1. BUSINESS ETHICS AND CORPORATE GOVERNANCE OBJECTIVE OF THE CHAPTER
The aim objective of this chapter is to give a basic understanding of ethics and its application in the
relevant fields of business study human behavior. It is to establish & prioritize moral standards & the
values of any business and understand by any entity the scope, concept and importance of Ethics, its
gradual development and the relevance in business scenario. It also aims to encourage independent
critical thought and develop an individual system of ethics within an individual and the organization at
large. A business established with a foundation of strong ethics and values is more promising, successful
and enduring than that of rapid growth at a cost of many compromises. Presenting moral behavior i.e.
making recommendations abt how to & how not to behave, making judgment on human behavior based
on the standards set of expressing an opinion abt human conduct in general.
1.1 AN OVERVIEW OF BUSINESS ETHICS
Customers want products and services for which they are ready to pay the price. Businesses create
these products and services and in return multiply their returns, objective is profit. But in this
process of requirements and fulfilling or meeting out the customer requirements and the
expectations, companies often tend to ignore their basic principles of ethics during selling their
products because then their objective of profit takes the helm. There should be their profit motive
but ethically, i.e., at the same time the origin of business which was done on certain parameters and
ethics should not be ignored or over-ruled. There is old French saying that has much relevance in
today's corporate world. It runs thus saying, "He who knows deepest into the past looks farthest
into the future." Hence, it is important to look deep into the past in the hope of perceiving the
needs of the future. Business ethics reflects the philosophy of business. The basic aim of business is
to create profit at all costs. Wealth creation invariably begins with a passion and the vision of its
owners who lay the basic foundation of the business. They build an idea to create a product or
service that is market oriented or relevant and monetarily profitable. The bottom-line of any
business is how much revenue generation it is making and what kind of brand image or the goodwill
of the company is getting created amongst the customers. Business success is measured
quantitatively in terms of profit and loss. Profit being the mantra in business, all strategies, actions
and decisions are directed towards it, sometimes regardless of what is ethically correct. It is
assumed that profitable business cannot be done without a certain degree of unscrupulousness. An
action might be morally correct but if it is the best move for business, then it is justified. Invariably,
adjusting the numbers to record better profits becomes a matter of routine with a common dictum
that business ethics is an oxymoron leading to the rules of business, values take a back seat. In this
entire process of sweeping business ethics under the carpet and maximizing profits, it is overlooked
that who we are and what actually influences the work that we do. Business ethics overlaps with the
philosophy of business. One of the aims of business is to determine the fundamental purpose of the
incorporation of a company.

2. On one hand if it is to make profits, it should also consider sincere means to maximize profits arid
believe that there are no shortcuts to success. Corporate social responsibilities an umbrella term
under which the ethical rights and duties existing between companies and society is debated. Issues
regarding the moral rights and duties between a company and its shareholders, fiduciary
responsibility, stakeholder concept vs. shareholder concept are argued. Ethical issues concerning
relations between different companies: e.g. hostile takeovers, industrial espionage, Leadership
issues, corporate governance; Corporate Social Entrepreneurship, Political contributions made by
corporations towards the betterment of the society, Law reform, such as the ethical debate over
introducing a crime of corporate manslaughter and to continue the misuse of corporate ethics &
policies as marketing instruments are all considered, understood, argued and implemented towards
practicing ethics. Leadership is a management process, a command of guidance of encouraging &
helping others to work enthusiastically towards the set objectives. For Aim Premix, chairman of
Wipro, integrity is paramount both in personal as well as business life. He narrates that the only
advice that his father gave him was to conduct him with values and that he believes it has helped
him all through his life. He has always leaded a simple life, and considered integrity the fundamental
value. He ran a factory on captive power generation for 18 months just because he did not want to
bribe the concerned people to get an electricity connection. That sums up his philosophy. This
standard of Premji sets a benchmark for his employees in Wipro to emulate. Integrity being the
guiding principle for Premji has resulted in the formulation of the 'Integrity Manual' in his company
that guides through the tough choices confronted within the daily execution of the employees roles
and to help create confidence in the minds of the customers , investors, suppliers and the society at
large with respect to Wipro's dependability and sincerity. This is how the ethical choices of a
business leader permeate into the company's organizational behavior and functioning. As is shown
by the performance of companies like Wipro and Infosys a leader's personal ethics are not a
deterrent to generating revenue for the company will later. It can be a foundation for higher
standards of functioning, accountability and transparency that motivates the employees, influences
the way they behave in the workplace, earns their loyalty and eventually helps an organization
endure. No doubt the organization faces lots of turbulences in the process of inception,
continuation of its proving of existence and constant attacks and challenges but it is not to be
forgotten that it was but expected and had to be thought before the implementation of the idea
incarnated. An individual plunges into business when he thinks he is better than somebody, can do a
particular thing better, face competition more effectively, has an enhanced vision to accomplish and
dares to confront the storms, takes the risks and gets into entrepreneurship. Ethics is seen to be at
its peak at the inception but gradually sinks when profits takeover the prime seat in business or start
losing hopes when sees that ethical ways are longer and difficult comparing the easier routes of
accomplishing quicker benefits growth and meeting the reason for business establishment. So can
we really meet the above and grow, getting retained in business by following ethics throughout?
This is a challenging question which plays the foundation of the business further.
1.2 MEANING OF BUSINESS ETHICS

