Everything you need to know about business ethics. Business ethics refers to the application of ethical principles and moral values while conducting business.
A company must demonstrate ethical behaviour in all internal matters as well as in dealings with the external environment.
All stakeholders must ensure that ethical standards are adhered to while handling business transactions. The challenge for management is to make sure that the standards of all internal functions are reasonably maintained in a controlled environment, and are managed through policy, procedures, and punishments.
According to Garrett,
ADVERTISEMENTS:
“Business ethics studies the special obligation which a man and citizen accept when he becomes a part of the world of commerce.” As a matter of fact, business ethics deals with morality in the business environment. That is why it is that “business ethics refers to the system of moral principles and of conduct applied to business.”
Learn about:-
1. Introduction to Business Ethics 2. Meaning of Business Ethics 3. Definitions 4. Features 5. Examples 6. Need 7. Elements 8. Principles
9. Factors 10. Importance 11. Golden Rules 12. Measures 13. Criteria 14. Different Myths 15. Significance 16. Barriers and Solutions.
Business Ethics: Introduction, Meaning, Definitions, Need, Elements, Principles, Factors and Significance
ADVERTISEMENTS:
Contents:
- Introduction to Business Ethics
- Meaning of Business Ethics
- Definitions of Business Ethics
- Features of Business Ethics
- Examples of Business Ethics
- Need of Business Ethics
- Elements of Business Ethics
- Principles of Business Ethics
- Factors of Business Ethics
- Importance of Business Ethics
- Golden Rules of Business Ethics
- Measures of Business Ethics
- Criteria of Business Ethics
- Different Myths of Business Ethics
- Significance of Business Ethics
- Barriers and Solutions of Business Ethics
Business Ethics – Introduction
The term ‘ethics’ has been derived from the Greek word ‘ethos’ which implies character, ideas and standards of behavior practiced within a society. Personal ethics define right and wrong behaviour for an individual. In the business sense, ethics describe what constitutes good or bad in human conduct in organizational context. We can also say that business ethics are concerned with making life, not just living.
By definition, business ethics are moral ideas that guide the way a business acts. It is the application of ethical reasoning to certain business situations and activities, so that any moral issue emerging in business can be resolved or clarified.
A businessperson is said to be ethical only when his or her actions are righteous arid in favor of the society. Ethical behavior plays a significant role in any business and in the advancement of the society. Ethical behavior results in better goodwill in the market, wins public confidence and success in the business domain.
ADVERTISEMENTS:
For a better understanding of the topic, some of the do’s and don’ts of ethical conduct are listed below:
1. Pay taxes regularly and discharge other duties of a good citizen.
2. Ensure the products are properly labeled to provide the necessary information to the customer.
ADVERTISEMENTS:
3. Compensate employees fairly and see to it that they are justly treated.
4. Make accurate and correct business documents available to the authorized government agencies and organizations.
1. Avoid cheating the consumer by way of misleading advertisement about the company product.
ADVERTISEMENTS:
2. Do not employ unfair production practices or sell sub-standard or adulterated goods.
3. Abstain from misappropriating company funds.
4. Do not resort to black-marketing, hoarding and profiteering.
5. Avoid sharing confidential business information with the competitors.
ADVERTISEMENTS:
6. Refrain from destroying the goodwill and reputation of competitors by using wrong means.
Business Ethics – Meaning
Business ethics refers to the application of ethical principles and moral values while conducting business. A company must demonstrate ethical behaviour in all internal matters as well as in dealings with the external environment. All stakeholders must ensure that ethical standards are adhered to while handling business transactions. The challenge for management is to make sure that the standards of all internal functions are reasonably maintained in a controlled environment, and are managed through policy, procedures, and punishments.
To understand the nature of this issue in greater detail, one needs to first understand the challenges inherent in various internal functions of a company.
Today, the maturity in corporate practices and standards has ensured that fairly well- established procedures are followed in competitive companies. Usually it is seen that in companies, business ethics are always normative in nature, that is, prescriptive about the ‘dos and don’ts’. The interest in business ethics was accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia. This was mainly because of the surfacing of many corporate scams and frauds, especially, with respect to financial instruments, markets, and false reporting.
