importance of business ethics assignment

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What Are Business Ethics & Why Are They Important?

• 27 Jul 2023

From artificial intelligence to facial recognition technology, organizations face an increasing number of ethical dilemmas. While innovation can aid business growth, it can also create opportunities for potential abuse.

“The long-term impacts of a new technology—both positive and negative—may not become apparent until years after it’s introduced,” says Harvard Business School Professor Nien-hê Hsieh in the online course Leadership, Ethics, and Corporate Accountability . “For example, the impact of social media on children and teenagers didn’t become evident until we watched it play out over time.”

If you’re a current or prospective leader concerned about navigating difficult situations, here's an overview of business ethics, why they're important, and how to ensure ethical behavior in your organization.

Access your free e-book today.

What Are Business Ethics?

Business ethics are principles that guide decision-making . As a leader, you’ll face many challenges in the workplace because of different interpretations of what's ethical. Situations often require navigating the “gray area,” where it’s unclear what’s right and wrong.

When making decisions, your experiences, opinions, and perspectives can influence what you believe to be ethical, making it vital to:

• Be transparent.
• Invite feedback.
• Consider impacts on employees, stakeholders, and society.
• Reflect on past experiences to learn what you could have done better.

“The way to think about ethics, in my view, is: What are the externalities that your business creates, both positive and negative?” says Harvard Business School Professor Vikram Gandhi in Leadership, Ethics, and Corporate Accountability . “And, therefore, how do you actually increase the positive element of externalities? And how do you decrease the negative?”

Related: Why Managers Should Involve Their Team in the Decision-Making Process

Ethical Responsibilities to Society

Promoting ethical conduct can benefit both your company and society long term.

“I'm a strong believer that a long-term focus is what creates long-term value,” Gandhi says in Leadership, Ethics, and Corporate Accountability . “So you should get shareholders in your company that have that same perspective.”

Prioritizing the triple bottom line is an effective way for your business to fulfill its environmental responsibilities and create long-term value. It focuses on three factors:

• Profit: The financial return your company generates for shareholders
• People: How your company affects customers, employees, and stakeholders
• Planet: Your company’s impact on the planet and environment

Check out the video below to learn more about the triple bottom line, and subscribe to our YouTube channel for more explainer content!

Ethical and corporate social responsibility (CSR) considerations can go a long way toward creating value, especially since an increasing number of customers, employees, and investors expect organizations to prioritize CSR. According to the Conscious Consumer Spending Index , 67 percent of customers prefer buying from socially responsible companies.

To prevent costly employee turnover and satisfy customers, strive to fulfill your ethical responsibilities to society.

Ethical Responsibilities to Customers

As a leader, you must ensure you don’t mislead your customers. Doing so can backfire, negatively impacting your organization’s credibility and profits.

Actions to avoid include:

• Greenwashing : Taking advantage of customers’ CSR preferences by claiming your business practices are sustainable when they aren't.
• False advertising : Making unverified or untrue claims in advertisements or promotional material.
• Making false promises : Lying to make a sale.

These unethical practices can result in multi-million dollar lawsuits, as well as highly dissatisfied customers.

Ethical Responsibilities to Employees

You also have ethical responsibilities to your employees—from the beginning to the end of their employment.

One area of business ethics that receives a lot of attention is employee termination. According to Leadership, Ethics, and Corporate Accountability , letting an employee go requires an individualized approach that ensures fairness.

Not only can wrongful termination cost your company upwards of $100,000 in legal expenses , it can also negatively impact other employees’ morale and how they perceive your leadership.

Ethical business practices have additional benefits, such as attracting and retaining talented employees willing to take a pay cut to work for a socially responsible company. Approximately 40 percent of millennials say they would switch jobs to work for a company that emphasizes sustainability.

Ultimately, it's critical to do your best to treat employees fairly.

“Fairness is not only an ethical response to power asymmetries in the work environment,” Hsieh says in the course. “Fairness—and having a successful organizational culture–can benefit the organization economically and legally.”

Why Are Business Ethics Important?

Failure to understand and apply business ethics can result in moral disengagement .

“Moral disengagement refers to ways in which we convince ourselves that what we’re doing is not wrong,” Hsieh says in Leadership, Ethics, and Corporate Accountability . “It can upset the balance of judgment—causing us to prioritize our personal commitments over shared beliefs, rules, and principles—or it can skew our logic to make unethical behaviors appear less harmful or not wrong.”

Moral disengagement can also lead to questionable decisions, such as insider trading .

“In the U.S., insider trading is defined in common, federal, and state laws regulating the opportunity for insiders to benefit from material, non-public information, or MNPI,” Hsieh explains.

This type of unethical behavior can carry severe legal consequences and negatively impact your company's bottom line.

“If you create a certain amount of harm to a society, your customers, or employees over a period of time, that’s going to have a negative impact on your economic value,” Gandhi says in the course.

This is reflected in over half of the top 10 largest bankruptcies between 1980 and 2013 that resulted from unethical behavior. As a business leader, strive to make ethical decisions and fulfill your responsibilities to stakeholders.

How to Implement Business Ethics

To become a more ethical leader, it's crucial to have a balanced, long-term focus.

“It's very important to balance the fact that, even if you're focused on the long term, you have to perform in the short term as well and have a very clear, articulated strategy around that,” Gandhi says in Leadership, Ethics, and Corporate Accountability .

Making ethical decisions requires reflective leadership.

“Reflecting on complex, gray-area decisions is a key part of what it means to be human, as well as an effective leader,” Hsieh says. “You have agency. You must choose how to act. And with that agency comes responsibility.”

Related: Why Are Ethics Important in Engineering?

Hsieh advises asking the following questions:

• Are you using the “greater good” to justify unethical behavior?
• Are you downplaying your actions to feel better?

“Asking these and similar questions at regular intervals can help you notice when you or others may be approaching the line between making a tough but ethical call and justifying problematic actions,” Hsieh says.

Become a More Ethical Leader

Learning from past successes and mistakes can enable you to improve your ethical decision-making.

“As a leader, when trying to determine what to do, it can be helpful to start by simply asking in any given situation, ‘What can we do?’ and ‘What would be wrong to do?’” Hsieh says.

Many times, the answers come from experience.

Gain insights from others’ ethical decisions, too. One way to do so is by taking an online course, such as Leadership, Ethics, and Corporate Accountability , which includes case studies that immerse you in real-world business situations, as well as a reflective leadership model to inform your decision-making.

Ready to become a better leader? Enroll in Leadership, Ethics, and Corporate Accountability —one of our online leadership and management courses —and download our free e-book on how to be a more effective leader.

About the Author

Business Education

Why Are Business Ethics Important? Types and Examples

19 Aug, 2024

Implementing business ethics extends beyond moral principles, driving financial success and reputation. Discover how ethical practices shape operations, boost customer loyalty, and prove crucial for modern business professionals.

What Are Business Ethics?

Business ethics are more than just a set of guidelines; they are the foundation of a corporate culture that values ethical behavior and decision-making. These principles govern how businesses and their leaders operate, ensuring that both legal and moral standards are upheld. In essence, business ethics encompass a range of practices - from adhering to environmental regulations to maintaining a strong ethics culture - that guide how a company interacts with its stakeholders, including employees, customers, and the wider community.

Incorporating business ethics into every aspect of operations helps corporations establish a framework for ethical conduct. This framework not only guides business decisions and ethical business practices but also fosters a positive reputation and corporate responsibility. For ethical businesses, it's not just about avoiding legal trouble or questionable ethics; it's about setting a standard for excellence in ethical operation and creating a legacy of good ethics.

Whether it’s through ethics education programs in the workplace or the development of ethical business leaders, the importance of business ethics reaches every corner of a company. They are the bedrock upon which ethical companies are built and are essential for ensuring that business practices align with moral and ethical beliefs.

Why Do Good Business Ethics Matter?

Good business ethics are pivotal in today's business world, impacting everything from a company's reputation to its financial health. When corporations establish business ethics, they set a standard for ethical behavior and decision-making. This is crucial not just for maintaining a good reputation but also for fostering trust among customers , employees, and other stakeholders.

The importance of business ethics extends to all facets of a business. Ethical companies tend to attract and retain top talent , as employees often seek workplaces where ethical standards are high and where their values align with those of the company. Ethical leaders play a significant role in this, embodying and promoting integrity and ethical principles in their daily operations.

Furthermore, a strong ethical foundation influences consumer perceptions. In an era where information is readily accessible, businesses that engage in unethical practices like insider trading or environmental negligence can quickly lose customer loyalty and face public backlash. On the other hand, companies known for their ethical conduct and corporate social responsibility can enhance their brand appeal and even gain a competitive edge in the market.

Lastly, a commitment to ethical behavior helps organizations navigate the complex web of laws and regulations governing business operations. By embedding ethical reasoning and a culture of compliance into their ethics programs, companies can mitigate risks associated with legal violations and unethical practices. In essence, good business ethics are not just about doing what's legally required, but about going above and beyond to promote a culture of ethical operation and corporate governance that benefits everyone involved.

6 Types of Business Ethics

Business ethics encompass a variety of practices and principles, each playing a vital role in fostering an ethical culture within a business organization. Understanding these types helps illustrate the importance of business ethics in shaping a company's identity and operations.

• Corporate Social Responsibility (CSR): This refers to a company's commitment to manage its social, environmental, and economic effects responsibly. CSR initiatives often include efforts to promote environmental sustainability, engage in community development, and ensure fair labor practices.
• Ethical Decision-Making: This involves choosing actions that are not just profitable but also morally sound. Ethical decision-making is crucial in situations like financial reporting, employee relations, and customer service, ensuring that ethical standards guide business decisions.
• Workplace Ethics: These are the ethical principles that govern behaviors and interactions within the workplace. They include promoting workplace diversity, ensuring employee loyalty, and maintaining a discrimination-free environment. Workplace ethics are vital for creating a respectful and productive work environment.
• Leadership Ethics: Ethical leaders set the tone for ethical behavior in the organization. They exemplify integrity, promote ethical principles, and encourage others to follow suit. Leadership ethics involve transparency, accountability, and a commitment to fair practices.
• Compliance and Governance: This type involves adhering to laws, regulations, and company policies. It encompasses areas like avoiding conflicts of interest, preventing insider trading, and ensuring financial honesty. Compliance is fundamental to maintaining company-wide integrity and avoiding legal trouble.
• Human Resources Ethics: These ethics cover aspects of employee management, including hiring practices, employee behavior, and performance evaluations. Ethical human resource practices ensure fairness and respect for all employees and are key to retaining talent.