3. The term business ethics is quite ambiguous. It has various meanings with varied implications based on
its use. Business ethics appeals to people who have a strong sense of role morality. It can be both a
normative and a descriptive discipline. As a corporate practice and a career specialization, the field is
primarily normative. In academia descriptive approaches are also taken. These_ are the business
principles and values that a company follows to do business. In future these ethical requirements
become legal requirements of business in terms of policies, safety measures, quality products,
conditions of work, needs of employee requirements etc. Gradually companies, sometimes to save cost
may opt for certain compromises.—Even for the companies there is a dilemma that if they follow ethics
to that hardcore standards, can they really make profits? This leads to minor acceptations in the
beginning in terms of bribery, selling under quality products, etc. Historically, interest in business ethics
accelerated dramatically during the 1980s and 1990s, both within major corporations and within
academia. For example, today most major corporate websites lay emphasis on commitment to
promoting non-economic social values under a variety of headings (e.g. ethics codes, social
responsibility charters etc.). When managers reporting to NASA were thoughtful whether to ask for a
postponement before what turned out to be a fateful launch of the space shuttle Challenger, the Chair
of the meeting literally said, "Take off your engineering hat and put on your management hat." The hats
symbolize the various roles people take on in different situations. Therefore, if the main aim of the game
in business were just maximizing profit, this approach would allow a businessman to act as if business
were-a moral game where success is measured in financial terms alone. Ethics thus refers to the moral
principles, a sense of right & wrong or the goodness & badness of the action, their motives & the
consequences further. What is ethics then?
. Ethical issues in business include the rights and duties between a company and its employees,
suppliers, customers and share holders. Many philosophers consider ethics to be the "Science of
Conduct" and many of them explain that ethics lays the fundamental ground rules by which we live our
lives. Some of them also consider emerging ethical beliefs to be the state-of-the-art legal matters, i.e...
What becomes an ethical guideline today is often translated to a law, regulation or a rule tomorrow.
Thus applied ethics is a field of ethics that deals with ethical questions in many fields such as medical,
technical, legal and business ethics. Ethics in business is supplying the application of everyday moral of
ethical means in business.
Organizations today are finding themselves under public attack and criticism and they responded by
developing the notion of social responsibility. They thus start the social responsibility program and
spend a good deal of money in advertising their programs and how they promote the social cause. The
fundamental purpose of a company is both profit and social responsibility and adhering to both with due
consideration on ethical values and norms brings not only success but also stability and dependability in
the long run. The different sources of ethical values are through; Genetic inheritance, code of conduct,
culture, religion, legal system, philosophical system etc. Religion here refers to a specific &
institutionalized set of beliefs & practices which are generally agreed upon by a group of persons or
sections of the society.
Religion is the oldest source of inspiration for ethics. Across the globe, we find various religions with
different doctrines with a strong conviction that ethics is indispensible and reveals what is right and

4. wrong in all the facets of life. All the religions stress on the need for an ordinary social system and
responsibility towards general welfare. Why business ethics? Business ethics refers to the application of
ethics in business. It is in other words an elaborative study of the good and the evil, right & the wrong,
just and unjust actions of the business. We also find transactional ethics here which means the
asymmetrical or irregular and uneven relations of unequal claims & conflicting interests which do not
exhaust the arsenal of possible action patterns. As an individual decides principles for his life that he will
not cheat anyone, not tell lie under any circumstance, be sincere at all difficulties and challenges etc. in
the same way company sets certain standards and values or formulates the moral philosophy of the
business to conduct it in a better way. There are many instances wherein companies did not follow
business ethics and they had to shut down, compromise profits and company image, shattered goodwill,
undergo losses etc in the long run consequently. Hence it is very critical that certain basic structures on
ethics are set and followed emphasizing the study, implementation and regular practice of ethics in
business. Business ethics came into limelight as organizations started realizing that they need to manage
a more positive image of their company to the public. The philosophy of any business is reflected by the
business ethics followed or implemented by the organization which examines and resolves the ethical
and moral principles and problems that arise in business environment. Environment refers to all external
forces which have a bearing on the functioning of business. Environment includes factors such as socio-
economic, technological, suppliers, competitors and the government. It applies to all aspects of business
conduct and is relevant to the conduct of individuals and the entire organization. Problems such as
corporate responsibility, corporate governance, share holder relation, bribery and discrimination are
examined in Business ethics. It concentrates on moral standards as they apply particularly to business
policies, institutions and behavior. Discussion on ethics in business is necessary because, firms and
corporations operate in the social and natural environment is duty bound to be accountable to its
surviving environment and business can go thus unethical. There are plenty of evidences on unethical
corporate practices. Irrespective of the demands and pressures upon it, business, by virtue of its
existence is bound to be ethical, for at least two reasons: one, because whatever the business does
affects its stakeholders and two, because every juncture of action has curve of ethical as well as
unethical paths. The existence of business is justified by ethical alternatives. The demise of small scale,
high trust and face-to-face enterprises and emergence of huge multinational corporate structures are
capable of drastically affecting everyday lives of the masses and compliments the ethical and unethical
decisions of business.
Culture at the same time means the mode of life of a particular group of people with due reference to
the way they lead their lives in the society, their dress code, beliefs, rules and regulations, rituals,
behavior and ethical practices. Therefore cultures of different nations are different with its own
predefined ethical practices.
The basic values of a society constitute nothing but the core of its culture. Man as a social animal cannot
live alone and hence his conduct has a direct or indirect reference to the culture he belongs to. These
moral standards and values have a tremendous impact and profoundly affect the person in building his
own ethical value structure.