ADVERTISEMENTS:
However, most major companies today lay emphasis on commitment to promoting non-economic social values under a variety of headings such as ethics codes, or social responsibility charters.
Infosys’ ‘code of conduct and business ethics’ has detailed guidelines to help guide its transactions with employees, communities, customers, governments, investors, regulators, and society. This is what the company believes will help it achieve the highest standards of governance and help it live up to the level of transparency and integrity it has set itself.
Similarly, Toyota Motor Corporation is another company that is well-respected across the globe for its guiding values and code of conduct.
Another well-known company that is internationally talked about is Hewlett-Packard (HP). It has set standards of business conduct (SBC) that form the basis of ethics in its business. There are regular updates which reflect recent policy, business, organizational, and legislative changes. It is believed that the SBC provides helpful links to questions and answers, key tips, and red flags to assist in applying it to situations encountered by an employee.
The SBC also contains links to corporate policies and other supporting documents. The company SBC cannot contain every policy that is relevant in every country and for every employee. In addition to the guidance contained in SBC, there are other policies and rules that must be followed. If employees have concerns or questions about the right thing to do, they are encouraged to check with management.
Hewlett-Packard recommends a test called ‘the headline test’ that encourages an employee to evaluate the soundness and impact of decisions. It recommends that decisions that are likely to make an employee uncomfortable in front of colleagues should not be pursued. This is a very simplified way of saying that the company does not want an employee to do something that is not legal, or not in its SBC.
ADVERTISEMENTS:
To summarize, the following are the guidelines that companies must set in this regard:
1. Employees must live up to the core values and beliefs that are set up.
2. Every company sets a code of conduct and ethics, and along with other policies and procedures, an employee is expected to strictly adhere to the same.
3. A company does not encourage what is not legal. Even if it is legal, it should be conducted as per policy guidelines. In case of doubt, an employee must approach management for guidance.
4. Employees are discouraged to do anything that they would feel uncomfortable doing in front of an audience.
It is clear that the onus lies with employees to follow the guidelines. These guidelines are set by management with the approval of the board, and must be comprehensive and involve both internal and external stakeholders.
ADVERTISEMENTS:
It is important to observe that though the code of conduct and ethics is written and put into practice by a company, the inability to live by it happens, at times, because of failure at the top. One such case is that of Mark Hurd, a former chief executive of HP.
In a similar incident, Phaneesh Murthy resigned on 23 July 2002 from Infosys, announcing that a sexual harassment case had been filed against him by a former employee. Since sexual harassment issues were discussed only behind closed doors, and because Phaneesh Murthy was a senior and successful executive, widely acclaimed for his transparent management and ethical corporate governance, the incident sent shock waves across corporate India.
Sexual harassment and discrimination against women are common ethical issues. As early as 1997, the Supreme Court’s case of the NGO Vishakha versus the State of Rajasthan, clearly delineated the concept of sexual harassment at the workplace and set down guidelines for government departments, business houses, and others. According to the court, it ‘includes such unwelcome sexually-determined behaviour (whether directly or by implication) as physical contacts and advances, a demand or request for sexual favours, sexually-coloured remarks, showing pornography, and any other unwelcome physical, verbal, or non-verbal conduct of sexual nature’.
However, some feel that despite the court’s insistence that these guidelines be notified, and companies such as Infosys seriously putting such a policy in place, actual complaints of sexual harassment are few and far between, and not a true reflection of what goes on at the workplace.
Business Ethics – Definitions: Suggested by Baumahart, P.W. Wrigh, Hurley,T.M. Garrett and Wheeler
The word ‘ethics’ is derived from the Greek word ‘ethos’ which refers to character. Baumahart defines the term ‘ethical’ as concerning principles of human conduct.
Ethics as matter of fact, deals with certain standards of conduct and morals. Ethics is an indirect governing force behind every human conduct, may it be that of an individual or that of an organisation. It directs human behaviour and differentiates between proper/improper, right/wrong or fair/unfair human actions.