Each type of business ethics plays a crucial role in shaping the ethical framework of a company. They are interconnected, reinforcing the overall ethical behavior and social responsibility of a business. By integrating these types into their operations, companies can build a strong foundation for ethical conduct, critical thinking, and corporate integrity.

How to Implement Good Business Ethics

Implementing good business ethics is a strategic process that requires commitment and active participation from all levels of a business organization. Here are key steps to ensure that ethical practices are integrated into the fabric of a company:

• Develop a Clear Ethics Program: An effective ethics program should outline the company's values, ethical principles, and standards. This program serves as a roadmap for ethical behavior and decision-making within the company. It should cover various aspects, including environmental responsibility, ethical business practices, and behavioral expectations.
• Leadership Commitment: Business leaders , including company leaders and management teams, must demonstrate a commitment to ethical behavior. They set the tone for an ethical workplace by modeling ethical behavior and promoting integrity. When leaders prioritize ethics, it encourages employees to follow suit.
• Employee Training and Engagement: Regular training on business ethics and company policies helps ensure that employees understand the importance of ethical behavior. Educational initiatives, such as workshops or online MBA programs focused on ethics, can reinforce this understanding. Engaging employees in discussions about ethical dilemmas and decisions fosters a culture of open communication and critical thinking.
• Create a Supportive Environment: Encourage an environment where employees feel comfortable reporting unethical behavior without fear of retaliation. Establishing clear channels for communication and feedback is crucial. This includes setting up systems for anonymous reporting and ensuring that concerns are addressed promptly and fairly.
• Regular Evaluation and Improvement: Continuously assess and improve the ethics program. This can be done through regular surveys, audits, and reviews of business practices. Learning from other businesses and best practices in the industry can help in refining the program.
• Promote a Culture of Social Responsibility: Encourage practices that go beyond just profit-making. This includes taking responsibility for the company's social and environmental impacts and engaging in community-oriented initiatives.

Example of Business Ethics

To illustrate the importance of business ethics in action, consider the example of a hypothetical ethical company, "EcoSolutions." EcoSolutions has made a name for itself not just for its innovative products but for its commitment to ethical business practices.

• Ethical Decision-Making: EcoSolutions is faced with a decision to use cheaper materials for their products, which would increase profits but have a higher environmental impact. Choosing to uphold their ethical standards, they opt for more sustainable, albeit costlier, materials. This decision reflects their commitment to environmental responsibility and ethical decisions in business operations.
• Promoting Integrity and Ethical Leadership: The CEO of EcoSolutions actively promotes integrity and transparency in all business dealings. This ethical leadership trickles down through the management team, fostering a strong bond based on trust and ethical behavior. Regular meetings are held to discuss ethical dilemmas and reinforce the company's values.
• Social Responsibility: EcoSolutions engages in various socially responsible business initiatives. These include community outreach programs and collaborations with educational institutions to offer internships and practical experience for students in online MBA programs .
• Ethical Workplace Practices: The company ensures a diverse and inclusive workplace , promoting equality and fairness. They have a well-rounded MBA curriculum for their employee development programs, emphasizing the importance of ethics in business.

Direct Engagement with Employees: EcoSolutions maintains an open-door policy where employees can directly communicate with leadership about ethical concerns. This promotes a culture of direct and honest communication, enhancing employee loyalty and satisfaction.

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• February 21, 2024
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What Are Business Ethics and Their Importance

Manaferra Content

In the contemporary business realm, the phrase “What are business ethics?” has garnered significant attention, reflecting a growing emphasis on ethical practices within corporate environments. As organizations adapt to changing social attitudes and stricter regulations, the need for ethical behavior is more crucial than ever. 

This blog post aims to break down the concept of business ethics and emphasize their significant role in contemporary business. It covers the basic principles, their impact on a company’s sustainability and reputation, and practical methods for integrating ethical considerations into decision-making. Exploring this topic will provide a deeper understanding of how business ethics contribute to trust, accountability, and long-term success in the business world.

The Definition Business Ethics

Business ethics refers to the set of principles and standards that guide the conduct of individuals and organizations in the business world. It involves making decisions based on moral values and principles rather than solely on legal obligations.

While legal requirements establish the minimum standards of behavior, business ethics extends beyond these mandates to encompass broader moral and social responsibilities. This includes fairness, honesty, transparency, and respect for all stakeholders, including employees, customers, suppliers, and the community. 

Ethical behavior in business not only helps in complying with regulations but also contributes to creating a positive business environment. When companies prioritize ethical conduct, they build trust and credibility with stakeholders, foster strong relationships, enhance their reputation, and ultimately contribute to long-term success and sustainability.

Why Are Business Ethics Important?

Business ethics play a crucial role in shaping a company’s reputation and fostering positive relationships with stakeholders. As an organization conducts business with integrity, transparency, and a commitment to doing right, its employees, customers, investors, and the wider community considers it more trustworthy and credible. 

Moreover, by prioritizing ethical behavior, organizations mitigate the risk of legal and reputational damage while also positioning themselves for long-term success. The success comes as ethical practices directly contribute to sustainable growth by attracting loyal customers, retaining talented employees, and attracting responsible investors.

Another crucial benefit of business ethical practices is that they cultivate the moral compass of future professionals, preparing them to navigate complex ethical dilemmas in their careers. By integrating ethics into the curriculum, students develop a deeper understanding of the importance of integrity and social responsibility, laying the foundation for personal and professional growth. In result, this will lead to a business environment that doesn’t work for the benefit of the shareholders, but all stakeholders involved. 

Ethical Principles

Understanding and adhering to key ethical principles is critical for guiding decision-making processes and promoting ethical conduct within organizations. These principles, including integrity, fairness, responsibility, and respect, serve as guiding values that shape behaviors and interactions across various contexts.

When companies and corporations conduct business with ethical principles in mind, their trust with stakeholders becomes stronger, as such, it contributes to long-term success and sustainability.  Let’s explore each of these principles in detail to understand their significance and practical application in organizational settings.

Integrity involves honesty, consistency, and adherence to moral values, even when faced with difficult decisions. It entails being truthful and transparent in all business dealings and maintaining consistency between words and actions.

For example, a company demonstrating integrity would openly disclose any potential conflicts of interest to its stakeholders, ensuring trust and credibility.

Fairness requires treating all individuals impartially and equitably, regardless of personal biases or interests. It involves providing equal opportunities and resources to all stakeholders and making decisions based on objective criteria.

An example of fairness in action would be a company implementing non-discriminatory hiring practices and offering fair wages and benefits to all employees, regardless of their age, gender, sexual orientation, race, ethnicity, or disability.

Responsibility

Another crucial ethical principle is responsibility which entails recognizing and fulfilling one’s obligations towards stakeholders and society at large. It involves considering the impact of decisions on all affected parties and taking proactive measures to mitigate any negative consequences.

For instance, a responsible corporation would implement environmentally sustainable practices to minimize its carbon footprint and protect natural resources.

Respect involves valuing the dignity, rights, and autonomy of all individuals and treating them with civility and consideration. It encompasses listening to diverse perspectives, fostering inclusivity, and honoring confidentiality

 An example of respect would be a company actively promoting diversity and inclusion initiatives and creating a supportive work environment where employees feel valued and respected.

Benefits of Practicing Business Ethics

Prioritizing ethics in business operations yields numerous advantages contributing to organizational success and sustainability. Recent research examining consumer attitudes toward brands regarding business ethics and Corporate Social Responsibility (CSR) underscores the significant impact of ethical conduct on brand attitude, emphasizing the importance of business ethics in shaping consumer perceptions. While this finding highlights the value of ethical behavior, it does not diminish the importance of CSR, which remains vital for firms and society.

Moreover, businesses prioritizing ethics often attract top talent-seeking employers with strong values, fostering a skilled and motivated workforce. Below we will discuss some of the ways ethical practices help organizations in their business. 

Ethical practices enhance employee morale

Ethical behavior can significantly enhance employee morale within an organization. Employees who perceive that their company operates with integrity and fairness feel valued and respected, leading to higher levels of job satisfaction and commitment.

This positive work environment encourages greater employee engagement and productivity, ultimately contributing to organizational success and sustainability.

Ethical practices improve innovation and creativity

Fostering an ethical organizational culture can also lead to increased innovation and creativity among employees. When individuals feel empowered to voice their ideas and opinions without fear of reprisal, they are more likely to collaborate freely and think outside the box.

This open and supportive environment cultivates a culture of innovation, where employees are encouraged to explore new possibilities and solutions to challenges. As a result, businesses that prioritize ethics not only uphold their reputation but also drive innovation and adaptability, ensuring long-term success in today’s dynamic business landscape.

Challenges in Upholding Business Ethics

While strides have been made in business ethics, maintaining ethical standards is still challenging for businesses. They encounter obstacles like prioritizing short-term financial gains, navigating the global business landscape, and balancing stakeholder interests.

Recognizing and addressing these challenges is crucial for promoting integrity and sustainability within organizations. Let’s explore the main hurdles businesses face in upholding ethical conduct.

Pressure for short-term financial results

While the evolution of business ethics is commendable, the path to ethical business conduct is challenging. One of the primary obstacles businesses face is the pressure to deliver short-term financial results, often leading companies to compromise on ethical standards in pursuit of immediate gains. The temptation to cut corners, engage in dubious practices, or prioritize profit over principles can be overwhelming, especially in competitive industries.

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This challenge underscores the importance of fostering a culture that values long-term sustainability over short-term gains and prioritizes ethical decision-making at all levels of the organization.

Complexities of the global business environment

Furthermore, the interconnected global business environment introduces complexities that demand heightened ethical awareness. Companies operating in multiple jurisdictions must navigate diverse legal and cultural landscapes, requiring a nuanced approach to ethics. This presents challenges such as ensuring compliance with varying regulatory frameworks, respecting cultural norms and practices, and addressing ethical dilemmas that may arise from conflicting cultural values.

Developing comprehensive ethical guidelines and training programs tailored to the specific cultural contexts in which a company operates can help mitigate these challenges and promote ethical behavior across borders.

Balancing stakeholder interests

Additionally, balancing the interests of various stakeholders, including shareholders, employees, customers, and the community, poses another significant challenge in upholding business ethics. Conflicting stakeholder interests may create ethical dilemmas, forcing companies to make difficult decisions that impact different groups differently.

