2. Business
Ethics
• There are many definitions of business
ethics, but the ones given by Andrew Crane
and Raymond C. Baumhart are considered
the most appropriate ones.
• According to Crane, "Business ethics is the
study of business situations, activities, and
decisions where issues of right and wrong
are addressed.
• Baumhart defines, "The ethics of business is
the ethics of responsibility. The businessman
must promise that he will not harm
knowingly."
5. • Stop business malpractices: Some unscrupulous
businessmen do business malpractices by indulging in
unfair trade practices like black-marketing, artificial high pricing,
adulteration, cheating in weights and measures, selling of
counterfeit (duplicate) and harmful products, illegal hoarding,
etc. These business malpractices are harmful to consumers and
the safety of society. Business ethics help to stop these
malpractices and safeguard society. It creates a healthy
business environment for everyone.
6. • Improve customers' confidence: Business ethics are needed
to improve the customers' confidence about the quality, utility,
reliability, quantity, price, etc. of the products. The customers
have more trust and confidence in the businessmen who follow
ethical business rules or principles. They feel safe that such
businessmen will not cheat them. Ethics binds businessmen to
maintain trust by offering quality products and services to
customers.
7. • Survival of business: Business ethics are mandatory or compulsory
for the survival of any business. The businessmen who do not follow
it will only have short-term success, but they will fail in the long run.
This is because they can cheat a consumer only once. After realizing
being cheated, the consumer will not buy goods or services from that
businessman. He will also tell others not to buy from that
businessman. So, this will defame his goodwill or image and provoke
negative publicity in the market. This will result in the failure and
even closure of the business. Therefore, if the businessmen do not
follow ethical rules, he will fail in the market. So, it is always better to
follow appropriate code of conduct to survive in the competitive
market. Hence, ethics is essential for the survival of business.
8. • Safeguarding consumers' rights: The consumer has many
rights such as the right to health and safety, right to be
informed, right to choose, right to be heard, right to redress,
right to be satisfied, etc. But many businessmen do not respect
and protect these rights of their consumers. Business ethics are
must to safeguard these basic rights of the consumers. A
business who safeguards its consumers' rights, in fact,
safeguards its own existence.
9. • Protecting employees and shareholders: Business ethics are
required to protect the interest of employees, shareholders,
competitors, dealers, suppliers, customers, government, etc. It
protects them from exploiting each other through unfair trade
practices like cheatings or frauds. Ethics compels each entity
participating in the business activity to properly execute its role
by adhering the established code of conduct. Since everyone is
disciplined and function appropriately, business grows well in
the long run.
10. Develops good relations: Business ethics are important to
develop good and friendly relations between business and
society. This will result in a regular supply of good quality goods
and services at low prices to the society. It will also result in good
profits for the businesses thereby resulting in the growth of the
economy. If the economy keeps growing, it ultimately improves
the standard of living of the society.
11. • Creates good image: Business ethics create a good image for
the business and businessmen. If the businessmen follow all
ethical rules, then they will be fully accepted and not criticized
by society. The society will always support those businessmen
who follow the necessary code of conduct and avoids engaging
in unscrupulous activities. If the business succeeds in creating
and maintaining its goodwill in the society, it flourishes well even
in the most competitive markets.
12. • Smooth functioning: If the business follows all the business
ethics, then the employees, shareholders, consumers, dealers,
and suppliers will all be happy. So, they will give full cooperation
to the business. This will result in the smooth functioning of
business activities. So, the business will grow, expand and
diversify easily and quickly. It will have more sales and
eventually more profits. If even one entity participating in the
business activities is unhappy and not fully satisfied then also
the business will not function smoothly. The satisfaction of all
involved parties is necessary for the smooth functioning of a
business. Business ethics maintain this safe level of satisfaction
and protects the business from being dysfunctional.
13. • Consumer movement: Business ethics are gaining importance
because of the growth of consumer movements all over the world.
Today, consumers are well aware of their rights. Now, they are more
united and organized, and hence cannot be easily cheated. They
take actions against those businessmen who indulge in bad
business practices. They boycott poor quality, unreliable, harmful,
high-priced, and counterfeit (duplicate) goods. They even file
lawsuits against bad businesses and demand huge compensation
and stringent legal action. If a business is found guilty of indulging in
illegal activities, it invites huge penalties, revoking of a license,
lowers consumers' trust, downgrades market reputation, and even
hurts profits. Therefore, the only way to survive in business is, to be
honest, fair, and loyal to the consumers.
14. • Consumer satisfaction: Today, the consumer is the king of the
market. He can make a business or break a business. His every
wish (expectations) should be taken as a command and must be
fulfilled as early as possible. Any business simply cannot survive
without its consumers. Therefore, the main aim or objective of a
business must be to achieve the highest level of consumer
satisfaction. If the consumer is not satisfied, then there will be no
sales and eventually no profits too. Consumer satisfaction must be
taken seriously. Business must be always ready to adapt itself as per
the changing demands of its consumers. The consumer will be
satisfied only if the business follows all the business ethics. Ethics
helps to achieve consumer satisfaction to a great extent and hence
are highly needed.