ADVERTISEMENTS:
P.W. Wrigh defines, “Ethics is that branch of philosophy which is the systematic study of reflective choice, of the standards of right or wrong by which it is to be guided and of the goods towards which it may ultimately be directed.
Hurley defines Ethics as a system of moral principles.
Whether there should be a separate ethics for business is a controversial issue. For example, according to Drucker, every individual and organisation in society should abide by certain moral codes, and that there is no separate ethics of business. However, there are others who say that every profession is bound by certain ethical principles and rules of conduct which reflect its responsibility, authority and dignity.
Therefore, there should be something like business ethics. A business should not be allowed to conduct itself in a manner which can be detrimental to the interests of other elements of society or the business itself. They assert that there should be business ethics so that the business may be conducted according to certain self-recognised moral standards.
Due to the controversy referred above, on the question whether there should be separate ethics of business or not, there is no unanimity of opinion on what constitute business ethics. To some, business ethics is “businessman’s integrity so far as his conduct or behaviour is concerned in all fields of business as well as towards the society and other businesses.”
According to Garrett, “Business ethics studies the special obligation which a man and citizen accept when he becomes a part of the world of commerce.” As a matter of fact, business ethics deals with morality in the business environment. That is why it is that “business ethics refers to the system of moral principles and of conduct applied to business.”
ADVERTISEMENTS:
Here are few important definitions of business ethics:
According to Wheeler, “Business Ethics is an art and science for maintaining harmonious relationship with society, its various groups and institutions as well as reorganising the moral responsibility for the Tightness or wrongness of business conduct.”
T.M. Garrett defines, “Business ethics is primarily concerned with the relationship of business goals and techniques to specifically human ends.”
However, it should not be forgotten that the basic ethical standards are universal; the difference lies in the application of ethical principles to business situations. The same action may be ethically right in one situation or in a particular society whereas that very action may be ethically wrong in another situation or in particular in another society.
It is because of moral standards prevalent in particular society. Hence, whether a particular business practice is fair or not will be judged from the fact that whether it is consistent or inconsistent with the generally accepted customs of conduct and right living in a society.
Similarly it is not essential that an action which is legally right may also be ethically right, because, ethics extends beyond the legal question and involves goodness and badness of an act. For example, in a society where there may be acute shortage of a particular commodity it may not be legally wrong to charge even a very high price but ethically it may not be justified.
Business Ethics – 9 Features
1. Business ethics is a discipline.
ADVERTISEMENTS:
2. It is considered both as science and art.
3. It tests the rules and moral standards and is dynamic in nature.
4. It is based on theological principles such as sincerity, human welfare, service etc.
5. It is based on reality and social customs prevailing in business environment.
6. It studies the activities, decisions and behaviour which are related to human being.
7. It has a universal application.
8. It helps in developing personal dignity.
9. It keeps harmony between different roles of businessman, with every citizen, customer, owner and investors.
Business Ethics – 6 Examples
Every business is supposed to conduct its operations in an ethical manner or in a socially desirable way.
The following are some examples of ethical business practices:
(i) To charge fair prices for their products.
(ii) To use correct weights for measuring merchandise.
(iii) To comply with tax laws of the country.
(iv) To make reasonable profits from business/trading and not to remain engaged in profiteering.
(v) To supply genuine and safe products to customers.
(vi) To give fair treatment to all employees (i.e., avoid discrimination at work place).
Amazon(dot)com has a reputation for being an ethical company and its employees are expected to always act ethically, and in the best interest of the company. By contrast, Indians’ trust in corporations has been strained because of unethical behaviour of executives in a number of firms and banks. The loss of public trust threatens the integrity of business. It is in this context that we refer to the importance and significance of ethical behaviour in business.
Business Ethics – 6 Main Needs
The development of a business has an impact on the lifestyle of a businessman. The behaviour of a businessman has close relationship with his lifestyle.