5. But it is also to be remembered that the moral conduct of a person is not confined only to his family
culture. It transcends and goes beyond family culture and spills over to the society or the race which he
belongs to. In spite of ethics being culture specific there are certain principles which run like a common
thread among all cultures, all religions and among all the ages in history. These are nothing but the
principles of honesty, respect for life and freedom, fairness, loyalty, human dignity, integrity etc. These
principles are unchangeable, immortal and remain always valid, transcending time, space and distance.
Corporate culture is a shared value that defines for its members as to what the organization stands for,
its functioning, its priorities and the importance of its existence. Thus it has a strong impact on business
ethics
Business ethics can be defined as the critical and structured examination of how people and institutions
should behave in the world of commerce, addressing the moral features of a commercial activity. In
particular, it involves examining appropriate constraints on the pursuit of self interest or profits when
the actions of the individuals or firms affect others. It is a movement which refers to the development of
structures and principles internal to the company resulting in helping the company and the employees.
Some companies have always been ethical and have structured themselves and their culture to
reinforce ethical behavior. A running business requires adequate consideration to a number of issues
outside the traditional scope of making money, of which ethics is most certainly an important one. As
business grows and becomes more significant, we concentrate and focus on creating jobs and wealth.
But it is equally important to understand the business ethics which can build the reputation or affect it
negatively if not considered. The relationship between ethics and business can be viewed in two angles:
One is that, ethics conflicts with profits and second being that businesses always choose profits over
ethics. Business has the highest level of humanity and social good. One of the important questions here
is what are the ethical values that a business leader needs to have?
Who decides what the right ethical conduct for business is? It’s no longer enough for companies to
produce healthy profits. They must also prepare the next generation of business executives to respond
to ethical, social and environmental considerations of today’s corporate world.
A few guidelines to manage ethics at workplace are:
1. Managing ethics is a gradual process: Ethics is a matter of values and associated behaviors
distinguished through the process of constant reflection. Ethics programs may seem more process-
oriented and prefer processes focused on deliverables with measurements. However, experienced
managers realize that the deliverables of standard management practices (planning, organizing,
motivating, controlling) are only tangible representations of the very process-oriented practices.
Practice cultural relativism which is a concept of relating any given decision about right or wrong, true or
false to the culture prevailing in a particular place. In short, it means 'Be a Roman in Rome'. Of course
the process of strategic planning is more important than the plan produced by the process. The same is
true for ethics management which produces deliverables like codes, policies and procedures, budget
items, meeting minutes, authorization forms, newsletters etc. and ethics management program is the
process of reflection and dialogue that produces these deliverables.

6. 2. Ethics program aims at accomplishing preferred behaviors at workplace: The best of ethical values
and intentions are relatively meaningless unless they generate acceptable ethical behaviors in the
workplace that can translate these values to appropriate behaviors. Thus certain standardization is
created and implemented into the system from seniors to juniors.
3. Ethical dilemmas can be handled by avoiding their occurrence: Precaution is always better than cure.
The development of ethical practices such as developing code of conduct and ethics sensitizes the
employees to ethical considerations and minimizes the chances of unethical behavior occurring in the
first place.
4. Make ethics decisions in groups and then publicize the decision: It produces better quality decisions
by including diverse interests and perspectives and increases the credibility of decision process and
outcomes by reducing suspicion of unfair bias.
5. Integrate ethics management with other management practices: While developing strategic planning,
the value statement towards ethical values needs to be more prominent in workplace as they reflect
organizational objectives, goals and the company culture. Corporate culture is a set of shared values
that defines for its members about what the organization stands for and how it functions along with
what it considers to be the most important. Integrate ethical requirements with other management
practices to create a sound corporate environment and system.
6. Cross-functional teams to develop and implement ethics management program: It is always advised
to include employees in developing and operating the values of ethical program that is to be initiated in
the organization which makes them feel a sense of participation and ownership in the program.
7. Value forgiveness: It rather sounds a little religious and preachy to hear, but it's also one of the prime
components of any management practice. An ethics management program may increase the number of
ethical issues to be dealt with because people are more sensitive to their occurrence. At the same time,
there may be more occasions to address people's unethical behavior. It is always to be remembered
that a shaking hand and a patting attitude is always better than a pointing finger. The most important
ingredient for remaining ethical is trying to be ethical. Therefore, help people recognize and address
their mistakes and then support them to continue to try operate ethically.
8. Try to operate ethically and making a few mistakes is better than not trying at all: Some organizations
have become widely known, as thus operate in a highly ethical manner, e.g., The Tata’s, Johnson and
Johnson, Hewlett Packard, etc. Unfortunately, it seems that when an organization achieves this strong
public image, it's placed on a pedestal by some business ethics writers. All organizations are comprised
of people and people are not perfect. However, when a mistake is made by any of these organizations,
the organization has a long way to fall. In our increasingly critical society, these organizations are
accused of being hypocritical and they are soon pilloried by social critics. Consequently, some leaders
may fear sticking their necks out publicly to announce an ethics management program. This is extremely
unfortunate. It's the trying that counts and brings peace of mind and not achieving a heroic status in
society. We can always initiate a process or a route which can become a basis for somebody else to
improvise with better ideas, concepts, means and perceptions.