15. • Importance of labour: Labour, i.e. employees, workers, or
active staff play a very crucial role in the success of a business. They
are the main wheels on which business actually runs. A business
must use business ethics while dealing with its employees. The
business must give them timely monetary compensation for their
hard work by releasing appropriate wages or salaries based on
working hours. The business must also provide good working
conditions for its employees. The employer must welcome their
suggestions, reasonable demands, and complaints. Good relations
between an employer and employees is essential for the smooth
functioning of a business. The employees must also be given proper
welfare facilities, holiday leaves, bonuses, etc. They must be treated
with dignity and respect.
16. • Healthy competition: Today, competition is a part and parcel of
our lives and business world is no exception to this. Competition
is essential because it inculcates creativity and innovation,
competitive pricing, affordable services, corporate responsibility,
consumer satisfaction, etc in the realm of business. This
competition must be healthy and should not be aggressive,
fierce or cut-throat. A business must treat its competitors as
fellows and not as rival enemies. A business must never use
unethical means like provocative adverts to malign the
reputation of its competitors. If a competitor is successful his
behavior, management, marketing skills, business tactics,
customer handling, etc must be carefully studied.
17. Features of Business Ethics
There are eight major features of business ethics:
1. Code of Conduct: Business ethics is actually a form of codes of conduct. It lets
us know what to do and what not to do. Businesses must follow this code of
conduct.
2. Based on Moral and Social Values: Business ethics is a subject that is based on
moral and social values. It offers some moral and social principles (rules) for
conducting a business.
3. Protection to Social Groups: Business ethics protect various social groups
including consumers, employees, small businesspersons, government,
shareholders, creditors, etc.
4. Offers a Basic Framework: Business ethics is the basic framework for doing
business properly. It constructs the social, cultural, legal, economic, and other
limits in which a business must operate.
Continued……..
18. • Voluntary: Business ethics is meant to be voluntary. It should be self-
practiced and must not be enforced by law.
• Requires Education & Guidance: Businessmen should get proper
education and guidance about business ethics. Trade Associations and
Chambers of Commerce should be active enough in this matter.
• Relative Term: Business ethics is a relative term. It changes from one
business to another and from one country to another.
• New Concept: Business ethics is a relatively newer concept.
Developed countries have more exposure to business ethics, while
poor and developing countries are relatively backward in applying the
principles of business ethics.
20. • Honesty: an ethical director, manager or executive must be
honest and truthful in all his or her dealings. They should never
purposefully mislead or deceive other people by
overstatements, partial truths, misrepresentations, selective
omissions, etc.
21. • Integrity: ethical executives demonstrate the courage of
their convictions and demonstrates personal integrity by doing
what they believe to be the right thing, regardless of pressures
to do otherwise. They are honorable, principled and upright, and
will defend their beliefs. Principle is never sacrificed for
expediency, they are never unscrupulous or hypocritical.
22. • Trustworthy & a Promise-Keeper: they are worthy of trust.
Ethical executives are forthcoming and candid in explaining
things with the relevant information and correcting
misstatements. They try as hard as they can to keep to the
letter and spirit of their commitments and promises.
• – Loyalty: they are loyal to individuals and institutions by
support and devotion to duty and friendship in adversity. They
do not exploit a situation by disclosing information they learned
in confidence. They are extremely careful not to be affected by
conflicts of interest. They are extremely loyal to their companies
and work colleagues.
23. • Fairness: they are just and fair in all their dealings. They never
exercise power arbitrarily. They do not use indecent means to
gain an advantage or exploit other people’s mistakes for their
own benefit. They are committed to justice and the equal
treatment of people. They are willing to admit they are wrong.
• – Compassion and Empathy: ethical executives are
compassionate, empathetic, benevolent, kind and caring. They
strive to achieve their business goals and targets in a manner
that causes the least harm and the greatest positive good.
24. • Respect: they demonstrate total respect for the human rights,
dignity, autonomy, interests and privacy of everybody who is
affected by their decisions. They are polite and treat everybody
with equal respect and dignity regardless of nationality, national
origin, race or sex.
• – Law Abiding: they respect and abide by the laws, regulations
and rules of the marketplace.
25. • Committed to Excellence: they aim to perform their duties to
the best of their abilities. They make sure they are prepared and
well-informed, and constantly try to improve in all areas of
responsibility.
• – Leadership: they aim to be positive ethical role models.
They are aware of the responsibilities and opportunities of their
position of leadership – they aim to create an environment in
which ethical decision-making and principled reasoning are
highly prized.
26. • Reputation & Morale: they aim to build and maintain the
company’s good reputation as well as the morale of its
workforce. They avoid becoming involved in conduct that may
undermine respect and will take all actions necessary to prevent
the inappropriate conduct of others.
• – Accountability: they accept personal accountability for the
ethical quality of their decisions.
27. Four Different Levels of Business Ethics
1. The society level, which defines ethical behavior and
assesses the effect of business on society.
2. The industry level, which suggests that different industries
have their own set of ethical standards (e.g., chemical
industry vs. pharmaceutical industry)
3. The company level, under which different companies have
their own set of ethical standards
4. The individual manager level, at which each manager and
other corporate participants are responsible for their own
ethical behavior
28.
29. Factors Influencing Business Ethics
• 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.
• 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.
30. 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.
• 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.
31. 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.
• 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.