Hence, it is necessary to observe business ethics for the following reasons:
1. Survival of the Business Unit:
Businessmen should consider the interest of the business unit. Unethical practices of businessmen will lead to the closure of business unit. The closure of a business unit does not only create problems to business but also to employees and the society in general. Normally, good behaviour is rewarded and bad behaviour is punished. Since, a business is an economic institution, it aims at maximising profits.
Businessmen do not maximise the profit at the cost of existence of a business unit. The behaviour of a businessman is affected by some of the factors such as – leadership qualities, integrity, knowledge, skills, influence and exercising power. Businessmen are expected to protect their units in all respects.
2. Growth of Business Unit:
The next reason for observing business ethics is that it ensures the growth of a business. Whenever a businessman observes ethics strictly, definitely the particular business unit will get developed. A business could not be run in such a manner as is detrimental to the interest of society or business itself. So, it is argued that there should be some business ethics for the growth of a business.
3. Earning Goodwill:
The prime objective of any business is to earn profit. At the same time, no business is allowed to earn profit without following business ethics. If business ethics are properly followed by a business, automatically that particular business unit earns a good name among the public.
4. Improving the Confidence:
Business ethics are necessary to improve the confidence of the customers, employees and the like. If confidence is infused, they (customers and employees) will popularise the name or excellent consumer services of the particular business unit. For example, by speaking well of its merits and pointing out its flaws.
5. Maintaining Inter-Relationship:
No business functions separately or independently. Each business has close relationship with another business even though the nature and size of the other business differs. The proverb “No tree can be considered as a forest” attests this fact. It is expected that each business unit should have a smooth relationship with others. The inter-relationship of business is maintained by adopting business ethics.
6. Solving Social Problems:
If a businessman observes ethics in his business, the public have no difficult in having their wants fulfilled. There is no bargaining between the businessman and public. There is a fair treatment of an employee by him. This will avoid social problems like strike, lockout, etc.
Business Ethics – 5 Prime Elements: Top Management Commitment, Code of Ethics, Compliance Mechanisms, Employee Involvement and Regular Monitoring
Ethical behavior benefits both business organizations and society. Hence, a business firm should pledge itself to nurturing business ethics in its day-to-day working.
The prime elements of business ethics are discussed as under:
Element # 1. Top Management Commitment:
The executives at the top level play a remarkable role in guiding the organization towards ethical behavior. The board of directors, the CEO, Chairman and departmental heads must show the way by their dedication to ethical conduct. They should encourage the employees in imbibing and practicing moral values.
Element # 2. Code of Ethics:
It is a good practice for an ethical organization to have a written code of conduct defining the principles of conduct to be followed. The code of conduct comprises issues such as honesty, product safety, fair marketing practices, fair business practices, health and safety at work etc.
Element # 3. Compliance Mechanisms:
A business organization should have suitable mechanisms in place to make sure that actual decisions and actions of the employees cohere with the company’s ethical standards. For instance, the company must see to it that the ethical code is followed in business functions such as production, recruitment, selection and training. There should be a reliable system of proper communication for employees to report any incident of unethical behavior.
Element # 4. Employee Involvement:
The management must involve employees at all levels in the implementation of ethical programs and policies because they are one of the main practitioners of ethical policies. In addition, small groups of employees can be formed to review the company’s ethical policies. This will help the policymakers in gauging the thoughts of employees about such ethical policies and revise them if it deems fit.
Element # 5. Regular Monitoring:
The results of ethical programs organised are hard to be measured meticulously. Nonetheless, business organizations should regularly check the degree to which the ethical practices have been followed. On the basis of the gathered data, the top management and other personnel should review the company’s ethical policy and initiatives.
Business Ethics – 30 Basic Principles
Following are some of the basic principles of business ethics.
They are briefly explained:
1. Service motive should be in the first place rather than profit motive, even though the very purpose of any business is to earn profits.
2. There is no discrimination against any particular group of people, say the rich, the poor, the high, the low, the caste, the religion, etc.