7. 1.3 HISTORY AND DEVELOPMENT OF BUSINESS ETHICS
The history of business ethics is probably as old as business itself. Even in prehistoric societies there
were most likely rules governing acceptable trade practices which dealt considerably with issues
concerning commerce, tariffs and pricing.
The evolution of business ethics and awareness can be attributed to a number of factors like increased
globalization and decentralization of business, an expanded corporate business to ethics and the
influence of various stakeholders focusing attention on both ethical successes and challenges. With the
globalization of economy and media and the growth of internet, companies are being held accountable
for their ethical conduct. A range of new economic issues such as the shifting of production to
developing economies, what constitutes a living wage and how companies respond to cultural
differences is being cast in ethical frames since times.
By the 4th century B. C., ethical issues related to business and trade can be traced receiving academic
treatment in the philosophies of Plato and Aristotle. The history of business ethics also has its formative
years in the reformation. Reformation figures like Martin Luther and John Calvin, in the 15th and 16th
centuries A. D., applied religious and moral considerations to trade and economics leading to the
development of the Protestant work ethic. But in the following two centuries, Enlightenment thinkers
such as John Locke and Adam Smith began to separate religious doctrine from moral and ethical
considerations of commerce and business.
Locke introduced the concept of property as a natural right, and Smith developed the foundation for
modern economic theory by championing the moral values of self-interest in guiding and promoting the
progress of markets. In the 19th century, theories like Smith's came under attack from Karl Marx and his
followers, who saw the maximization of profit dictated by self-interest as necessarily exploitative of
labor. We have seen in the past that great teachers have searched for their disciples and instances
where the student has covered a long distance in finding out their teachers.
There are various examples like Swami Ramakrishna Paramhamsa who has seen Mother Kali incarnating
and he himself traveled around to discover his student Swami Vivekananda, Swami Guru Ramdas who
searched for his student Shiva Maharaja, Chanukah, who went in search of and found his shishya
Chandragupta Maurya, Shri Gokhale who found Mahatma Gandhi and so on there are various examples
which exhibit how in the past religious, moral, political, social and business concerns were met with the
help of ethics identification, exploration and ways of implementation so as to establish peace, justice,
customs, behaviors, conduct, habits and rules for the smooth administration processes. Likewise we also
have many examples wherein the student has explored his Guru and covered the journey of their lives.
When Swami Ramanandji did not accept Ramdas as his student, since he was an untouchable, one early
morning in the dawn when the Guru was on his way to take bath in the river, Ramdas slept on the steps.
The Guru did not notice and stamped him and said Ram-Ram. Though the Guru did not accept Ramdas

8. as his disciple, the student took his uttered words as Gurumantra and continued believing him as his
Guru. We know the story of Sri Hanuman who waited for his Guru Sri Ram and later was prominently
known for his Guru-bhakti, both for and because of his Guru. Ekalavya is a classic example in this stream,
which was not accepted by his Guru Shri Dronacharya as his disciple for which he made an idol of his
Guru and practiced archery.
Not only this, ethics meets its reality when he was asked for his thumb as Gurudakshina and he did not
hesitate or rethink to give it though he knew that his dream, passion, talent and practice would come to
an end after it. Thus ethics cannot be pointed and said that this is right and this is wrong. That which
helps in the multiplication of profit, social gains, benefits to individuals and society at large without
following or indulging into any illegal, prohibited, banned or illegitimate or dishonest means can be
stated as ethical or unethical the otherwise.
To this day, many of the issues and concerns raised by the religious, philosophical, and economic
traditions have continued in various forms in discussions of ethics and morality in business practices. But
business ethics as a separate, formal academic discipline is a fairly recent development. In the midst of
the changes in social attitudes that emerged in the 1960s, questions about the social and moral
responsibilities of businesses and corporations began to emerge in academic and professional circles.
Sociologist Raymond Baumhart was among the first academicians to explicitly teach and study the ethics
of business and commerce and by 1974 there was enough of a developing discipline in the field to give
rise to a landmark conference at the University of Kansas. Since then, courses and organized studies in
the field have emerged in universities throughout the world, even spawning sub-disciplines such as
marketing, accounting, and financial ethics. Business ethics has only existed as an academic field since
the 1970's.
During the 1960's corporations found themselves increasingly under attack over unethical conduct. As a
response to this, corporations in the developed social responsibility programs involved charitable
donations and funding local community projects. This practice was unorganized and it differed from
industry to industry and from company to company.
Business schools in large universities began to incorporate social responsibility courses into their syllabi
around this time. But it was mostly focused on the law and management strategy Social responsibility
has been descried as being a pyramid with four types of responsibility involved into called as —
Economic, legal, ethical and philanthropic. Ethical issues were dealt with in social issues and were not
considered in their own right until the 1970's when philosophers began to write on the subject of
business ethics.
Previous to this development, only the management professionals, theologians and Journalists had been
highlighting problems of this nature on a regular basis. When philosophers became involved they
brought ethical theory to bear on the relevant ethical issues and business ethics became a more
institutionalized, organized and integral part of education in business. This aspect of business ethics
differentiated it from social issue courses in three ways, like;
• Business ethics provided an ethical framework for evaluating business and the corporate world.

