Introduction to Business Ethics

Prepared by: Priya Shukla Asst. Prof. SVMC

Morality
A person develops moral standard from his very childhood by observing the sources around him/her like family, friends, neighbor, society, media, even to specific situation etc. As child grow up his and start encountering more sources, he starts exhibiting moral standard, these standard are further modified as he grow up, starts experiencing real world. It is expected that we live by these moral standards that we develop and hold. If the standard matches that what is generally believed to be acceptable or morally good and right by the society we live, we called that person MORAL. Thus moral standard of the person reflect his or her attitude and orientation in which he grows, thinks, feels, behaves, judges and act in life

Characteristics of Moral Standards

1. Moral standard deals with the subject matter that have serious implication on society, environment and workplace. 2. Moral standards are self regulatory and cannot be changed by the laws and regulations of bodies including the government. 3. Moral standards are not guided by the self interest or other non moral standards and values. Those who uphold their moral do not hesitate to sacrifice their own self interest. 4. Moral standards are based on impartial considerations. One cannot take a moral stand if there is no impartiality in the decision making. 5. Moral standards are self-inflicting i.e. one who fails to commit would feel guilty and bad.

Moral reasoning for ethics

Development of our moral understanding goes with our maturity. What is moral at one stage of our life may not necessarily be moral at another stage. According to famous psychologist Lawrence Kohlberg, there are 3 levels of our development of moral understanding starting from childhood to maturity which can be further divided into two stage: Level I : Childhood stages: 1. Punishment and obedience orientation: Where physical consequences of an act wholly determine the goodness or badness. 2. Instrument and relatively orientation: when right actions become those that can serve as instrument

Level-II Conventional Stage

3. Interpersonal concordance orientation: where good behavior is living up to the expectations of those for whom one feels loyalty, affection and trust. Here the right action is what is expected of an individual by his family, friends. 4. Law and order orientation: where the sense of right and wrong comes from loyalty to the conventions of the society in particular and the laws of the nation at large.

Level-III Principled stage

5. Social contract orientation: when the person becomes aware that people hold different conflicting views and opinions and fair way of reach an agreement and path is of consensus after reasoning. They should be tolerated or adjusted with. 6. Universal ethical principles orientation: where right actions are came to defined in terms of moral principles which are chosen because of their logical comprehensiveness, universality and consistency. It is not rigid like law but flexible and can be changed for the welfare of the people and society. At this stage the individual reasons of doing right and wrong depends on his or her understanding of moral principles. At the later stage people can justify their deeds on the basis of their moral principles that are relatively

 Moral reasoning tries to place or project facts and figures that help one to judge human behaviour, policies and programmes. Two component of reasoning: 1. An understanding of what acceptable moral standard or value with regard to specific situation. 2. Evidence and information which shows that persons, policies or behavior have a kind of features which are required.

 Thus moral or ethical reasoning has 3 distinct features: 1. Identifying what constitute the moral standard. 2. Examining facts and figures concerning the policy, behavior and action under specific situation. 3. Arriving to a moral judgement

Features of Ethics
1. Ethics contains a set of principles of personal and professional conduct. 2. Existing norms and judgments may contain valuable insights but ethics tests them in terms of ultimate norms. 3. Principles not feelings give us ethics. 4. Ethics is not legal. 5. Ethical behavior in one society may be unethical in another society. 6. Ethics is involved in all human activities including business.

Development of Ethics
1. Greek Ethics: It deals with duties of a person as moral citizens of the nation. Famous advocate of this view are Socrates, Plato and Aristotle. 2. Medieval Ethics: It does not deal with duties of a person, rather it deals with increasing inner aspect of ones morality. 3. Modern Ethics: Believes in performing actions whose results bring good to us and others.
A. Theory of value or good B. Theory of the right

Business Ethics
Business ethics deals with determining rules or behavior of business enterprises. It determines rightness or wrongness of actions of businessmen. Management Ethics is a concept related to the concept of social responsiveness of a firm It is the set of moral principles that governs the actions of an individual or a group. Business ethics is the application of ethical principles to business relationships and activities. It governs the way a business runs and carries its operations.

Features of Business Ethics

1. It determines issues that business houses face in operating their activities. 2. It distinguishes between right or wrong, fair or unfair, just or unjust. 3. It is an important component of corporate social responsibility. 4. It demands that corporate houses should be good corporate citizens. 5. It demands that corporate houses should obey the law. 6. It is broader than law.

Unethical Behavior
1. Environmental competition 2. Inter organisational dependence
A. Bribery B. Kickback

3. Pressure for high performance 4. Poor financial performance 5. Labour dissatisfaction

Factors influencing business ethics

1. Legal concern 2. Government regulations 3. Industry and company ethical codes 4. Social Pressures 5. Tension between personal standards and needs of the organization.

Relevance of Ethics in Business

1. Business practices affect our lives considerably. Scandals and disasters like Bhopal gas tragedy can be disastrous for people within and outside the business organizations. 2. There is increasing awareness amongst society that business houses are the creation of society, and therefore must work for benefit of society. 3. Liberalization and globalization have united markets in the world into a single market. 4. Business houses that do not have ethical profile in favor of public at large may face threat of consumer boycotts. 5. Unethical business firm will invite government regulations and interference.

The code of ethics serves the following purposes:

1. It protects the interest of consumers as they know they are not being misled or misguided by false advertisements or price fixing. 2. It helps firms in obeying the law and treating people honestly and fairly. 3. It promotes employment ethics: fairness in hiring people, working conditions etc. 4. It helps in making valid contracts with third parties. 5. It ensures safety of investor dealing with firm. 6. It promotes healthy and fair competition amongst business firms in the same industry.

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