For example, decisions related to layoffs, product pricing, or environmental policies may prioritize the interests of shareholders over those of employees or the community. Striking a balance between competing interests while upholding ethical principles requires careful consideration, transparent communication, and a commitment to stakeholder engagement and accountability.

Fostering an Ethical Business Environment

Fostering an ethical business environment necessitates developing and implementing effective strategies for establishing ethical policies in the workplace. This begins with creating clear and comprehensive ethical guidelines that outline the company’s values, principles, and expectations regarding ethical behavior.

Ethics training and education for employees are essential to ensure understanding and adherence to these policies. Providing ongoing training sessions, workshops, and resources helps cultivate ethical awareness and equips employees with the knowledge and skills to navigate ethical dilemmas. 

Furthermore, the importance of monitoring and enforcement mechanisms cannot be overstated in maintaining ethical standards. Regular audits, compliance checks, and internal controls help promptly identify and address potential ethical breaches. Implementing channels for reporting ethical concerns, such as ethics hotlines or anonymous reporting systems, encourages transparency and accountability within the organization. 

These mechanisms, when coupled with appropriate disciplinary measures for violations, help reinforce the importance of ethical conduct and ensure accountability at all levels of the organization. By integrating these strategies into the organizational culture, businesses can foster an environment where ethical behavior is valued, promoted, and upheld as a cornerstone of corporate integrity and success.

The bottom line

In conclusion, exploring business ethics reveals a crucial aspect of modern commerce. These ethics, rooted in principles like integrity, fairness, responsibility, and respect, shape organizational operations and decisions beyond legal requirements. Prioritizing ethical conduct enhances reputation and stakeholder relationships and fosters a positive business environment for long-term success. Despite challenges, such as attracting talent, boosting morale, and fostering innovation, upholding ethical standards underscores the essential role ethics play in today’s business landscape. Integrating ethical principles helps businesses navigate ethical dilemmas, build trust, and contribute to a sustainable, socially responsible business environment.

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Frequently Asked Questions

How does personal morality influence business ethics.

Personal morality influences business ethics by shaping individuals’ decision-making processes and guiding their behavior toward ethical or unethical actions in business contexts.

What are examples of ethical practices in business?

Examples of ethical practices in business include:

• Maintaining transparency in financial reporting;
• Giving a fair shot in job application people from different background;
• Adhering to environmental sustainability standards.

How do business ethics vary across countries?

Business ethics can vary across countries due to differences in cultural norms, legal regulations, and societal values. While some ethical principles may be universal, the interpretation and application of these principles can differ significantly between countries.

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Ethics in Leadership

Employee ethics, ethics by industry, benefits of business ethics, the bottom line, why are business ethics important a guide.

The system of moral and ethical beliefs that guides the values, behaviors, and decisions of a business organization and the individuals within that organization is known as  business ethics .

Some ethical requirements for businesses are codified into law. Environmental regulations, the minimum wage, and restrictions against insider trading and  collusion  are all examples of the government setting certain standards for business ethics. The concept of business ethics has also evolved over time .

Key Takeaways

• Business ethics involve a guiding standard for values, behaviors, and decision making.
• Running a business with ethics at its core from the top down is essential for company-wide integrity.
• Behaving in a consistently ethical manner can lock in a solid reputation and long-term financial rewards for companies.
• Employees tend to remain loyal to, and perform more effectively for, a company with a high standard of ethics.

A management team sets the tone for how an entire company runs on a day-to-day basis. When the prevailing management philosophy is based on ethical practices and behavior, leaders within an organization can direct employees by example. They can guide them in making decisions that are beneficial to them as individuals and to the organization as a whole.

Building on a foundation of ethical behavior helps create long-lasting positive effects for a company. One such effect is the ability to attract and retain highly talented individuals. Another is a positive reputation within the community.

Running a business in an ethical manner from the top down establishes stronger bonds between individuals on the management team. This, then, creates greater stability within the company.

By contrast, unethical behavior at the top can not only destabilize but even destroy a company. In one famous example, Enron Corporation , an American energy and commodity services company, collapsed after the Securities and Exchange Commission investigated its improper accounting practices and revealed that the company hid massive losses and liabilities while paying its executives millions. Thousands of employees suddenly were left jobless. Several executives were convicted of federal crimes. The company's unethical behavior also led to the downfall of one of the oldest and biggest accounting firms, Arthur Andersen.

When management leads an organization in an ethical manner, employees tend to follow in those footsteps. Employees can make better decisions in less time when business ethics are a guiding principle.

When employees conduct themselves in a manner that is based on honesty and integrity, the whole organization benefits. Employees who work for a company that demands a high standard of business ethics in all facets of operations are more likely to perform their job duties at a higher level. They're also more inclined to stay loyal to that organization.

Business ethics can differ from industry to industry, and nation to nation . The nature of a business's operations has a major influence on the ethical issues with which it must contend.

Ethics Concerning Clients

For example, an ethical quandary can arise for an investment brokerage when the best decision for a client and their money runs counter to whatever pays the brokerage the highest commission. A media company that produces TV content aimed at children may feel an ethical obligation to promote good values and eschew off-color material in its programming, even if there is money to be made by crossing that line.

Ethics Concerning the Environment

A striking example of industry-specific business ethics is in the energy field. Companies that produce energy, particularly  nonrenewable energy , face unrelenting scrutiny on how they treat the environment.

One misstep, whether it's a minor coal ash spill at a power plant or a major disaster such as the 2010 BP ( BP ) oil spill, can force a company to answer for its actions. Numerous regulatory bodies and society at large may pursue whether the company skirted its duty to protect the environment in an aggressive pursuit of higher profits. Even after the matter at hand has been resolved, the reputational damage to a company can endure for years.

A stringent, clearly defined system of environmental ethics is paramount for an energy company if it wants to thrive in a climate of increased regulations and public awareness on environmental issues.

Companies such as Amazon ( AMZN ) and Google ( GOOGL ), which conduct most of their operations online, are not scrutinized for their environmental impact the way energy companies such as BP and Exxon ( XOM ) are. However, when it comes to protecting their customers' privacy and security, their ethics are examined very closely. Many such companies have elaborate privacy policies that they make available online.

Ethics Concerning Privacy

A particular area in which technology companies must make tough ethical decisions is marketing. Advancements in  data mining  technology enable businesses to track their customers' movements online and sell that data to marketers or use it to match customers with advertising promotions.

Many people view this type of activity as a serious invasion of privacy. However, such customer data is invaluable to businesses, as they can use it to increase profits substantially. Thus, an ethical dilemma is born. To what extent is it appropriate to spy on customers' online lives to gain a marketing advantage?

The importance of business ethics reaches far beyond employee loyalty and morale or the strength of a management team bond. As with other business initiatives, the ethical operation of a company is directly related to profitability in both the short and long term.

The reputation of a business in the surrounding community, among other businesses, and for individual investors is a key factor in determining whether a company is a worthwhile investment . If a company is perceived to operate unethically, investors are less inclined to buy stock or otherwise support its operations.

Companies have more and more of an incentive to be ethical as the area of socially responsible and ethical investing keeps growing. The increasing number of investors seeking out ethically operating companies to invest in is driving more firms to take this issue more seriously.

In addition, changes in society and new technologies are raising fresh ethical concerns. The advent and ongoing development of artificial intelligence , for example, is creating new ethical dilemmas across a host of industries.

What Is Meant by Business Ethics?

Business ethics represents a standard of behavior, values, methods of operation, and treatment of customers that a company incorporates, and insists that all employees adhere to, as it functions from day to day.

How Do Business Ethics Benefit Companies?

By behaving according to a high ethical standard, companies can strengthen the drive to succeed internally among executives, management teams, and staff. Furthermore, companies can attract and keep investors who themselves are attracted to companies that align with their own standards of ethical behavior. In other words, business ethics can help companies build long-lasting, solid reputations and financial success.

Why Do Some Companies Have Bad Business Ethics?

That's a good question, especially when the financial advantages arising from a high degree of ethical behavior can be so great. A couple of reasons may be that some CEOs, management teams, or employees may feel it's just easier to work outside of an ethical standard. They may reach certain financial goals faster and not care about the long-term repercussions. It may seem to be less expensive to work without moral and ethical boundaries. Where money is concerned, good ethics can be forgotten.

With consistent ethical behavior comes an increasingly positive public image. There are few other considerations as important to potential investors and current shareholders . To retain a positive image, businesses must be committed to operating on an ethical foundation as it relates to the treatment of employees, respecting the surrounding environment , and fair market practices in terms of pricing, delivering value, and serving customers.

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Introduction

Chapter outline.

Ethics consists of the standards of behavior to which we hold ourselves in our personal and professional lives. It establishes the levels of honesty, empathy, and trustworthiness and other virtues by which we hope to identify our personal behavior and our public reputation. In our personal lives, our ethics sets norms for the ways in which we interact with family and friends. In our professional lives, ethics guides our interactions with customers, clients, colleagues, employees, and shareholders affected by our business practices ( Figure 1.1 ).

Should we care about ethics in our lives? In our practices in business and the professions? That is the central question we will examine in this chapter and throughout the book. Our goal is to understand why the answer is yes .

Whatever hopes you have for your future, you almost certainly want to be successful in whatever career you choose. But what does success mean to you, and how will you know you have achieved it? Will you measure it in terms of wealth, status, power, or recognition? Before blindly embarking on a quest to achieve these goals, which society considers important, stop and think about what a successful career means to you personally. Does it include a blameless reputation, colleagues whose good opinion you value, and the ability to think well of yourself? How might ethics guide your decision-making and contribute to your achievement of these goals?

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• Authors: Stephen M. Byars, Kurt Stanberry
• Publisher/website: OpenStax
• Book title: Business Ethics
• Publication date: Sep 24, 2018
• Location: Houston, Texas
• Book URL: https://openstax.org/books/business-ethics/pages/1-introduction
• Section URL: https://openstax.org/books/business-ethics/pages/1-introduction

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Business Ethics Lesson Ideas

Activities, discussion questions, and suggested readings.

We offer a growing list of lesson plan ideas and resources for high school and college students learning about business ethics.

Introduction to Business Ethics Beyond obedience to the law, what responsibility do corporations have to act ethically or in the social interest? This lesson introduces students to the concept of business ethics through the film "The Corporation." It includes discussion questions as well as suggested readings and additional resources.

What is the Role of the Corporation in Society? What is the best way to promote sustainable business practices and solve global problems? This lesson plan outlines an activity for students to create a business with a social goal. It also includes suggested reading and multimedia to learn more about best social business practices.