9. • It allowed critical analysis of business and development of new and different methods.
• Business ethics focused on personal and social responsibility together and gave it a theoretical
foundation.
In this way we find business ethics had a broader remit than the social issues and was a good deal which
was more systematic and constructive. Business ethics also recognized that the world of business raised
new and unprecedented moral problems and covered by personal systems of morality. Common sense
morality is sufficient to govern judgments about stealing from your employer, cheating customers and
tax frauds. It could not provide all the necessary required tools for evaluating moral justification of
affirmative action, the right to strike and whistle-blowing. Business ethics being part of the larger social
ethics, always has been affected by the ethics of time.
The followers of Epicures, a Greek follower who taught and gave the doctrine that pleasure was the
chief God meant Epicure or Epicureanism. At different periods, people, especially the elites of the world,
were blind to ethics and morality and obviously unethical to the succeeding ages. History of business,
thus, is tainted by and through the history of slavery and colonialism and later by the history of cold war.
The need for business ethics in the current times had begun gaining more attention since 1970s.
Historically, firms started highlighting their ethical stature since the late 1980s and early 1990s, as the
world witnessed serious economic and natural disasters due to unethical business practices.
The Bhopal disaster, and the fall of Enron are instances of the major disasters triggered by bad corporate
ethics. It should be noted that the idea of business ethics caught the attention of academics, media and
business firms by the end of the overt Cold War. Of the many, the first definition of social business
ethics in India dates back to around 1000 to 1600 BC. In the Bhagavada Gita, Shri Krishna laid down the
rights and obligations of each one of us. Shri Krishna said that a manager must look upon the task that
he has been set for that he sets himself, not interms of personal gains or profit but purely interms of its
fulfillment and the satisfaction that he gets out of that. To elaborate the same, it can be a better
instance to relate the instance provided by Mr.Prakash Tandon, when he was the director of Hindustan
Lever in 1956 and it became a public company with its first board meeting with a every scholarly
chairman, Lord Heyworth, whose name had been associated with Unilever for 30years.
At the board meeting, Lord Heyworth said that there was one little thing that he would like to discuss.
Did the directors of Hindustan Lever buy and sell Hindustan Lever shares or not. Did they get involved in
any personal manner in the company, or was their involvement only professional? After a brief
discussion, the chairman said if they understood the market well, they could trade in other company’s
shares: but he advised them not to be associated with any personal gain in Hindustan Lever beyond
their remuneration.
Many years later an American scholar, Elliot Jacques, created a new term for this kind of professional
manager, he allied him 'property-less manager', one who manages the company but does not own any
part of it as his personal property. Jacques went straight back to Shri Krishna's definition of a true

10. manager, one who does his job, not for personal gain but for the sheer fulfillment of the task and the
satisfaction, which he derives.
Lord Buddha enunciated the same concept in his words with a beautiful phrase that a trade is like a
honey bee, which sucks honey out of the flower but does not harm the flower.
Buddha of course did not realize, that the bee actually helps the flower in the process of fertilization by
pollinating it. What Lord Buddha wanted to emphasize was that no harm must be done in quest of
personal gain. Arthashastra from the Mauryan's lays down the concept of accountability (duty,
responsibility) of the manager to keep complete accounts; it also mentions that he should be subject to
an audit from time to time on clarity and truthfulness of his fair accounts. Akbar gave us something
indispensible for regular ethical functioning; a clear and stable commercial set-up.
1.4 NATURE OF BUSINESS ETHICS
Business ethics reflects the philosophy of business and the aim is to determine the fundamental purpose
of the incorporation of a company. The moral philosophy, the business philosophy, employer-employee
philosophy and the responsibilities towards the customers need the optimum priority and attention in
business ethics. It is now considered as an important discipline because of its relevance and the
customers high awareness level. Hence the need of reformulate nature of business ethics or doing
business ethically has secured a more important place of prominence today.
If a company's purpose is to maximize shareholder returns, then sacrificing profits to other concerns is a
violation of its deemed responsibilities. Economist Milton Friedman writes that corporate executives'
responsibility generally will be to make as much money as possible while conforming to their basic rules
of the society. Similarly business consultant Peter Drucker observed, "There is neither a separate ethics
of business nor is one needed, implying the standards of personal ethics covers all business situations."
Another view of business is that it must exhibit corporate and social responsibility and an ethical
business must act as a responsible citizen of the communities in which it operates even at the cost of
profits or other goals. Stakeholders have the right to expect a business to be ethical; if business has no
ethical obligations, other institutions could make the same claim which would be counterproductive to
the corporation. Ethics and Values have their own stand and play a vital role.
Ethics can be denied as a description of norms and behavior that provide a comparable protection to the
coherence of the society whereas Values are global beliefs that guide actions and judgments across a
variety of situations. Values represent basic convictions of what is right and wrong, good or bad, just or
unjust, fair or unfair etc. Business ethics or corporate ethics is a form of applied ethics or professional
ethics which examines ethical principles and morals or ethical problems that arise in a business
environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals
and the entire organization. Consequently, business ethics can be strong preventative medicine and
there are many benefits of managing ethics in the workplace. Similarly Money Laundering which is
squandering of money involving transactions of cash outflow, conducted in a manner as to appear that
they were made honestly.

