stakeholders to depend on the information provided by the accounting to be free from significant error or bias. Continuous management of the process
  13. 13.  Embedded ness, or systems integration- Making the accounting process part of an organization’s operations, systems and policy making; that is, not just a one-off exercise to produce a report.  Continuous improvement- Steps taken to improve performance in response to the results of the accounting process. The Social and Ethical accountability model Embedding Planning Stakeholder Engagement Auditing And Accounting Reporting
  14. 14. The generic model of social & ethical accounting includes six elements in a continuing process that a business undergoes in order to manage & improve its accountability & performance.  PLANNING- The company commits to the process of social & ethical accounting, auditing & reporting, & defines & reviews its values & social & ethical objectives & targets.  ACCOUNTING- The scope of the process is defined, information is collated & analysed, & performance targets & improvement plans are developed.  REPORTING- A report on the company’s systems & performance is prepared.  AUDITING- The process of preparing the report & the report itself are externally audited, & the report is made accessible to stakeholder in order to obtain feedback from them.  EMBEDDING- To support each of the stages, structure & systems are developed to strengthen the process & to integrate it into the company’s activity.  STAKEHOLDER ENGAGEMENT- The concerns of stakeholder are addressed at each stage of the process through regular involvement.
  15. 15. At every stage a company should incorporate useful experience from the previous cycle- it must be flexible enough to learn & innovate from the process. Section 1 – Membership of any class shall be contingent upon conformance with the established principle of professional Ethics. Section 2 – Honesty, Integrity, Loyalty, fairness, Impartiality, Fidelity to trust, and inviolability of confidence are incumbent upon every member as professional obligations. Section 3- Members shall not make false, misleading or unwarranted statements, representation or claims in regards to professional matters, nor shall they engage in false or deceptive advertising. Section 4- Members shall not falsely or maliciously attempt to injure the reputation of others.
  16. 16. Section 5 – Member shall endeavor to cooperate with others in profession and shall encourage the ethical dissemination of geoscientific knowledge. Literature review Article 1 Wipro gets PHDCCI's Ethics in Business Award Our Corporate Bureau 30 November 2002 Mumbai: Wipro has been awarded the “Ethics is Good Business” award for the Year 2002. The award, instituted by the Punjab, Haryana and Delhi Chamber of Commerce and Industry (PHDCCI), recognizes Wipro’s ethics and value-based business performance. Wipro has compiled an "Integrity Manual" that defines the way Wiproites should deal with their customers. Wipro has also introduced a helpline known as “Wipro SOS”. This helpline comprises senior members of the company, like Chairman Azim Premji, who are available for guidance on any moral, legal or ethical issues that a Wiproite may face. Article 2 Press release, 3 November 2004 Reliance Industries ranks No.2 in 'India's Most Respected Companies'
  17. 17. Reliance emerges as India's 'Most Dynamic Organization' Reliance Industries ranks No.2 in 'India's Most Respected Companies' survey - India's Most Respected Companies Survey IMRB International - Business world, 2004. RIL is the first and only private sector company from India to feature in the 2004 Fortune Global 500 list of 'World's Largest Corporations' and ranks amongst the world's Top 200 companies in terms of profits. RIL also emerged as the only Indian company in the list of global companies that create most value for their shareholders. Article 3 Thursday, 3 September, 1998 Infosys Technologies is chosen Company of the Year The Economic Times today announced its Awards for Corporate Excellence, in consonance with its philosophy of recognizing and celebrating business at its best. The company has arguably pioneered in India the concept of valuing intellectual capital, and has aggressively attempted to introduce employee stock options - it, however, has an employee stock offer plan in place for five years now. Infosys is expected to be the first Indian company to have its shares listed on an American stock exchange. Article4 ``Ethics in business has to reflect ethics in society' Our Bureau Kolkata, June 22
  18. 18. Mr. S.M. Dutta, Chairman, Castrol India Ltd, and former Chairman of HLL said that, “Ethics was such an inborn concept that all of it cannot be contained in our law. Nobody teaches us ethics; no formal instructions as such, and we are just left to learn it through experimentation. While admitting that the primary task of business was to create wealth by adding economic value to society, the ethical dimension of business has to rest on the three key aspects of "legitimacy, equitability and transparency". Article 5 Date: 2005/7/19 Contact person: Mr. Saket Gupta, Supdt. Engineer (E&T) “ONGC's Communication on Progress on Global Compact” Our corporate mission also explicitly requires us to maintain high standards of business ethics and to enrich the quality of community life through our commitment to Safety, Health and the Environment. Because we are a public sector corporation, an integral part of our business is reaching out to the community. We have a Corporate Citizenship Policy, administered by our HR Department. It has its own budget, funded from a percentage of our profits; the figure is substantial. Ranbaxy Founded in 1962, Ranbaxy is India’s largest pharmaceutical company. The company is now moving from a generic company to a research oriented company and it is at the same time increasing its international presence. It manages operations with a high concern for safety and the environment. It stresses the fact that the company is a responsible corporate citizen. As a responsible corporate citizen, Ranbaxy ensures transparency in their dealings with enforcement agencies, and extends their co-operation to officers of statutory bodies for the purpose of audits and inspections. The company also urges its employees to avoid actions or relationships that might conflict with their job responsibilities, or the interests