3. Fullest satisfaction should be available to consumers.
4. There is no lack of consideration for clean environment.
5. Human feelings are properly considered while rendering service.
6. There is no wastage or misuse of available scarce resources.
7. Business must be a dynamic and efficient one.
8. Business should provide quality products at reasonable price.
9. Business must maintain or improve standard of living.
10. There must be healthy competition.
11. Employees have no fear regarding the security of job. In other words, there should be job security to employees.
12. Businessman must be sincere in payment of fair wages.
13. Better working conditions or environment should be provided.
14. Efficient employees are properly motivated and recognised.
15. Employees are requested to participate in management.
16. Monetary and non-monetary incentives must be available to employees.
17. Businessman must pay taxes promptly and obey other obligations promptly.
18. Business unit must avoid unfair trade practices like hoarding, black-marketing, etc.
19. There should be no formation of cartel agreements to control production, price, etc.
20. Businessman must disclose all relevant information to needy persons.
21. Businessman must prepare genuine books of accounts and presents before all authorized persons as and when required by them.
22. He should protect the interests of its members at the time of amalgamations, absorption and the like.
23. He should be ready to extend mutual co-operation and mutual help.
24. Business should act as a partner in the development of nation.
25. He should follow proper communication system at all levels.
26. He should not make promises that could not be fulfilled.
27. Business assets should not be utilized by its owner or employees for personal use.
28. Employees are allowed free speech in the work place.
29. Business unit should follow proper personnel policy with regard to promotion, transfer and the like.
30. Businessman should not indulge in politics.
Business Ethics – 5 Major Factors: Legislative Framework, Regulatory Framework of the Government, Corporates Ethical Codes, Societal Obligations and a Few Others
Following factors affecting the level of business ethics:
Factor # 1. Legislative Framework:
Ethics is a voluntary phenomenon. It cannot be forced but it should be persuaded. However, if businesses are not giving due weightage to ethics in their behaviour it is for the laws to intervene in the process. Laws are generally passed as result of low ethical standards or the failure to recognise social issues.
Legal action or government directives are the result of social pressure. A practice can be made illegal if society views it as being unethical. For example, if contributions to political parties by corporates are being viewed as excessive and unethical then the practice can be banned.
Factor # 2. Regulatory Framework of the Government:
From time to time, government regulates the working conditions, product safety, statutory warnings (on cigarettes and other harmful products) etc. These are all supported by laws or guidelines. These guidelines help the entrepreneurs in determining the working behaviour as per the acceptable standards and practices.
Similarly, Jago Grahak Jago is another persuading strategy among the potential consumers about the corporate business practices. This has also been launched by the Ministry of Consumer Affairs to improve awareness about corporate defaults in their marketing practices.
Factor # 3. Corporates Ethical Codes:
Many times business provides specific guidelines to their managers and employees about the ethical codes of behaviour. One important question in such instances is whether individuals within organizations are really governed by the code of ethics or give lip services to the guidelines.
Factor # 4. Societal Obligations:
Social forces and pressure have considerable influence on ethics in business. Job reservation to the handicapped in business is an important example of societal obligations being fulfilled by them. Society in fact, forces the entrepreneurs to alter their decisions by taking a broader view of the environment and the needs of society.
Factor # 5. Vision and Mission of Business:
Every day ethical decisions are usually made between the lesser of the two evils rather than obvious right and wrong dimension of the judgment. These judgments generally include different types of values being persued by the industrial house in the vision and mission of the group companies. In this context, we can include the norms of ethical standards formulated by the Tata and Birla group of companies.
Business Ethics – 6 Importance: Basic Human Needs, Improve Creditability, Improve Coordination, Better Decision Making and a Few Others
Importance’s of corporate ethics are as follows:
1. Basic Human Needs:
Ethics corresponds to basic human needs. It is human trait that man desires to be ethical: not only in his private life but also in his business affairs where, being a manager, he knows his decisions may affect the lives of thousands of employees or customers.
2. Improve Creditability:
Values create credibility with the public. A business perceived by the public to be ethically and socially responsive would be honoured and respected even by those who have no intimate knowledge of its actual working. There will be an instinctive prejudice in favour of its product; since people believes that the business offers value for their money. Public issues attract an immediate response from the business as it affects its credibility.