11. Laundering actually means 'cleaning up'. Money laundering cloaks the illegal activities and protects the
lawbreakers.
Wallace and Peel explain that attention to business ethics is critical during times of fundamental
changes in times much like those faced by businesses like values that were previously taken for granted
might now strongly be questioned.
Many of these values are no longer followed. Consequently, there is no clear moral compass to guide
leaders through complex dilemmas about what is right or wrong. Attention to ethics in the workplace
sensitizes leaders and staff to how they should act. Perhaps most important attention to ethics in the
workplace helps ensure that when leaders and managers are struggling in times of crises and confusion,
they retain a strong moral compass. However, attention to business ethics provides numerous other
benefits also. Business ethics refers to the application of ethics to business. To be considered ethical a
business must draw its idea about what is a desirable behavior from a common or a reliable source. It
should anyhow not try evolving into its own principles to justify its actions.
Also in order to have a long run existence and sustained profitability it is important for a business to
have an ethical foundation and function as responsible corporate citizen of a country. Business ethics is
considered as management discipline, especially since the origin of social responsibility movement. In
1960's, social awareness movements raised expectations of businesses to use their massive financial and
social influence to address social problems such as poverty, crime, environmental protection, equal
rights, public health and improving education.
An increasing number of people asserted that because businesses were making profit from using the
country's resources, they owed it to the country by improving society. Many researchers, business
schools and managers have recognized this broader constituency, and in their planning and operations
have replaced the word "stockholder" with "stakeholder," meaning to include employees, customers,
suppliers and the wider community.
Organizations can manage ethics in their work place by establishing an ethics management program
which is made up of values, policies and activities which impact the propriety of organization behavior.
To maintain the ethical culture in Infosys, employees are encouraged to report cases of fraud, in person
or by writing anonymously through e-mail or to the corporate counsel.
1.5 SCOPE AND IMPORTANCE OF BUSINESS ETHICS
The success of business depends on various factors which are both internal and external to the
organization. Strategies are chalked out or action plan is worked before executing or implementing any
idea or a long run theory. Strategy refers to a plan of action designed to achieve a particular goal or the
relevant alternatives chosen to make a desired future such as achievement of a goal or solution to a
problem. It is otherwise the art and science of planning of the resources for their most efficient and
effective use.

12. Conducting business requires adequate consideration to a number of issues outside the traditional
scope of making money. In the process of making profits and achieving growth, business people and
organizations face many challenges related to environment and conduct of business. So important part
of doing business primarily understands the business ethics.
If organizations and people fail to understand and consider, it might affect reputation of the business
and can even ruin the business affecting long standing establishments and success. Ethics being a
subjective topic might not have importance across all areas of business. But ethics has significant role to
play in most of the areas of business be it sales and marketing, product development, customer service
and even to some extent finance. So ethics plays an important role in ensuring business success and
ultimately living up to the corporate social responsibility.
Thus adopting ethics approach to doing business is critical towards ensuring a strong business model
with long term potentials. Business ethics is especially important in dealing with customers, maintaining
integrity with customer and building client relationships. On the other side of your business, it's also
important to adopt an ethical approach which considers your various responsibilities towards
shareholders, employees and the society at large. Ethics is no doubt an important business subject for
any entrepreneur to study, but it also has a wider application throughout organizations. So what is
ethical to one may not be ethical to others hence, it's important to establish a collective set of ethics
that represent the entire organization rather than just adopting it individually. This can be done through
training, through having standard business policies and even by careful selection of human resource.
An ethical image for a company can build goodwill and loyalty among customers and clients and the
importance of business ethics can be highlighted;
• Ethical motivation works on employee motivation which protects and improves reputation of the
organization by creating an efficient and productive work environment.
• Balancing the needs and wishes of stakeholders is also a critical requirement. There is pressure on
business to recognize its responsibilities to society. Business ethics requires business to think about the
impact of its decisions on people or stakeholders who are directly or indirectly affected by such
decisions. Companies build their image by acting in accordance with their values. Creating a positive
public image comes from demonstrating appropriate values. Publicizing and following a company's
values allows stakeholders to understand what the company stands for.
• A global challenge not only leads to business growth and expansion but has to become aware of the
ethical diversity of the world because of increasing globalization of the economy. Business must learn
the values of other cultures and apply them to its decisions, combining with its own values. • Ethical
pay-offs help the organization to reduce risks such as breaches of law, regulations or company
standards, and damage to reputation of the organization in long run.
• Employee Retention is a successful Business Ethics program which establishes a culture that rewards
making the right decision and helps company to retain talent. One of the major costs in business is

13. employee turnover. The loss of people is loss of valuable experience and training the new personnel cost
the company.
• Prevention and Reduction of Criminal Penalties through following a set of ethical practices can help a
company have "an effective program to detect and prevent violations of law". Exc7itives cannot always
be aware of everything done in a company's name.
• Market Leadership ^xi be seen when a company fully integrates its values into its culture, gradually
quality rises due to the employee's focus on values. Customers see that the employees care about the
customer's concerns. Employees reflect appropriate values in their attitude and conduct.
• Following ethical practices can help the company to set an example in the society and the market and
also lead to recognize the company as a leader.
1.6 NEED FOR BUSINESS ETHICS
Why to promote business ethics in organizations? Customers are more educated today and their
awareness level has comparatively increased. Business organizations will always set objectives for the
business and focus towards profit maximization and growth. The most important question is how
managers make profit and achieve growth?
They work towards understanding and working towards meeting these objectives. Business considers
why to make profits, and why should do so legally. But why should they be concerned about ethics, as
long as they are making money and staying out of legal problems making a legal profit for the firm.
These dimensions and arguments are confusing and often mistaken. So it is important to first
understand why should business people be ethical?
To say that one should do something is another way of saying it is ethical. If it is not ethical, then one
should not do it. Perhaps when business people ask why they should be ethical, they have a different
question in mind: what is the motivation for being good (ethical)? One should be good because "good"
is, by definition, that which one should be. As for motivation, good behavior often brings a reward, but
not every time. Think about it. If it were always in one's interest to be good, there would be no need for
ethics. We could simply act selfishly and forget about obligation. People invented ethics precisely
because it does not always coincide with self interest. No doubt organizations prove their existence by
profit taking, but it is always not necessary to opt for the unethical way. In the past a number of factors
have brought ethical matters into sharper focus. A few of the following points put an effort to explain
the need and intent of business ethics:
1. Globalization : Global expansion has brought about greater involvement with different cultures and
social-economic systems. With this kind of a development, the ethical considerations such as the
different assumptions about the responsibilities of business, about accepted business practices and
about the values needed to build a cohesive successful organization taking-up the lead and become
more important.