Ethics and Supply Chains How can multinational corporations effectively manage supply chains and promote sustainable practices throughout their operations? This lesson plan has a research activity for students, discussion questions, and accompanying resources.

Shell in Nigeria: Corporate Responsibility and the Ogoni Crisis ( Case Studies Series ) Using the response of Shell to the attacks on its record in Nigeria, this study examines the way in which one transnational corporation has reacted to demands that it accept responsibilities beyond maximizing profit.

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What Is Nature of Business Ethics And Why They Are Important?

Businesses run to earn revenue and make profits. Different organisations have different ways of earning revenue. While some of them sell goods, others make money by offering various services. Companies need people to work to perform their daily activities. These employees get paid for the work that they do. The company must follow certain moral principles and social values in all these functions . They must follow practices that will not harm their employees, their society, or their customers. It is called business ethics, and we will look at the nature of business ethics in this article. 

All HR professionals need to be familiar with business ethics. The Post Graduate Certificate Course In Human Resource Management is excellent for understanding this subject. You can learn more about this programme on our website. 

What Is Business Ethics?

Business ethics deals with a set of moral principles, social values and rules that companies must follow. Though their main aim is to make profits, companies must make sure that they make money by fair means. They must also ensure that their operations don’t cause any adverse effect on the society around them. Organisations are responsible for their customers too . The products they sell must not harm the users in any manner. The nature of business ethics also includes their responsibility to those working in the firm. 

Business ethics helps companies maintain a harmonious relationship with the people around them. The organisation must ensure that every employee follows these ethics and does not violate them. The best way to ensure compliance is to have a reward/punishment scheme. It will automatically make the staff members follow the rules. Companies must also have a system of checking whether employees are breaking any rules when dealing with people outside the firm for official purposes. Every HR employee must understand the nature of business ethics if the company’s employees must be happy.

Nature Of Business Ethics

It is also known as the features of business ethics, and every company must follow this without any deviation. 

• Code Of Conduct

Business ethics is a code of conduct that explains what a company can and must not do. It explains how an organisation must behave towards the society in which it operates. There are also regulations for how the firm treats its employees and customers. There is no scope for any establishment to deviate from this code of conduct. 

• Moral And Ethical Values

The nature of business ethics is that it is based on moral and social values. It means that the company must follow practices that will benefit society. It includes self-control, consumer protection, the welfare of society, service to society, fair treatment to social groups, not exploiting anybody connected to the firm, etc. Organisations must ensure that the products they supply don’t affect society in any manner.

• A Relative Term

We have seen that business ethics means operating as per moral and social values. These values are not the same for all societies, communities or countries. So the company must understand what is acceptable in their society and do it accordingly. The company must understand the morals and ethics in the location and follow them accordingly. 

• Protect The Interests Of The Society

It is one nature of business ethics that deals with protecting the interests of society. A business is supported by its stakeholders , employees, customers, business partners, etc. All these people live in the society around the company. When the organisation protects society’s interests, it indirectly takes care of all the above people who support the business in its operations. It must protect society by supplying quality products at reasonable prices. 

• Improves Business Social Relationship

Business ethics is a way of ensuring that the relationship between society and the business remains good. By following strict measures for the welfare of society, companies benefit from it. The business also benefits from society through the support they provide as customers, employees and investors . 

• Provides Basic Framework

Business ethics provides the basic framework for organisations to operate in. It provides the social, economic, cultural and legal limits within which the company must function. This nature of business ethics helps the company follow rules that are good for itself and society. 

Also Read: 10 Organisational Behaviour Challenges That Are Making Your Business Critical!

• It Is Voluntary

Following business ethics must be voluntary. The company should not be forced by any law to follow these moral and social values. When it does this by itself, the organisation earns a good name from society, customers and its employees. 

• Businessmen Should Be Educated

Not all business people are aware of a place’s social and moral values. They also don’t know what business ethics they must follow to earn the support of the society around them. This nature of business ethics makes it necessary for them to be educated in these values so that they don’t violate any of the directions. Trade associations must inform companies about the benefits they will gain from following business ethics.

• Business Ethics Is Not Against Making Profits

It is a misconception that most people have. Having ethics doesn’t go against the principles of business. All companies work to make profits, and nothing is wrong with it. Business ethics only demands that organisations earn profits by fair means. They must not cheat the customers, employees, shareholders or others to earn profits. 

• Good Employee Relationship

Companies need to maintain good relationships with their employees. They depend on the company for their livelihood, career and personal growth. The organisation and its employees must have a good relationship to benefit both. The company must ensure that the staff are paid a fair salary and are treated well . This nature of business ethics is very important for the progress of companies.

• Avoid Cheating And Fraud

Businesses must follow all the rules concerning their finances and ensure that all statutory payments to the government are made. Companies must also ensure that the shareholders are not denied their rightful share. They must not cheat the public with false promises or advertisements about their products.

• Help Save The Environment

The company must strive to protect the environment wherever there is an opportunity. It must avoid pollution and follow green practices even if they are not mandated by law. Such voluntary measures to protect the environment will earn the goodwill of society. It is one nature of business ethics that is very important these days when there is so much damage caused to the environment. 

• It Is Dynamic

Companies need to understand that business ethics can change from time to time. Many HR practices have been recently introduced to ensure that all employees get fair treatment. Newer regulations concerning environmental protection are being introduced daily. There are also new technologies that improve the safety of employees and ensure their well-being. Ethics can also change from region to region. Companies must understand this nature of business ethics and comply with new rules when formulated. 

• A New Concept

Business ethics is a relatively new concept. It is not enforced to the same degree everywhere. There are several countries in the world where ethics are unheard of, and businesses indulge in various practices that are harmful to society and the environment. Many governments are also not strict in enforcing various rules or checking whether all companies follow them. 

You will learn more about this topic in the Post Graduate Certificate Course In Human Resource Management offered by reputed institutions. More details about this course are available on our website. 

Scope Of Business Ethics

Ethics In Compliance

Various regulations govern companies in the country. All organisations must comply with these rules failing which they will be punished with heavy penalties. Most firms follow the rules due to fear of punishment. But companies that have good business ethics follow the rules because of a desire to be compliant. They follow the rules and stay updated with the latest regulations. The management monitors all the operations in the company to ensure there is no violation of rules in any department. 

Ethics In Finance

There are various areas in finance where companies are faced with ethical issues. This is one area that provides ample opportunities to violate laws. Companies with good ethics will avoid them. They will not give misleading financial analyses or manipulate their accounts. Such organisations don’t act in a manner in which the shareholders are cheated with wrong information or figures . These firms don’t show fake reimbursements to reduce their tax burden. They understand the nature of business ethics, and so avoid bribery or kickbacks. You will not find such establishments doing overbilling. 

Ethics In Human Resources

This is one department where there are ample opportunities to violate social values, and the HR department must ensure that this doesn’t happen. They should make sure there is no discrimination based on caste, age, gender, physical disabilities or appearance. Companies must also take care to prevent sexual harassment in the workplace. Employees must be allowed to represent their issues without fear. It is not correct for firms to shift financial risk to the employees through performance-based salaries. Companies need to understand the nature of business ethics and operate accordingly. 

Ethics In Marketing

This is the topic that deals with how a company markets its products. We can see various issues in the way firms market their product with false promises or assurances. Some companies also indulge in reducing the supply of products to the market, thereby raising the price. The content of certain advertisements hurts some sections of society. There are also misleading advertisements that cheat customers into buying a product. Companies must not use children wrongly to promote their products. Competition in the market must also be fair without damaging the reputation of other companies.

Ethics In Production

This is one area where there is much ambiguity about following fair practices. Various production practices could be dangerous to the employees. Companies must ensure that they change technologies and machines that can cause harm to the workers. The materials used in production must not include addictive or disease-causing. The manufacturing process in the company must not cause harm to the environment. A keen understanding of the nature of business ethics is essential to avoid such practices. 

Helps Control Malpractices

Business ethics have a direct influence on the working of organisations. They help us understand what is wrong and right in business. Ethics help companies lay down rules about what cannot be done. It also helps them decide penalties for violation of such regulations. The nature of business ethics also ensures that the company doesn’t indulge in malpractices like adulteration, black marketing, adjustments in weights or measurement or misleading advertisements. Ethics help the company supply good products at reasonable prices to the customers. 

Maintain Good Relationship With Employees

Companies need to maintain good relationships with employees. Staff members are vital for a company’s growth and development . Without their contribution, companies can’t achieve their business goals. This is why companies must look at employee welfare and ensure that their career goals are also met. It is the nature of business ethics to ensure good monetary benefits and working conditions for the employees. Companies will also ensure that there is no discrimination against employees on any basis. Promptly addressing employee issues helps the firm to maintain good relationships with them. 

Improves Customer Satisfaction

Customers are the most important entity of any business. Without them, companies can’t sell products and earn profits. The nature of business ethics is to lay down strict guidelines on how a company must be fair to its customers. Firms must sell good quality products at reasonable prices to the customer. They must also stand by the warranty and other assurances they give to their buyers. Business ethics guides the company to address customer complaints promptly and ensure quick redressal. This improves customer satisfaction and results in better business for the firm.

Improves Profitability

Business ethics forces every employee in the company to follow the rules. This means that there will be no waste of resources. When the staff members follow the guidelines laid down by business ethics, they will not indulge in any practices that bring loss to the firm. People will not misuse company property. They will not do anything to damage the reputation of the company. This will ensure good sales and revenues for the organisation. It is the nature of business ethics to follow the latest production practices that reduce wastage. All these contribute to the profitability of the company.

Also Read: What Is The Meaning Of Strategic Direction In HRM?

Helps Earn Goodwill

Goodwill is very important for all business establishments. It helps them capture more customers. Following business ethics is one way of earning goodwill in the market. By enforcing ethics, companies can provide better service to customers. Organisations with goodwill also attract the attention of better business partners who also follow ethics in their business. Such relationships will help the company spread their business. Creating a good image is another nature of business ethics , and this helps the company get new costumes with less effort. 

Enables Better Decision-Making

Every decision in a business is crucial as it can have effects throughout the organisation. This means that decisions must be made very carefully and with much consideration. Business ethics provides various guidelines within which decisions must be made. It makes this process easier for the management. It is not just the top management that is guided by business ethics. All employees are bound by them, and this means that decisions at all levels will be made respecting business ethics. This nature of business ethics helps companies make decisions that are fair and correct.

