AQUINAS UNIVERSITY OF LEGASPI

Master in Business Administration

S.Y. 2016 - 2017

TOPIC: BUSINESS ETHICS AFFECTING THE SUCCESS OF THE ORGANIZATION

ETHICS

- moral principles that govern a person's or group's behavior;

- the branch of knowledge that deals with moral principles;
- the principle of knowing the difference between what is right and wrong;
- goes beyond the legal requirements for a company and is, therefore, about discretionary
decisions and behavior guided by values;
- norms, values and virtues

PERSONAL ETHICS

- defined as what a person believes to be right which varies from person to person as
these are influenced by culture, beliefs, experience, law and religion

BUSINESS ETHICS

- also known as corporate ethics;

- the set of behavior and disciple that a business follows in its activities;
- moral principles that guide the way a business behaves;
- the application of ethical values to business behaviour

FACTORS HIGHLIGHTING THE IMPORTANCE OF BUSINESS ETHICS

1. Long-term growth: sustainability comes from an ethical long-term vision which takes
into account all stakeholders. Smaller but sustainable long-term profits must be better
than higher but riskier short-lived profits.

2. Cost and risk reduction: companies which recognize the importance of business ethics
will need to spend less protecting themselves from internal and external behavioral risks,
especially when supported by sound governance systems and independent research

3. Anti-capitalist sentiment: the financial crisis marked another blow for the credibility of
capitalism, with resentment towards bank bailouts at the cost of fundamental rights such
as education and healthcare.

4. Limited resources: the planet has finite resources but a growing population; without
ethics, those resources are repleted for purely individual gain at huge cost both to
current and future generations.
 AQUINAS UNIVERSITY OF LEGASPI
Master in Business Administration
S.Y. 2016 - 2017

IMPORTANCE OF BUSINESS ETHICS

1. Protection of Consumer Rights - consumer is the centre of all the business activities. In
fact, business is essentially meant for satisfaction of consumer wants. Unfortunately,
consumers are the most neglected and exploited group. The application of business ethics will
help to confer and implement consumer rights.

2. Social Responsibility - Business Ethics is a means of making business socially responsible

for its actions. Exploitation of consumers, employees, discriminate use of natural resources,
etc., is quite common in all type of business. Compliance to ethical standards will
ensure (a) Protection of consumer rights (b) Public accountability (c)Protection of workers
interests, and (d) Proper utilisation of natural resources.

3. Concept of Socialism - The Concept of Socialism in business states that gains of a

business must be shared by all and not just by the owner of business. Profit is a sign of
business skill and talent. Profit is also a result of group efforts. Employees, shareholders,
consumers, suppliers, and others contribute to the success of the business. Therefore,
success should be shared by all concerned.

4. Interest of industry - Business Ethics are necessary to safeguard the interests of the small
scale business firms. The tendency of big business firms is always to dominate the market
and drive away the small industries out of the market. Small scale units can establish their
position and fight for their right if the industry follows a code of ethics.

5. Consumer movement -The growth in consumer movement is also another important factor
that has necessitated the need for business ethics. The spread of education and awareness
among consumers about their rights has made the business community to conduct business
on ethical principles.
 AQUINAS UNIVERSITY OF LEGASPI
Master in Business Administration
S.Y. 2016 - 2017

6. Better Relations With the Society - Business Ethics is needed to develop good relations
between business and society. The relationship of business with society has various
dimensions such as its relations with shareholders, employees, consumers, distributors,
competitors and government.

7. Buyers market - There has been a structural change in the concept of business. The
concept of profit has been gradually taken over by consumer satisfaction. The large scale
production and increased competitions in the market changed the business scene from a
sellers market to a buyers market.

8. Beneficial to Business and Society - Ethics suggests what is good and bad, right and
wrong, ethical and unethical, etc., to businessman. It also brings an element of honesty,
sincerity, fairness, and human touch to business activities.

THREE LEVELS OF BUSINESS ETHICS

the macro level: the role of business in the national and international organization of
society the relative virtues of different political/social systems, such as free enterprise,
centrally planned economies, etc., international relationships and the role of business on
an international scale

the corporate level: corporate social responsibility ethical issues facing individual
corporate entities (private and public sector) when formulating and implementing
strategies

the individual level: the behavior and actions of individuals within organizations

At the highest (macro) level, we ask the fundamental question of the role of business in
society and what governance model works best to deliver the most benefits in a moral and
responsible way. Morality itself is, of course a widely interpretable concept but for this purpose
we will assume a broad understanding: that of "proper behavior" and "knowing the difference
between right and wrong", without specifying what constitutes right and wrong. (This is a whole
debate unto itself and subject to cultural and individual relativism). Suffice it to say here that
morality sets the stage for ethics, and therefore the code of conduct by which business activity
is carried out and allowed to be carried out by national and international rules and standards.

At the corporate level, the interpretation of those rules and standards is often what defines
business ethics, affected by the specific circumstances and socio-cultural context in which the
business or public sector organization is operating. While all corporate entities in theory are
directly influenced by personal morality and ethics, in practice there is often a gap between the
behavior of individuals within the working environment and outside it. This, we would argue, is
one of the major factors leading to mistrust of big business, where the separation of ownership
and management is greatest, and so open to abuse. Even if directors/senior managers are not
 AQUINAS UNIVERSITY OF LEGASPI
Master in Business Administration
S.Y. 2016 - 2017

acting unethically, it is likely they would act differently if the money and the company about
which they are making decisions were their own.

At the individual level, this separation creates a distinct ethical model - business ethics -
which, depending on factors like personality, peer pressure and the socio-political environment,
can be closer or further away from the individuals own moral/ethical code of conduct. With
limited liability meaning individuals are protected this can affect smaller businesses too as the
consequences of one's actions has a greatly reduced impact on personal circumstances.
Clearly, every corporate entity is directly affected by the individual's moral and ethical stance -
and any difference between business and personal ethics is itself arguably an indictment of that
individual stance as it implies some level of double standards.

RESULTS OF ETHICAL CONDUCT

Builds trust
Promotes confidence
Validates relationships

EXAMPLES OF UNETHICAL CONDUCT

Accounting fraud
Deceptive advertising
Unfair competitive practices
Internet theft

SOURCES OF UNETHICAL BEHAVIOR IN ORGANIZATIONS

1. Overly aggressive financial or business objectives

2. Abusive & intimidating behavior (also called bullies behavior)
 AQUINAS UNIVERSITY OF LEGASPI
Master in Business Administration
S.Y. 2016 - 2017
3. Conflict of interest

- the most common ethical issue identified by employees.

- advance personal interests over others interests
- benefit self at the expense of the company

4. Fairness & honesty

- How employees use resources

- No harm to customers
- Accurate representations
- Disclosure

5. Communications

- False/misleading advertising
- Deceptive personal selling tactics
- Product safety and quality
- Unsubstantiated claims
- Product labelinG

6. Business relationships

- Relationships with customers

- Relationships with suppliers
- Relationships with co-workers

CHARACTERISTICS OF AN ETHICAL COMPANY

Respect and fair treatment of employees, customers, investors, vendors, community,

and all who have a stake in and come in contact with the organization
Honest communication to all stakeholders internally and externally
Integrity in all dealings with all stakeholders
High standards for personal accountability and ethical behavior
Clear communication of internal and external policies to appropriate stakeholders

Contributed by:
CHARISSE N. MEDIAVILLO

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