14. 2. Competition. Rising competition brings with it added pressure to corners.
Simultaneously, leaders looking for new ways to differentiate their companies and moreover to a new
level of excellence. Some believe that a proactive ethical stance can have a positive impact on the
bottom-line.
3. Technology. The added capabilities of technology have created a new level of transparency and
immediacy to business communities. Now the conduct of businesses around the globe is more exposed
than it ever was before. The boon of science and technology is completely exploited by business arena
and used as stepping stones to success.
4. Public perception and the law. This is a perceived decline in social ethics that yields uncertainty.
Managers are no longer comfortable assuming the employees joining their companies and possess the
desired ethical values. Public expectations have also changed enormously. That which ones deemed
unacceptable is now more readily scrutinized. New laws and stepped up enforcement efforts Rave
increased the risk of personal and organizational liability.
Why Study Ethics? Ethics courses have a number of features that influence behavior. It provides a
language and conceptual framework with which one can talk and think about ethical issues. They
present ethical theories help define what a valid ethical argument looks like. They give an opportunity to
think through, complex ethical issues that are likely to arise later.
None of this convinces one to be good, but it is useful to those who want to be good. It may also
improve business conduct in general. How many of the recent business scandals would have occurred if
subordinates had possessed the skills, vocabulary and conceptual equipment to raise an ethical issue
with their coworkers?
Participatory ethics is a privileged part of business ethics. Parties co-operate voluntarily committing
themselves to a self imposed and non-enforceable obligation producing a distant common good.
Similarly recognition ethics is an ethics of self development guided by the principles of fidelity to one's
basic self which clarifies and supports the Principle of recognition (formal and conscious when one gets
involved in situations of moral asymmetry) and the Principle of beneficence (that no harm should be
done to others or avoided or compensated thereof).
Ethics and management are closely related. Business management is all about making decisions. Ethics
is all about making the right decision. So what is the difference between the two? Management is
concerned with how decisions affect the functioning of a company, while ethics is concerned about how
decisions affect everything else including the existence of a company.
Management operates in the specialized context of the firm, while ethics operates in the general
context of the world. Management is therefore part of ethics. A business manager cannot make the
right decisions without understanding management in particular as well as ethics in general. Business
ethics is thus nothing but management carried out in the real world. Hence a businessman should study

15. and understand ethics. The need of business ethics can be more appropriately discussed with, the
following relevance's :
• Introducing Socialism in Business which elaborates that the gains of business must be shared by all and
not just by owner of business. Profit is the result of group efforts and hence all concerned i.e., the
workers, shareholders, consumers and all others who contribute to the success of the business should
share the gain and profits.
• Interest of Industry should be protected by big firms which normally try to dominate and eradicate
small firms. If industry follows code of conduct, small firms can fight for their existence and stay in the
business for longer times contributing success and economy.
• Buyers Market is taking its importance in many products by converting sellers market into buyers
market. Under such changed business conditions business ethics needs to stress the importance of
consumer satisfaction and service orientation in place of profit orientation.
• Better Relations with business and society, reconciling conflicting interests of various sections of
society such as workers, shareholders, consumers, distributors, suppliers, competitors and government
can be done by implementing and following Code of conduct.
• Advantages to Business and Society can be shown by Ethics pointing out what is good and bad, so also
what is right and wrong. It brings to the notice of the business community the importance of honesty,
sincerity, fairness which makes them alert and socially conscious.
Thus business ethics helps business and society at large ensuring healthy atmosphere in business which
further leads to improvement in social, economic and cultural values of the society.
1.7 BENEFITS OF BUSINESS ETHICS
Most of the organizations today are taking up challenges related to bringing in ethical practices and are
also looking at the benefits that organizations get by following business ethics. So these benefits are
related to many dimensions like societal, public, employees, stakeholders and organizations. However,
the following list describes various types of benefits from managing ethics in the workplace.
1. Attention to business ethics has substantially improved society : A matter of decades ago, children in
our country worked 16-hour days. Workers' were harassed and exploited and disabled workers were
condemned to poverty and often to starvation. Big players affected the small players and prices were
fixed on ground rules. Employees were terminated with no valid reason. Then society reacted and
demanded that businesses place high value on fairness and equal rights. Anti-trust laws were brought in,
government agencies were established, Unions were organized, Laws and regulations were established.
2. Ethics programs help maintain a moral course in turbulent times and the times when change is
essential : Every organization passes through tough times and need for major changes in operations and
technology as it is demanded from the changing business environment. During such times culture of
following ethical practices helps the organizations to hold the momentum and face the challenge.

