BUSINESS ETHICS

MEANING :
The word ethics is derived from the Greek word ethos which means character. Ethics is the discipline which deals with values relating to human conduct.

Business ethics may be defined as moral principles or rules of behavior which should govern the conduct of business enterprises. Business ethics are concerned with what is right and what is wrong in the behavior of businessmen. It provides a code of conduct which can guide businessmen in performing their jobs. Ethical behavior means adhering to moral principles and social rules, and behaving in a way people ought to behave. It implies just and fair conduct which goes beyond observing laws and government regulations.

NEED AND IMPORTANCE OF BUSINESS ETHICS :

Businessmen often face choice between ethical and nonethical actions. Should an enterprise employ the son of a government official to get the favour from the official ? Should a company entertain a potential customer lavishly so that he feels obliged to purchase from the company ? Every businessman will make his own choice in these situations depending upon his moral stance. In general, however, ethical behavior is becoming increasingly significant in business due to the following reasons :

1. Moral Consciousness: Like other members of society, businessmen are morally conscious and believe that ethical business behavior is good business as well as good citizenship. It is due to moral consciousness that majority of businessmen have avoided adulteration overcharging, spurious goods, black-marketing, false advertising, etc. long before the law declared such practices illegal. 2. Enlightened Self-Interest : In the long run, ethical business conduct is in the self interest of businessmen. If a business enterprise serves its customers with good quality and fair prices, treats its employees with respect

and dignity, rewards its shareholders with good dividends and capital gains and pays taxes honestly and in time, its goodwill, sales and profits will increase considerably. Business ethics ultimately results in customer satisfaction , healthy competition and social peace.

3. Social Pressure : Consumer forums, trade unions, shareholders association, and other social groups are exerting considerable pressure on business firms to abandon unethical practices like false claims in advertisements, profiteering , exploitation of labour, etc. Environmental pressure has made many businessmen realize that they use resources of the society and they must discharge their social obligations through ethical behavior. They must adhere to social values.

4. Legal Imperative : Business firms must observe the laws of the land irrespective of whether it is in their selfinterest or not. If businessmen disobey laws and government regulations, they are surely to lose their power, prestige and their very survival will be in danger. Laws reflect ethical conduct and businessmen must follow them in both letter and spirit.

SCOPE :

Business ethics covers each and every activity of business. All ethical issues in business may be classified into four categories as follows :
1)

Societal Level : At this level, ethical questions are raised about the overall working of the business system and its relevance to society. The questions asked may be : Should business assume social responsibilities ? Should the government intervene in business ? Is privatization justified ? All such questions relate to the basic nature of business system and its role in society. Stakeholders Level : Stakeholders in a business firm include its customers, employees, shareholders, creditors, etc. At this level, the main ethical question is how should business deal with its stakeholders ? Such a question pertain to various policy decisions of a business enterprise.

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Internal Policy level : At this level ethical questions about employer-employee relations are raised. These questions are concerned with rights of employees, workers participation in management, employee welfare, leadership styles, work rules, etc. Internal working of a business enterprise is involved in these questions.

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Personal Level : At this level ethics is concerned with how an individual should behave with other individuals in the organization. Should we be honest with one another irrespective of the consequences ? What should be our roles for satisfactory mutual relations ? These questions deal with day-to-day life in any business enterprise.