3. Improve Coordination:
Values give credibility to the management by coordinating the language of value from the top to the lower level in the organisations. Organisational ethics, when perceived by the employees as genuine and create common goals, improves ethical environment.
The entrepreneur has credibility with its employees precisely because it has credibility with the public. Neither sound business strategy, nor a generous compensation policy and fringe benefits can win the employee credibility. Perceived moral and social uprightness about the business by its employees can be the basis for credibility among the employees.
4. Better Decision Making:
Values help better decision making. An ethical attitude helps the management to make better decisions, i.e., decisions which are in the interest of the public, their employees, and the business own long good, even though the decision making is slower. Ethics force a management to take various aspects of economic, social decisions keeping in mind their ethical implications.
5. Trade Off between Ethics and Profits:
Ethic and profit can go together. A company, which is inspired by ethical conducts, is also profitable one. Value driven companies are sure to be successful in long run, though in the short run they can loose money. Ethics help the business to develop long term brand equity in the society which ultimately improves sales and profit.
6. Humanitarian Approach:
An ethical oriented management takes measures to prevent pollution and protects workers health. Leading business houses had already initiated social responsibility initiatives to protect the environment, provides social welfare amenities to the workers etc. These business houses are incurring huge expenditures without any mandatory initiative of the government. It is a sharing of wealth by the business in favour of society at large.
Business Ethics – Golden Rules of Ethics
1. Everything you want others to do to you, you shall do to others.
2. Do not do to others that you do not want them to do to you.
3. Do not do anything to others that if done to you, would cause harm to you.
These rules have universal application.
Work Related Indian Ethos in Management:
i. All work is opportunity for doing well to the world and thus, giving materially and spiritually in our lives.
ii. Strength and inspiration for excelling in work comes from Divine, God within, through prayer, reading and unselfish work.
iii. He who works with calm and even mind, achieves the most.
iv. By mutual co-operation, respect and fellow- feeling, all of us will enjoy the highest goal, both material and spiritual.
Business Ethics – 8 Important Techniques Used for Promotion of Ethics: Vision and Mission Statements, Core Values, Business Policies and Rules and a Few Others
Some of the techniques that can be used for promotion of ethics in business are given below:
Technique # 1. Vision and Mission Statements:
A mission statement is a written statement of “what the business wants to be and in which direction it will move.” Ethical principles can be incorporated in the mission statement that will guide everybody in the enterprise for a long period.
Technique # 2. Core Values:
These values specify the limits of ethical conduct and the priorities of a business firm. If core values are ethical behaviour of people in the firm is likely to be moralistic. For example, during the 1970s, the Articles of Association of the major companies in the Tata Group stated “the company shall be mindful of its moral and social responsibilities to the consumers, employees, shareholders, community, and the society.”
Technique # 3. Business Policies and Rules:
The policies and rules are formulated to implement the core values. These policies and rules should be just and fair so that ethical conduct becomes a routine practice.
Technique # 4. Code of Conduct:
Code of ethics specifies standards that guide employees how to behave with respect to certain matters and uncertain circumstances. It helps in maintaining ethical behaviour in business.
Technique # 5. Grievance Redressal System:
Proper mechanisms are needed for the implementation of policies and rules in the organisation. Grievance redressal system is one such mechanism. Any employee who is not satisfied with any issue can appeal to the prescribed authority. The authority shall redress the grievance within the prescribed time period.
Technique # 6. Workshop for Resolution of Ethical Dilemma:
All ethical dilemmas cannot be anticipated and provided for in advance. Therefore, periodic workshops should be conducted to help employees in resolving the ethical dilemmas that occur from time to time.
Technique # 7. Training in Ethics:
Well-designed training programmes help to develop sensitivity to ethical issues.
Technique # 8. Incentives and Penalties:
Ethical acts should be widely publicised and publicly rewarded. Similarly, violation of ethical norms should be punished to discourage their occurrence.
Business Ethics – Criteria of Optimum Business Ethics
It is viewed, in the recent times, that business ethics should propose an optimum mix of values taking into consideration real life situations. The greed of human beings in general and business people in particular, needs to be controlled.