16. 3. Ethics programs cultivate strong teamwork and productivity : Ethics programs in the organization
helps to bring proper alignment between employee behaviors with ethical values preferred by leaders of
the organization. So there must be proper exhibition of right behaviors by employees which can match
organizational values. These values in the workplace build openness, integrity and teamwork which
results -in motivation and performance.
4. Ethics programs support employee growth and meaning : Following ethics in the workplace helps
employees face reality, both good and bad in the organization and within themselves. Employees will
express full confidence to handle the tasks and situation thus taking better decision which helps them to
produce better results. These results in turn help employees to perform better and achieve growth.
5. Ethics programs help ensure that policies are legal : Ethical practices usually complement legal
requirements and these practices are applied in the current situation and which will impact the future
too. So it is better to invest time and resources to ensure ethical practices now than investing on
handling litigation later. So most of the time ethical principles are often state-of-the-art legal matters.
Attention to ethics ensures highly ethical policies and procedures in the workplace. 6. Ethics programs
help avoid crimes and can lower fines : Ethics programs always help the team to identify ethical issues
and violations even before the implementation so that they can be reported or addressed. In some
cases, when an organization is aware of violation and does not report it to the appropriate authorities,
this can be considered a criminal act. So if organization attempts to follow the ethical practices, the
intensity of fine and penalties will be less.
7. Ethics programs help manage values associated with quality management, strategic planning and
diversity management : Organizations today, will have to face challenges due to dynamism of market
,thus focusing on managing strategic planning, diversity management and quality management. Ethics
programs help to identify preferred values to achieve better quality and strategic growth. This effort
includes recording the values, developing policies and procedures to align behaviors with preferred
values, and then training all personnel about the policies and procedures. This overall effort is very
useful for several other programs in the workplace that require behaviors to be aligned with values,
including quality management, strategic planning and diversity management
8. Ethics programs enhances public image of the company : Business organization will have certain
responsibilities towards society and public. Attention to ethics is also strong public relations but
managing ethics should not be done primarily for reasons of public relations. But the fact that an
organization regularly gives attention to its ethics can portray a strong positive image to the public.
People see those organizations who value people more than profit, as striving to operate with utmost
integrity and honor. 9. Overall benefits of ethics programs : Managing ethical practices has lot of positive
impacts on business and organization. It strengthens the team coherence and balances organization's
culture, improves trust and relationships between individuals and groups, supports greater consistency
in standards and qualities of products and cultivates greater sensitivity to follow organization values. 10.
Formal attention to ethics in the workplace is the right thing to do : As part of organization's practice it is
important to follow ethics and it also emphasizes on legal

17. . 1.8 ARGUMENTS AND DILEMMAS FOR AND AGAINST BUSINESS ETHICS
There are different arguments in business wherein a category of people believe that following ethics is
safer and rewarding in the long run though it brings with it a lot of problems and challenges, thrills and
breakdown time and by for the businessman.
But after all success is assured at a cost of long awaited patience and hard work. The arguments purport
to show that a businessman ought to maximize profit and nothing else. Money is very important for
anything be it continuation or the existence of the business, hence wealth maximization is a must. At the
same time a situation in which one had more money is necessarily preferable only if other things are
equal, which they often are not. If I am offered a pay-raise naturally am inclined to accept it, but not if it
would entail moving house and saying good-bye to all my friends, or moving to a location where there
are no good schools for my children or if it would involve working under hazardous conditions, or if it
would require of one telling lies to prospective customers. While the other category of people deny with
the fact and feel that we i have to mould ourselves and be as per the situation and circumstances and
thus being indifferent 7 should achieve the organizational objectives and achieve profit maximization.
Situational changes will decide about our being or not being or in other words towards the change of 4
business etc, hence being successful by hook or crook is important.
Maxi misers try to sidestep the argument by changing the content of what is being maximized. Instead
of money it is t profits, instead of profits it is long-term profits. Arguments for : Business organizations
today have accepted ethics as a part of their business conduct. They have realized that business exists
and operates within the society and is a part of the subsystem society, so its functioning should
contribute to the welfare of the society. As a company grows, the public takes more interest in it as it
has a great impact on the community. There is a greater social responsibility on the mangers to maintain
a proper image of the company in the minds of the public. The company cannot resort to unethical
behavior or disregarding social welfare.
Ethical practices sometimes reduce the cost of production in the long-run. Ethical and moral behavior
gives a unique edge and advantage in the market place. This has been well proved by the Tata group of
companies that have based their business activities on ethical principles. There have been different
discussions and contradictions for this view of following and implementing ethics in business or not.
Argument Against : Businesses are economic entities and should concentrate on producing goods and
services efficiently and thus maximizing the profits to the shareholders.
Some economists like Friedman believed that if business ethics is a part of corporate culture, the
customer would have to bear the cost of the ethical practices of the organization as some ethical
practices increase the price of products. Earlier people feared that ethical code of conduct would mean
a sacrifice of efficiency and productivity and the competitiveness of the marketplace would fade. It was
believed that business should use their resources and engage in activities designed to increase profits.
But now it is seen that the fears expressed by philosophers and psychologists have changed gradually.