Protection Of The Society

One cannot separate the company and the society in which it operates. Both depend on each other. The company must ensure that it does good for society. Its customers come from the same society. This means that the company can flourish or fail as per society’s wishes. But that is not the only reason for organisations to support society. It is another nature of business ethics to protect society and help it in developmental activities. It is part of the firm’s social responsibility. Companies must also refrain from causing any harm to society. 

The above are just a few points that highlight the importance of ethics in business. You can learn more about how it helps business in the Post Graduate Certificate Course In Human Resource Management , the complete details of which are available on our website. 

Following ethics is very important for all businesses. It helps them perform well and safeguards their reputation. There are multiple benefits to following ethics, and these include getting good people to join the firm. Today’s youngsters look at how ethically a firm operates before joining it. Following those guidelines also helps the company retain good employees. Being fair to them and providing them with good facilities will earn their loyalty. It is good to learn about business ethics in detail so that you can help your firm follow them and benefit from them. 

More Information: 

What are HR Analytics and Metrics?

Hr analytics: what is it and how to use it.

Top 21 Human Resource Interview Ques & How To Ans Them

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Business Ethics

Business ethics refers to the moral principles or rules of behaviour which should govern moral conduct of businessmen. They suggest the ways and means of running a business which are morally justified and are influenced by expectations of society, employees or government.

Business ethics refers to the moral standards which business persons are expected to follow. It simply means ethics as applied to business affairs. It represents what is ethically permissible in business. Business ethics is a set of norms and values that guides managers and employees in business enterprises.

“Business ethics is a study of moral standards and how these apply to the system and organisation which provide goods and services to society. Business ethics is specialised study of moral right or wrong. It concentrates on moral standards as they apply to business policy, institutions and behaviour.” — Manuel G. Velasquez.

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1. Introduction to Business Ethics 2. Definitions and Meaning of Business Ethics 3. Concept 4. Sources 5. Need 6. Elements 7. Types 8. Factors 9. Principles 10. Importance 11. Causes 12. Ethical Decision Making 13. Relevance of Ethics in Business 14. Limitations.

Business Ethics: Definitions and Meaning, Concept, Factors, Principles, Sources, Need, Elements and Importance   

• Introduction to Business Ethics
• Definitions and Meaning of Business Ethics
• Concept of Business Ethics
• Sources of Business Ethics
• Need of Business Ethics
• Elements of Business Ethics
• Types of Business Ethics
• Factors of Business Ethics
• Principles of Business Ethics
• Importance of Business Ethics
• Causes of Business Ethics
• Ethical Decision Making of Business Ethics
• Relevance of Ethics in Business of Business Ethics
• Limitations of Business Ethics

Business Ethics – Introduction

The word ‘ethics’ is derived from the Greek word ‘ethos’ which means character, norms or morals of the community. Ethics should be based on broad guidelines of what should be done (i.e. what is right) and what should be avoided (i.e. what is wrong).

Ethical standards are often enacted into laws. However, ethical behaviour is above the behaviour required by law. Ethics are not mandatory like law. They are based on broad guidelines of what should be done and what should be avoided. As ethics are not compulsory to be followed, they are not punishable under law (except some unethical aspects like adulteration, black marketing, etc.)

In simple terms, business ethics are moral principles that define right and wrong behaviour in the world of business. A businessperson behaves ethically when her or his actions are upright and serve the interest of society.

Examples of Business Ethics:

(i) Selling genuine goods at reasonable prices.

(ii) Paying taxes with honesty.

(iii) Giving fair treatment to workers.

(iv) Using fair weights for measurement of commodities.

In the modern competitive world, it has been widely recognised that ethics are essential for every business and for the progress of any society. Ethical business behaviour improves public image, earns people’s confidence and trust and leads to greater success.

Recently, there has been an increasing awareness, and more importantly increasing interest in the field of Business Ethics. This is indeed a very welcome trend! In fact, perhaps, there has not been any time in the history of business development when the concepts and an understanding of the nature of business ethics has been so urgently needed, so urgently felt, never before had the need for ethical practices in business so widely felt.

After the epoch making effects of the Industrial Revolution on business and the subsequent framing of labour legislations for protecting employees and the laying down of their rights and duties in legal terms, there has been one area which has caused concern repetitively to both business academicians and business practitioners alike, and that has been the ethical way of conducting business.

Previously, it was thought that business ethics is a contradiction of terms. The popular concept was that if it is business, then it cannot be ethical, and if it is ethical at all, it does not represent business. Fortunately, there were people in the world, even at that time, significant people, who disagreed with this philosophy-the notable amongst them being our very own J.R.D. Tata- and it is mainly due to the efforts of these significant people that Business Ethics has reached the proper place in business that is due to it.

Business Ethics – Meaning and Definitions: Suggested by Manuel G. Velasquez, Carroll Buchholtz, Goerge A. Steiner and Frederick and Lawrence 

“The term business ethics refers to the system of moral principles and rules of conduct applied to business.”

Business being a social organ shall not be conducted in a way detrimental to the interests of society and the business sector itself.

There is no unanimity of opinion on what constitutes business ethics. There are no separate ethics of business but every individual and organ in society should abide by certain moral order.

Commonly Advocated Business Ethics:

Premium non nocere (not knowingly do harm), this ethic implies that a professional should carefully evaluate his decision and ensure that his actions will not produce negative effects. This code rules out all antisocial business practices.

Premium non nocere encompasses most business ethics.

The imp ortant ethical principles that a business should follow are as follows:

(i) Do not resort to hoarding, black marketing or profiteering.

(ii) Do not deceive or cheat customers by selling substandard or defective products, by under measurement or by any other means.

(iii) Do not destroy or distort competition.

(iv) Do not tarnish the image of competitors by unfair practices.

(v) Make accurate business records available to all authorised persons.

(vi) Ensure sincerity and accuracy in advertising, labelling and packaging.

(vii) Restrain from secret kick-backs or pay offs to customers, suppliers, administrators, politicians etc.

(viii) Pay taxes and discharge other obligations promptly.

(ix) Do not form carte agreements, even informal to control production, price etc. to the common detriment.

(x) Ensure payment of fair wages to and fair treatment of employees.

Trade associations can play an important role to promote business ethics. These associations can promote business ethics in three important ways.

i. Education and Persuasion:

The trade associations can educate and persuade the members in the importance of and the need for having business ethics. The members should understand that if every businessman follows business ethics, all of them will be benefitted and there would be an improvement in the general image of the business community in the eyes of the public.

ii. Code of Ethics:

Trade associations should formulate a code of conduct, which also contains a code of ethics, for their members. The code of conduct will guide and regulate the conduct of business by the members.

iii. Moral Sanctions:

“Sanctions refer to the ways in which moral conduct is rewarded or misconduct is punished.” Such incentives and punishments should be expected to promote business ethics. Incentives can be in the form of public recognition and reward for high moral standards. Punishment way is in the form of debarring a member for a serious violation of the code of conduct.

“Business ethics is a study of moral standards and how these apply to the system and organisation which provide goods and services to society. Business ethics is specialised study of moral right or wrong. It concentrates on moral standards as they apply to business policy, institutions and behaviour. “ — Manuel G. Velasquez

“Business ethics are concerned with good or bad, right to wrong behaviour and practices that take place within a business. The concept of right or wrong includes questions of justice, fairness and equity.” — Carroll Buchholtz

“Business essentially is a means of society to used scares resources to produce in an efficient manner those goods and services which society wants and is willing to pay.” — Goerge A. Steiner

“Business ethics is the application of general ethical ideas to business.” — Post, Frederick and Lawrence

“Business ethics is the branch of ethics that examines ethical rules and principles within a commercial context; the various moral or ethical problems that can arise in a business setting; and special duties or obligations that apply to persons who are engaged in commerce.”

Business Ethics – Concept

Concept of business ethics generally applied to the business having separate entity from its owners. However, these separate entities are not involved in the decision making process. Managers at different levels are required to take decision within the business entity. Top level managers take decisions that affect the organisations policies and that determine how lower level managers confront decisions that involve applying organizational policies to their day to day circumstances.

Since managers are taking decisions it is their sense of right and wrong that ultimately determines the extent of corporate ethical environment. Business ethics is a form of applied ethics or professional ethics that examines ethical principles and moral 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 business organizations as a whole.

The study of ethics in management addresses individual decisions in the context of certain rules of conduct or moral standards. Ethical behaviour then refers to individual conduct that is considered “right” or “good” in the context of a governing moral code. It confirms not only to the law, but also to a broader set of moral principles expected by all or by a segment of society. In contrast, unethical behaviour covers any individual conduct that is “wrong” or “bad” within this moral code. It may or may not be illegal, but it falls short of the broader set of moral principles expected by society.

Human beings are the active segment of the business. The companies cannot and shall not be immune to ethics. The goal of business is to provide goods and services to customers and earn profits. The business organisation has to ensure the supply of goods and services at reasonable price and of a reasonable quality.

A society consists of people who have common ends and whose activities are organized by a system of institutions designed to achieve these ends. Family, community, society, schools, religion, temples, government etc., are the basic institu­tions which are the base for formulation of values and moral standards.

These institutions help in designing the sub-systems:

(a) Production of the goods and services to the members of society want and need, and

(b) Distribution of these goods and services to the various members of society.

Thus, economic institutions determine who will carry out the work of production, how that work will be organized, what resources that work will consume, and how its products and benefits will be distributed among society’s members. Business organisations are the economic institutions through which people in modern societies carry on the tasks of producing and distributing the goods and services.

They provide the fundamental structures within which the members of society combine their scarce resources – land, labour, capital and technology – into usable goods, and they provide the channels through which these goods are distributed in the form of consumer products, employee salaries, investors’ return, and government taxes.

Thus, the business ethics is a study of moral standards and how these apply to the systems and organizations through which modern societies produce and distribute goods and services, and to the people who work within these organizations. It includes not only the analysis of moral norms and moral values, but also attempts to apply the conclusions of this analysis to that assortment of institutions, technologies, transactions, activities, and pursuits that we call business enterprises.

Business Ethics – 4 Major Sources: Values and Goals, Values Forming Institution, Work and Career and Professional’s Codes 

Major sources of ethical behaviour of business are as follows:

Source # 1. Values and Goals:

There is an important relationship between goals and values of an organisation. The goals of the organisation are influenced by leadership, knowledge and skills, amity, influence and power and survival. All these factors change the goals of the organisation and consequently business expects values based behaviour from their individual managers.