1. Criteria of Truth:
Another universally accepted ethical principle is speaking and presenting the truth. However, Indian tradition exempts from strictly speaking the truth, if it adversely affects the greatest number of people and or the basic life of even a few people. Speaking truth, in its turn emphasize transparency in business and honesty in carrying out business transactions.
2. Criteria of Charity and Compassion:
Charity and compassion are regarded as essential ethical values by various major religions like Buddhism, Christianity, Islam and Hinduism. Though capitalist markets do not believe in these values, organisations in practice, particularly in India, are more concerned with these ethical values.
3. Criteria of Trust and Co-Operation:
The values of trust and cooperation should be deep rooted and spread in all directions of the business in order to run the business prudently and with care. Adaptation of these values enhances business efficiency, trust of the customers and all other stakeholders of a business organisation.
Business Ethics – Different Myths: Business and Ethics do not Mix with Each Other, Ethics is Personal and Confined to Self and a Few Others
There are different views and concepts about ethics referred in business performance.
Some of the myths as briefly described here:
Myth 1- Business and Ethics do not Mix with Each Other:
This concept is relevant to decades back. Presently, the business tasks and operations are an integral part of society. The principles, concepts and values of society is invariably applicable to business also. These social values are based on ethics and as such, the business and ethics may be mixed each other with their separate entity.
Myth 2- Ethics is Personal and Confined to Self:
An individual has a right to decide what is right and what is wrong within the purview of social standards. All the legal aspects also recognises and confers rights on our citizens to make choices and preferences. But it is not absolute to make choices of right and wrong.
Individuals are the integral part of any group or organisation, which have some norms, standards and values to govern what is acceptable and not acceptable. So, probably the ethical norms, values and aspects are not absolutely individual, there are certainly curbed to be restricted by groups and as such, these are established, governed and directed by the group or any organisation.
Myth 3- Good Business is Good Ethics:
Some time we can say that good business is called good ethics. Most of the business firms acquired different achievements like productivity upgradation, quality standards, customers’ satisfaction, product image and earn more profit. They are not much concerned with ethics at their work places. Probably, it is more likely to ascertain that good business is good ethics which may not be correct. We can say that it is difficult to make a correlation between goodness and some material and substance successes’.
Myth 4- Ethics in Business is Relative:
It is the most popular myth about business ethics that it is relative. The ethical standards may have a different opinions. What is right in one place may be wrong in another, and only the ethical standards for judging the criteria at a particular situation is in which it has taken place. The relativity between business and ethics are not acceptable at different situations.
Myth 5- Ethics Denotes a Conceptual Biased Only:
Many thinkers and philosophers believed that ethics had been a fad or movement. Long ago ethics denotes conceptual ideas and beliefs. It was only a complex philosophical debate or an issue. But now a days the ethics are being practical submissions and relevance’s towards making goodness in society.
Myth 6- Business Ethics and Social Responsibilities are the Same Thing:
Within business scenario, the concepts and appliances of social responsibilities are based on social values and responsiveness. But the formulation of ethical norms, code of conducts and value based approaches have a broader scenario than the concept of social responsibility. Moreover, ethical norms provide the directions and stimulate to fulfilment of social responsibilities. So ethics and social responsibility have separate concepts and they are not the same thing.
Myth 7- Ethics cannot be Managed:
In our society, those persons who have oriented by traditional concepts and indifferent attitudes argued that ethics cannot be implemented and managed. But, those who believed in spiritual wisdoms and are having strong morale influences may create and develop the ethical norms. Ethical values channelise the individual energies into pursuits that are benign to others and beneficial to the society. So, ethics can be managed.
Myth 8- Business Ethics is more a Matter of Religion and Culture, than Management:
Some of the persons who are more oriented with ideologies of religion and cultural values, have the concept that ethics are related with religion and culture, not concerned with management. But with open and well concept, we can say that ethics are needful to every part of human life. Moreover, in order to make more perfections in management as well as in business also, there is need to make ethical norms and behaviour.