  19. 19. of Ranbaxy.As for the environment, it ensures responsible consumption of natural resources through processes that are eco-friendly. Reliance Industries Limited Reliance is India’s largest private sector enterprise and it plays a major role in India’s petrochemicals sector. Reliance has India’s largest marketing network and all its brands are market leaders. As for business ethics practices, Reliance stresses environmental responsibility. The company has its own set of environmental policies and the policies are available to the public. Highlights of its policies are: Prevent pollution, maximize recycling, and reduce wastes, discharges and emissions. Conserve natural resources by their responsible and efficient use in all our operations. Plant trees, develop green belt and promote lush green surroundings at manufacturing locations to work in harmony with nature. Emphasize every employee’s responsibility in environmental performance; ensure appropriate operating practices and training. Promote awareness among contractors, suppliers and customers for shared responsibility towards environment protection. Infosys Founded in 1981 by a former socialist, It is located in Bangalore Infosys has become a well-known player in the software industry for its ethical business practices and generous treatment of employees. Its books are open to investors, it offers a stock option plan to employees, and it was the first Indian company to be listed on a U.S. stock exchange. "We certainly find it useful to benchmark ourselves against companies like Infosys," said the
  20. 20. chairman of Hindustan Lever, the Indian subsidiary of personal care products giant Unilever. Indian Petrochemicals Corporation Limited (IPCL) Indian Petrochemicals Corporation Limited, established in 1969, is the pioneering petrochemical company in India, and one of the leading petrochemical companies. Its products include polymers, synthetic fiber, solvents, surfactants, catalysts and adsorbents. The company is backed by strong R&D and is continuously innovating its processes and products. Outside its business, the company is known for its rural development programs. The program sets up low cost sanitation facilities to rural families and provides school buildings, books, library furniture, playgrounds, and a subsidized bus service for school children. It also supports environmental preservation, constructs primary health centers, provides ambulances and trains people in primary health care. Furthermore, IPCL also provides technical assistance to the National Institute for the Blind and camps for social welfare. Balrampur Chini Mills Limited Balrampur is India’s premier sugar company. It maintains a set of ethical standards and emphasizes the following: Integrity: "We demand of ourselves and others the highest ethical standards." Respect for People: Balrampur contributes its success today to its people and is committed to treating its people with dignity. Community: One of the company’s goals is to focus not only on its earnings but also on its efforts to make the world a better place to live. Transparency: Balrampur strives to maintain global standards of corporate transparency, and to increase shareholder confidence in management.
  21. 21. Mitsubishi Corporation Mitsubishi Corporation, one of the major global enterprises, conducts various businesses in India including marine product trading and automotive parts. The company is committed to serving the welfare of world and local communities. The company set up a Committee for Philanthropy in 1991 to come up with ways to make corporate responsibility to society a part of the company’s activities. In addition, the Mitsubishi International Corporation Foundation was also established to help serve the educational needs of economically disadvantaged young people. Environmental responsibility is also an integral part of Mitsubishi’s corporate philosophy. The company has its own internal environmental guidelines for business activities and has formulated an Environmental Charter that follows the international standard for environmental management systems. Shell’s Shell’s 2001 annual report provides details of disciplinary action taken by the company against staff who has breached the company’s code with regard to bribery. Reported cases of bribery in Shell Number of bribes and total value $ 1997 1998 1999 2000 Bribes offered and/ or 0 1 1 0 paid by Shell company employees directly or ($ 300) ($ 300) indirectly to third parties Bribes offered and /or 1 paid by intermediaries, 0+ ($ 4,562) contractor employees * * directly or indirectly to third parties.
  22. 22. Bribes solicited and/or 23 4 3 4 accepted by Shell company employees (small) ($75,000) ($153,000) ($89,000) Brides solicited and/ or accepted by intermediaries , * * 1 1 contractor employees or others (unknown) (Zero) * Data not available. + One Case in which a shell employee used an intermediary to make payments of us$300 has been included in the vases concerning company employees. HONEYWELL No employee will give, offer or promise to give, or ask or accept anything of value….. With the following expectations: Items of a strictly advertising nature (that is, imprinted with the company’s name……) which are less than $10 in value. Standard Chartered Bank Nothing may be given or received which might distort commercial judgment or harm the Groups reputation….. Any business-related personal benefits which you or your family give receive must be reported in writing within three working days to the person to whom you normally report.
  23. 23. For useful Documents like this and Lots of more Educational and Technological Stuff... Visit... www.thecodexpert.com

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