Source # 2. Values Forming Institution:

The life and development of society produce values. There are so many organizations like family, school, state and religion which are the basic sources of values for individuals. The basic purpose of values formation by these institutions is that they prescribe what is good or bad for an individual. And at a later stage inculcation of these values enable the managers to work for values in their own business.

Source # 3. Work and Career:

Work consists of the tasks or responsibilities associated with the job or position in an organisation. In organisation, the work is organized and directed for the achievement of desired end. An individual’s experience over a period of time constitutes his career work and career creates special values that give unity, cohesion and meaning to persons and groups.

Source # 4. Professional’s Codes:

In recent days, more and more appointments of professionals are being by the business houses. These professionals are required to go by the values and code of conduct prescribed by the relevant professional institutes and associations. Professional’s codes are the sources of ethical norms for managers in business organizations.

These codes are consistent with customs, beliefs, social values, public laws and generally desirable behaviour. The Institute of Chartered Accountants of India, Institution of Engineers, Institute of Company Secretaries of India and All India Management Association etc. have prescribed a set of code of conduct for their members.

Business Ethics – Needs

The ethical behaviour of corporate leaders/managers is being put to debate and discussion everywhere. Issues such as corporate scandals, corruption at high places, managerial misconduct, inflating profits, deceiving customers, withholding crucial facts, misusing company property, copyright violations etc., have tarnished the image of business as well as business managers in re­cent times. There is, therefore, a big question mark over the public face of big corporations. Unethical companies have collapsed under their own weight.

Precisely for this reason, ethical issues cannot be dismissed as trivial issues and demand attention due to the following reasons:

i. If ethics are missing, business and society as a whole cannot flourish.

ii. Likewise, when job values are in conflict with individual expectations, productivity suffers. The job-holder remains unhappy and discontented.

iii. If the organisation fails to project a healthy image of itself in society – its quality, service and customer satisfaction – its very existence may be in danger. A positive public image, on the other hand, can attract customers who might view such an image as desirable.

iv. When the image takes a dent, the company may lose market share fair­ly quickly because customers will not like to buy the products of such companies.

v. Again, where companies are said to be behaving unethically, the public is more likely to seek increased governmental intervention and regu­lation. In short, ethical concerns are of vital importance to individuals, organisations and the society in general and cannot be discounted or slighted away as unimportant and unnecessary.

Business Ethics – 5 Main Elements

Ethical business behaviour is beneficial for both the business enterprise and society. Business can promote ethics in its day-to-day working.

The essential elements of business ethics are as under:

Element # 1. Top Management Commitment:

Top management plays a crucial role in guiding the entire organisation towards ethical behaviour. Top level executives (CEO, Directors, etc.) must be strongly committed towards ethical conduct. They should guide and encourage employees to follow ethical behaviour.

Element # 2. Publication of a Code:

Ethical enterprises often defines the principles of conduct to be followed by entire organisation. They are in the form of written documents and are termed as ‘Code’. The ‘code’ generally covers areas like honesty, adherence to laws, product safety, healthy working environment, fair business practices, etc.

Element # 3. Establishment of Compliance Mechanisms:

The business enterprise should establish suitable mechanisms to ensure that actual actions of organisational members comply with firm’s ethical standards. For example, enterprise must ensure that values and ethics are followed in recruitment, selection and training. Similarly, there should be efficient communication system so that employees can freely report incidents of unethical behaviour.

Element # 4. Involving Employees at All Levels:

Employees must be involved in the process of developing ethical programmes as ethical policies have to be implemented by them only. For example, small groups of employees can be formed to discuss the important ethics policies of firms and to examine their attitude towards such policies.

Element # 5. Measuring Results:

Although, it is very difficult to accurately measure the results of ethics programmes, the firms should periodically verify and audit the extent to which the ethical practices have been followed. Top management should also discuss the result with employees in order to decide the further course of action.

Business Ethics – Top 2 Types: Normative and Business

All individuals, irrespective of their vocation, are concerned with ethics. Ethics refer to the principles of right and wrong, and moral duty and obligation that are accepted by an individual or a social group. Personal ethics relate to the rules and values that individuals follow to live and lead their life. Accounting ethics relate to code of accepted accounting practices and rules that are to be adhered to in case of company accounts.

Since ethics emanate from philosophy and not science, there is no singular correct answer to the question ‘is this ethical?’. As such there are different views of ethics that can be applied to evaluate whether a particular decision or behaviour is ethically acceptable or not.

Managers while performing their roles in pursuit of achievement of corporate goals have to compete for getting information and resources, and influence employees and other stakeholders. What matters the most is the criteria and principles governing morality and acceptable conduct of business.

Type # 1. Normative Ethics :

There are three types of moral theories pertaining to normative ethics—utilitarian theory, theory based on rights, and theory of justice. Utilitarian theory suggests that plans and actions of managers should give rise to greatest benefit and good to the largest number of people. Theory of rights emphasize that all people have rights while working in an organized group, or governmental body by law or tradition or nature.

As per the Constitution of India, people have fundamental rights to equal­ity, right to particular freedom, cultural and educational rights, right to freedom of religion, right against exploitation, and right to constitutional remedies. The theory of justice emphasizes that decision-makers’ approach to problem-solving should be based on and guided by fairness, equity, and objectivity.

i. Utilitarian View :

The utilitarian view focuses on the welfare of the greatest number of people. It implies the greatest good for the greatest number as a criterion for weighing and evaluating decisions. Therefore, the decision that benefits the greatest number of people would be the decision of choice. This decision can be viewed as ethical as per utilitarian view, even if few people are adversely or negatively affected by it.

ii. Rights View :

The rights view focuses on the premise that individuals have basic rights that must be protected, irrespective of associated cost to the society or to the organization. The protection of individual’s rights is the main concern as per the rights view.

iii. Justice View :

The justice view is grounded in the idea that rules of organizational or societal existence must be imposed equitably to all. The focus is making a decision that is objective, without prejudice to emotions, and fair to everyone involved.

Type # 2. Business Ethics :

Business ethics relate to true and honest practices that are adhered to in the conduct of business in various areas of operation, such as advertising, competition, public relations, social responsibilities, consumer liberty and independence, and behavioural attributes of a corporate entity in its operations in home country and abroad.

Unethical practices leading to temporary business gains are becoming more and more prominent in the present context. Business houses attempt to gain competitive advantage to improve their profits by taking recourse to unethical acts, such as insider trading, bribery, unethical accounting practices by providing incorrect information to customers and investors, and using wrong means to influence people in power.

Managers by being dishonest to customers and colleagues try to take advantage of the situation. Enron, WorldCom, and Tyco International are some of the recent cases from the corporate world where the management manipulated company data for personal gains, thus leading to the collapse of these companies. As a result, investors who had put in their hard-earned money lost all they had invested.

These incidents have created a greater debate in favour of business ethics. The need for profits through values and long-term sustained growth requiring adherence to ethical business practices is being realized more and more by managers. ‘There are two big driving forces behind the growth of the ethics industry – Sarbanes-Oxley Act 2002 and the USA sentencing guidelines.

The debate has shifted from whether to be ethical to how to be ethical. Five years ago, the debate was theoretical. Now, corporate governance is an important part of the analysis on Wall Street’, says Michael Connor, publisher of the magazine Business Ethics. An example of Coca-Cola, the way it reacted and responded to the challenges posed by public movement, is given here.

Business Ethics – 10 Important Factors

Business ethics reflects its responsibility, authority and dignity. So, the business organisation wants to conduct its business without affecting the interest of society and the business itself by assuming responsibility, exercising authority and maintaining dignity. But there are some factors affecting the observation or adoption of business ethics.

They are briefly explained below:

1. Unhealthy competition – Businessmen adopt unfair trade practices to have an edges over other competitors. This will ruin business in the long-run. Unhealthy competition is not preferred by gentleman-businessman.

2. Abnormal profit motive -The very purpose of starting a business unit is to earn profit. Only a lesser amount of profit is earned during the initial period of business. But, the businessman wants to earn more profits by economising establishment expenses.

3. Political interference – Political parties approach the businessman to get donation. Now, the businessman is not ready to deny it as it would affect the smooth running of business. The donation given to a political party is considered unnecessary expenses from the business point of view. This will affect profit and the smooth running of business.

4. Political uncertainty – The policy of government affects the business ethics to some extent. If a number of governments are in power for short periods, there is every chance for changes in the policies of the government. A Stable Government alone does not affect business ethics.

5. Unjust legislation – An act is passed only after thorough discussion. But, the person who participates in the discussion does not know the practical difficulties and practices and no business experience. So, a legally right practice may not be ethically right.

6. Corruption – A business is regulated by the government through its officials. Straightforward and able officials are working in the government departments. However, the approach or behaviour of some government officials are not appreciated by the businessmen.

7. Lack of ethical attitude – A businessman wants to stand out distinctly from other fellow businessmen. At the same time, he does not prefer to practice business ethics inspite of his sound knowledge of them.

8. Lack of education – Here, education refers to the knowledge of ethical values. Businessman wants to follow business ethics strictly but he does not know what is the business ethics relating to his business.

9. Non-Co-operation of workers – Workers or employees do not care about the business ethics. They want, just, to do their work as quickly as possible for remuneration. The impact of non-adoption of business ethics affects the business and not the workers or employees.

10. Red-tapism – The existence of red-tapism also affects the business ethics. Business unit should get prior permission of the government for all its proceedings at every stages of development. Red-tapism is found to be at its maximum in the issue of licenses and in the taxation policy.

Business Ethics – 9 Main Principles: Fair Advertising, Competence, Self-Regard and Welfare, Informed Consent, Freedom to Withdraw and a Few Others  

Many professional bodies have developed their own ethical codes. Managers should be familiar with the relevant ethical codes of their vocation and country.

Most ethical codes cover nine main points:

1. Fair advertising

2. Competence

3. Self regard

4. Informed consent

5. Freedom to withdraw

6. Confidentiality

7. Respect for social codes and multicultural sensitivities

8. Professional relationships between colleagues

9. Principles of fees and financial arrangements

Principle # 1. Fair Advertising:

There is nothing wrong with advertising and promoting goods and services. Indeed adver­tising increases market size, which eventually leads to economies of scale and less expensive products. However, advertising needs to be fair, accurate and socially responsible.

In general:

(a) Qualifications, training and affiliations should be represented accurately.