Myth 9- Ethics is a Recent Phenomenon and it is Just Emerged:
It is fact that the term ethics was emerged long before i.e. almost before 2000 A.D. It was contributed the ideology and basic norms to create the humanitarian grounds in society. Though, ethics is not a new concept but it has recently emerged in dynamic forms to achieve perfections in human life within the purview of business and management.
Business Ethics – Significance
The term, ‘ethics’ refers to the study of standards of conduct and morality. In practice ethics is descriptive of the conduct one may expect from a reasonable person under normal circumstances. In addition, many trade groups have established codes of ethics that address specific areas peculiar to their business or industry.
Ethics assists business persons in deciding when an act is moral or immoral, socially desirable or not. Ethical behaviour in business is critical. When business firms, large and small, are charged with various infractions and when employees of those firms come under legal investigations there is a concern raised about moral behaviour in business. Hence, the level of mutual trust, which is the foundation of a modern market-based economy, is threatened.
Ethical behaviour does not cost money. Instead it adds to it. In contrast, unethical behaviour, even if it seems to work in the short, does financial damage for a long period. Those cheated are the shareholders themselves. So managers need to be aware of what constitutes ethics and how organisations can promote ethics.
Business ethics has gained importance for the business for the following reasons:
(i) Ethics set standard as to what is good or bad in conduct and decision making. An ethical issue is present in a situation when the actions of a person or an organisation may harm or benefit others. There is no doubt that ethical behaviour is worthwhile. Studies have shown a positive relationship between ethical behaviour and leadership effectiveness. And unethical behaviour is damaging at various levels.
The unethical behaviour of Enron, Union Carbide and other companies not only cost many other organisations (its suppliers and distributors) and people a great deal of money directly but it also hurts every investor and the whole economy in more ways than one. This is why Mahatma Gandhi called business without morality a sin.
Values and ethics are vitally important to effective leadership. People trust others they believe have integrity. Today employees don’t feel safe to trust managers. As R.N. Lussier has opined, “A broken promise or a lie results in a loss of trust which is extremely difficult to regain. Honesty is the best policy and some executives are building truth-telling cultures, as ethics impact the bottom line.”
(ii) If a business is not ethical government intervention and legal actions against it are inevitable.
One of the most important roles of managers is to practice ethical leadership. Ethical leadership means that managers are honest and trustworthy, fair in their dealings with employees and customers, and behave ethically at least in professional lives. Managers and first-line supervisors are important role models for ethical behaviour. So they strongly influence the ethical climate in the organisation by adhering to high ethical standards in their own behaviour and decisions. In addition, managers are proactive in influencing employees to embody and reflect ethical values.
Finally, managers can also implement organisational mechanisms to help employees and the company stays on an ethical footing. This is crucially important for the company.
Business Ethics – Barriers and Solutions
Barriers to Business Ethics:
James A. Waters describes three “organisational blocks” that come in the way of management ethics:
1. Chain of Command:
If employees know their managers are not following ethical behaviour, they hesitate in reporting the matter to managers up in the hierarchy for fear of being misunderstood and penalised. The chain of command is, thus, a barrier where subordinates do not report unethical activities of superiors to top executives.
2. Group Membership:
Informal groups in the formal organisation structure develops a group code of ethics. The group members are so strongly bonded by their loyalty and respect for each other that unethical behaviour of any member of the group is ignored by others.
3. Ambiguous Priorities:
When company’s policies are unclear and ambiguous, employees’ behaviour cannot be directed in a unified direction. It is difficult to understand what is ethical and what is unethical in such situations.
Solutions to Barriers:
The following steps can improve the climate for ethical behaviour:
1. Organisational objectives and policies should be clearly laid down so that every member of the organisation ethically works towards effective attainment of the goals.
2. The behaviour of top managers is a precedent followed by others in the organisation. Ethical actions of top managers will promote ethical behaviour throughout the organisation.
3. Penalties and threats for non-conformance to ethical behaviour help in reducing unethical activities in the organisation. Formal procedures of lodging complaints will promote subordinates to report unethical behaviour of superiors to the concerned committees.
4. Educational institutions can offer courses and training in business ethics to create conscientious business managers.