(b) Information should not be withheld in order to promote misunderstandings.

(c) Employees of the press, radio television or other media should not be paid in return publicity. Paid advertisements should be clearly identified as such.

The principle of fair advertising extends to the statements of others – especially those who are paid to promote the service or product. If they make a deceptive or full statement on behalf of an organisation the organisation must make reasonable efforts to issue corrections.

Principle # 2. Competence:

The principle of competence means that managers should operate to high technical and professional standards. Difficult decisions are often necessary and cannot be shirked. The managers who make them should be competent and qualified. They should not get involved in situations where they could not cope should things go wrong. This means being able to cope with the worst case. A key to observing this principle is to recognise one’s own limits and operate within them.

In a changing world, this principle also imposes the need to extend competence. It is relatively easy to extend personal competence by training and development. The main dif­ficulty is obtaining experience in a way that does not harm others.

Principle # 3. Self-Regard and Welfare:

Human dignity should be upheld. People should not be harmed except in very exceptional circumstances. This includes psychological harm. Actions involving humiliation, embarrass­ment and harm to people should be avoided. If such tactics seem absolutely necessary a second opinion should be obtained.

This may be provided by an impartial senior colleague or by an “ethics committee”. In this context, degradation or embarrassment must be seen through the eyes of lay people, not through the eyes of managers or professionals who may have become blase or burnt out after years of work in the field.

Principle # 4. Informed Consent:

People have the right to know what they are letting themselves in for before they make any significant comment.

They should have reasonable information on:

(a) The processes to be used

(b) The uses to which the information will be put

(c) The “ownership” of information

(d) The identity the people and organisations involved

Principle # 5. Freedom to Withdraw:

People are expected to keep agreements that have been willingly agreed. However, there may be a problem over the definition of the term “willing”. For example, is a parent taking out a second mortgage in order to buy medical treatment for their child a willing vendor? However, rather different rules apply to professional services and participation in experi­ments. People are free to withdraw from a professional relationship after giving due notice and paying appropriate fees. People are free to withdraw at will from experiments.

Principle # 6. Confidentiality:

In the vast majority of circumstances, information obtained on a confidential basis should not be divulged to others without explicit, preferably written, consent.

There are, however, some situations where the principle of confidentiality should be breached. They include situations where people are likely to be a danger to themselves or others. They also arise when people are involved in illegal activities. Even in these cases a second impartial opinion should be sought. Information should only be disclosed to auth­orities when there is clear legal authorization. In almost all circumstances the law must be obeyed – even if you have formed your subjective opinion that the law of the land is silly!

Principle # 7. Respect for Social Codes:

People should show sensible regard to the social codes and moral expectations of the com­munity in which they work. For example, an atheist doing maintenance work in a monastery should not engage in blasphemous behaviour that causes gratuitous offence. If one cannot be tolerant and courteous to the people in an organisation it is better not to accept work in that organisation in the first place.

Principle # 8. Relationships with Others:

A final set of ethics covers relationships with others. Many aspects of relationships with others are covered elsewhere. However, it is worth pointing out that managers and pro­fessional workers should avoid body contact with employees or clients other than customary greetings such as shaking hands or giving “a pat on the back”. Any form of activity with clients which could be construed as sexual or likely to reduce objectivity must be avoided.

Ethics relating to professional colleagues usually concern boundaries and roles. A general principle is to agree, in advance, an orderly, explicit arrangement concerning roles, rights and obligations. Harassment of other people, especially junior colleagues, should be avoided. A professional worker should avoid interfering with or inhibiting the work of another professional. While the ideas, theories and data of another person can, and should be, scrutinised, personal “ad hominem” attacks should be avoided.

Principle # 9. Fees and Financial Arrangements:

There is a cardinal ethical principle concerning fees- fee structure and terms of payment should be made clear during, or immediately after, an initial meeting or consultation. Sometimes broaching the matter of fees can be “delicate” and it is often appropriate to send a short letter confirming acceptance of an assignment together with a sheet setting out the fee rate, the estimated length of the assignment and the terms of the payment.

A client should be notified immediately if it is apparent that costs are likely to exceed the initial estimate. Fees for missed appointments and cancelled meetings often need clarification. As a general rule, some level of fee is appropriate for second and subse­quent cancellations.

Up to a limit, “pro bono publico” work should be encouraged. “Gift work” serves two main purposes. It provides a way of returning to society the gifts and benefits that have been received. This is in addition to paying taxes and levies. A clear policy of giving, say, 5 per cent of one’s time as “gift work” avoids ambiguities and helps defend against unreasonable demands.

Sinclair and Pettifor (1991) give a useful guide to the work that can be undertaken on a pro bono publico basis. Other ethical aspects of financial ethics include prompt payment of bills and, whenever possible, the avoidance of arrangements involving barter. Where barter is absolutely necessary, the items bartered should be translated into monetary terms and recorded.

Business Ethics – Importance

The importance of ethics in management are briefly stated here:

1. Almost all the required ethical norms and values may determine the rationality in role and behaviour of employees,

2. By way of ethical and morale standards the feeling of enthusiasm, devotion and loyalty may be developed,

3. By way of ethical norms, the managers may be able to create positive thoughts and approaches as well as to fulfill their commitments in proper way,

4. By means of ethical norms, we may be able to fulfill our responsibilities and accountabilities in due course,

5. The ethical norms and behaviour stimulate some appropriateness to formulate team spirit and team work among employees,

6. By means of ethics, the quality awareness and consciousness among employees may be developed,

7. By means of ethics, there will be an emerging trend to fulfill the social responsibilities which may be increased for the well-being of society,

8. By means of ethics, the applications of human values and aspects may be developed within overall managerial performances.

Business Ethics – 13 Major Causes: Professional Attitudes, Developing Learning Organisation, Informal Groups, Better Work Environment and a Few Others 

Within the field of management, whereas the human aspects are very much decisional and important part, the ethical norms and values are needful for better work environment. Here, some of the valuable causes are being responsible to follow the ethical norms and values in an organisation.

The causes are briefly stated here:

Cause # 1. Professional Attitudes :

Management is required to become a profession and as such, there is a need to introduce ethical code of conducts, learning attitudes, service motives, consultation services, efficient work performance and to fulfill the social responsibilities. All these things are duly based on the social and ethical values in managerial scenario.

Cause # 2. Developing Learning Organisation :

The learning and teaching attitudes are never ending at the employees’ platform. Every organisation is basically a learning organisation and the management may be able to make learning attitudes by some sort of social concepts and values etc.

Cause # 3. Informal Groups :

In order to create and develop the motivational aspects and inner feelings, there is a need to make some desirable behaviour to be based on informal relationship with different persons. As such, the informal relationship may be based on some value oriented aspects like devotion, enthusiasm and work spirit etc.

Cause # 4. Better Work Environment :

The ethical norms and better values are most beneficial to develop healthy work environment. The values like devotion, loyalty, trust and belongingness may develop the feeling of better opportunities as well as work environment.

Cause # 5. For Discipline :

In every field of management the discipline is a very important part in organisation. By different ways and means concerning of ethical values, the discipline may be observed with proper way.

Cause # 6. Encouraging the Cooperative Tendencies :

In any organisation, the ethical norms establish the spirit of cooperation. With the initiative role of ethics and values within any organisation, all the policies, decisions and rules becomes very clear, easy and acceptable and thereby the cooperative attitudes and tendencies may be developed.

Cause # 7. Better Work Performance :

Besides the emerging role of ethics and value based work culture, there are certain approaches and standards which may be developed to recognise the work, allotment of work and evaluation of work as well as better work performance by the employees. So, in order to make most congenial work performance, the ethical norms are much needful.

Cause # 8. Human Aspects :

Ethical values are concerned with humanity and human aspects. All the relevant norms of ethics are determined by the human behaviour and its aspects. The management is required to introduce and determine the concepts and viewpoints concerning the humanitarian grounds.

Cause # 9. Vision Forming :

In order to achieve goals and target in an appropriate manner there is a need to formulate fair and practical visions. Ethical norms develop the visualisation of a better state of goal achievements. It is based on vision forming in nature to be applied.

Cause # 10. Equitable Behaviour :

The ethical norms and attributes contributes to the standards and behavioural aspects to make fair and equitable conducts in an organisation. The ethics are based on some congenial views to make fair and equitable behaviour between individual and group of persons.

Cause # 11. Creativity :

The ethical norms and attitudes are being able to shape and organise the novel ideas towards creativity among people to make a better working and social environment. So, for creativity, it is needful to learn the lessons of Ethics.

Cause # 12. Fearlessness :

The ethical norms develop some feelings of fearlessness in attitudes and behaviour among employees. These norms may develop the fearlessness environment in organisation, so that the ethical norms are very much needful in it.

Cause # 13. Contentment :

It has constantly a path for satisfaction of mind with lot of happiness. Ethics provide a balancing norm towards a state of satisfaction. Every part of behavioural approaches makes a mind set up towards some feeling of satisfaction.

Business Ethics – Ethical Decision Making

In managerial tasks and practices, the decision making is an important part to make most applicable performance. In context of business management, the decision making process is invariably related with the responsiveness of management. It is required to make decisions to be based on fair and justified manner by managers.

Here, proper attention is given to involve the ethical norms and values in decision making process.

In order to formulate ethical decision making, we should consider the ethical norms in it as briefly stated here:

1. On the basis of intuition with inner feeling of decision taker, the appropriate decision may be considered,

2. The decision maker should have an open and full hearted views and opinions,

3. There is a need to make an open and without any barrier communication system,

4. The practicability of trial and error with refined concepts may be observed,

5. We should avoid misconduct and misbehaviour in decision making programmes,

6. Within the overall decision making programme, it is required to determine the responsiveness by means of effective accountabilities,

7. All the aspects should considered human values and relations,

8. Motivational work designs and standards can be given to top employees to discourage the negative issues,

9. Decisions should be based on fair, justified and equitable manners,

10. Within decision process the self-respect, self-discipline, self-actualisation and self-control etc., may be emerged,

11. Within decision process, the role and behaviour should be based and involved with rationality and logical viewpoints,

12. Pre and after decision making process, it is required to make the balancing form between ‘work’ and ‘life’ scenario.

Business Ethics – Relevance of Ethics in Business

Ethics are important in business for the following reasons:

1. Business practices affect our lives considerably. Scandals and disasters like Satyam Computers, Bhopal Gas Tragedy etc. can be disastrous for people within and outside the business organisations. There is, therefore, need for business houses to perform actions that are morally right and do not adversely affect the lives of people at large.

2. There is increasing awareness amongst society that business houses are the creation of society and, therefore, must work for the benefit of society. It should not be the sole responsibility of the Government to look after the desired social programmes (education, hospitals, employment, old age homes etc.). The changing social expectations make it necessary for business houses to follow ethical practices.

3. Liberalization and globalization have united global markets into a single market. Business houses operating in global markets must have common standards of employment which is possible if they have uniform code of ethics.

4. Business houses that do not have ethical profile in favour of public at large, may face the threat of consumer boycotts. This may threaten their survival and, therefore, the growing need for business ethics is relevant.

5. Globalization may be disadvantageous for small and weak economies. These economies can favourably operate in developed countries if they develop a common code of business ethics.

6. Unethical business firms will invite government regulations and interference. To avoid this, firms prefer to regulate their activities and address issues that are morally and ethically justified.

Law cannot regulate business dealings because law cannot always define what is desirable or undesirable. In case there is an ethical controversy, law is itself unclear about what is ethical. There are many actions that are unethical but not illegal at the same time. For example, it is unethical to hire one’s relative for the job when there is another more deserving applicant but it is not illegal. Law may forbid selling weapons to A who is a culprit but not to B who is an honest citizen (for self-defense).

In this case, selling to B is legal even if it is known that B will further sell the weapons to A. Selling to B is, thus, legal but not ethical. The code of ethics helps in solving such problems by uniformly laying down actions that should or should not be followed by business organisations. They determine rightness or wrongness of actions to be followed by all professionals or corporations.

The code of ethics serves the following purposes:

1. It protects the interests of consumers as they know they are not being misled or misguided by false advertisements or price fixing. They have faith in their dealings with business firms.

2. It helps firms in obeying the law and treating people honestly and fairly.

3. It promotes employment ethics: fairness in hiring people, promotions, conforming to health and safety issues by providing safe working conditions etc.

4. It helps companies in making valid contracts with third parties which are subject to compliance.

5. It ensures safety of investors’ dealings with business firms. Investors are not misled by false promises made by companies regarding increase in the value of their investment.

6. It promotes healthy and fair competition amongst firms in the same industry, which is beneficial for the public at large.

The code of ethics, thus, provides guidelines that helps business houses exhibit fair and just behaviour in specific circumstances. All firms behave alike and their behaviour is morally justified. There may be code of ethics that governs business practices (professional code), business decisions and policies (policy guidelines) and values and Link Company with the society (company creed).

Study of business ethics has been important since times immemorial but lately the subject of business ethics is gaining wide popularity. It has become a subject of interest and academic curriculum of most of the business schools today.

Business Ethics – 9 Major Limitations

There are different problems and limitations as arising from the performance and proper implementation of ethical norms and behaviour by way of management.

In brief, these are being stated here:

1. There are narrow and self-centered ideas and viewpoints of the managers and employees so that they can’t develop any perspective thoughts and approaches,

2. Somehow the managers does not pay proper and responsive behaviour with employees. By way of negligent and indifferent behaviour, the ethical behaviour can’t develop,

3. Within the dynamic and competitive environment, the managers are not fully able to observe and implement the code of conducts,

4 . It is being difficult to follow the provisions of the ethical code of conducts as there are no certain and sound provisions for penalising on them,

5. There are no provisions as well as lack of training facilities towards learning about ethical norms and behaviour,

6 . The management has not paid attention towards fulfilling the social responsibilities towards the society,

7. There is a lack of proper consultation and counseling services for employees for making the refined and positive thoughts and ideologies,

8. There is a lack of confidence, enthusiasm and devotional feelings and aspirations among employees,

9. There are certain personal differences as well as different cross cultural backgrounds. Thereby due to different conceptual viewpoints, the ethical norms can’t get proper platform.

It is stated that within the present scenario, the role of management is important to create and develop the congenial environment based on ethical norms. Some of the causes are responsible to study the ethical values in management. The causes are professional attitudes, developing learning organisation, informal groups, making discipline and human aspects etc.

Related Articles:

• Professional Ethics Prescribed for the Members in Practice
• Corporate Culture of a Company: Elements and Evaluation
• Social Responsibility of Business: Definitions, Concept, Objectives, Benefits and Kinds
• Top 3 Groups for Whom Social Audit is Conducted

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A New Model for Ethical Leadership

• Max H. Bazerman

Rather than try to follow a set of simple rules (“Don’t lie.” “Don’t cheat.”), leaders and managers seeking to be more ethical should focus on creating the most value for society. This utilitarian view, Bazerman argues, blends philosophical thought with business school pragmatism and can inform a wide variety of managerial decisions in areas including hiring, negotiations, and even time management. Creating value requires that managers confront and overcome the cognitive barriers that prevent them from being as ethical as they would like to be. Just as we rely on System 1 (intuitive) and System 2 (deliberative) thinking, he says, we have parallel systems for ethical decision-making. He proposes strategies for engaging the deliberative one in order to make more-ethical choices. Managers who care about the value they create can influence others throughout the organization by means of the norms and decision-making environment they create.

Create more value for society.

Idea in Brief

The challenge.

Systematic cognitive barriers can blind us to our own unethical behaviors and decisions, hampering our ability to maximize the value we create in the world.

The Solution

We have both an intuitive system for ethical decision-making and a more deliberative one; relying on the former leads to less-ethical choices. We need to consciously engage the latter.

In Practice

To make more-ethical decisions, compare options rather than evaluate them singly; disregard how decisions would affect you personally; make trade-offs that create more value for all parties in negotiations; and allocate time wisely.

Autonomous vehicles will soon take over the road. This new technology will save lives by reducing driver error, yet accidents will still happen. The cars’ computers will have to make difficult decisions: When a crash is unavoidable, should the car save its single occupant or five pedestrians? Should the car prioritize saving older people or younger people? What about a pregnant woman—should she count as two people? Automobile manufacturers need to reckon with such difficult questions in advance and program their cars to respond accordingly.

• MB Max H. Bazerman is the Jesse Isidor Straus Professor of Business Administration at Harvard Business School and the author (with Don A. Moore) of Decision Leadership: Empowering Others to Make Better Choices (Yale University Press, 2022) and Better, Not Perfect: A Realist’s Guide to Maximum Sustainable Goodness (Harper Business, 2020).

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The Importance of Applying Ethics in Business

• December 2022
• Asian Journal of Applied Business and Management 1(1):11-18
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• Introduction To Business Ethics

Business ethics or corporate ethics refers to a study of the ethical and moral principles as well as problems which might arise while conducting business . Furthermore, this study is relevant to the habits of individuals and the entire organization . Learn business ethics definition here.

Introduction to Business Ethics

Business ethics is the study of business activities, business policies, ethical principles, business situations and problems that take place in the business. It is a study where issues of right and wrong are discussed.

While conducting business, traders often try to generate the highest possible returns. Similarly, landlords try to increase their earning from house property and workers demand a higher wage. However, these actions cannot be considered unethical or illegal provided they do not transcend the payment norms set by peer business houses and trades.

Business profits refer to the wages received by proprietors in return of the invested capital and this is why it is imperative to include business profits within the boundary of ethics. Business world comprises an important aspect of our society which is concerned with the standard of living of people.

                                                                                    Introduction To Business Ethics

Benefits of Adhering To Business Ethics

Right of workers.

Business class exerted ruthless exploitations over children and workers even a few decades back and the growth of small businesses was bottlenecked by the market dynamics which was controlled to a great extent by trusts.

This led to the demand for business ethics and equal rights of workers and thus Government agencies were established for recognizing the importance of labor unions.

Easy Communication

Communicating with peers about ethics at workplace leads to the development of integrity and openness which are important ingredients of team building. Employees slowly develop a positive attachment as they see a strong alignment between their own and the business organization’s values which ultimately results in better performance and strong motivation .

Getting Across Complex Situations

During times of changes, business houses often face crisis scenarios as no clear moral compass is present for guiding leaders for overcoming complex conflicts surrounding what is right and what is wrong.

Providing adequate attention to business ethics can be of significant help in such a scenario and this explains the requirement of keeping consistency in actions to both the leaders and their staffs.

Easy Evaluation

Personnel policies try to ensure ethical treatment of employees especially in matters concerning evaluation, hiring, firing and disciplining. If the employer fails to comply with such guidelines, then he can be sued for breach of contract.

Thus, the gap between actual practice and stated corporate culture can actually usher in both ethical and legal implications. Paying attention to ethics can assist supremely in managing diversity and staying buffered from expensive litigation costs.

Learn Ethics and Morals here in detail. 

Increased Confidence

Business ethics help employees in gaining confidence while dealing with complex situations which might arise in the workplace.

Fewer Errors

Undertaking ethics programs help workers in avoiding acts of omission and lowering the levy of hefty fines. Violations and ethical issues can be detected at an early stage by these programs for being reported to the concerned authorities.

Better Public Image

An organization which pays adequate attention to its ethics is able to portray a better public image as these organizations impart greater value to people in comparison to profit figures and thus operate with greater honor and integrity.

 Questions on Business Ethics

• _________ lays the foundation stone of business ethics .

Ans.     Moral and social values

• Business ethics refer to the code of conduct and this should ideally be followed by businessmen during _________.

Ans.     Normal activities

• Business ethics relate to the decisions of an _________.

Ans.     Individual or workgroup

• The application scope of business ethics is ________.

Ans.     Universal

• Business ethics started catching the attention of business firms, media and academics towards the end of _________.

Ans.     Cold war

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Importance of Business Ethics in an Organization

Business ethics can be denoted as written or unwritten codes of morals, values, and principles that govern actions and decisions in a company. In business, standards are set for determining good and bad behavior and decision-making. As a result, business ethics is a broad topic, covering everything from corporate governance to corporate social responsibility.  

Business ethics is a subjective term. However, it is easy to identify unethical business practices in an organization, such as employing child labor, taking bribes, or illegally using copyrighted materials.  

When ethical guidelines are followed, trust is developed between the employees, management, the public, and the corporation. Thus, business ethics leads to a more productive workplace.  

Characteristics of Business Ethics  

There are many essential characteristics of Business Ethics. The 13 main characteristics are discussed below:  

• They are based on the general societal perception of ‘right’ and ‘wrong’ practices.  
• It also adheres to social customs, traditions, culture, attitudes, and standards.  
• Business ethics assist in evolving business performance by optimizing the processes.  
• Business ethics provides guidelines for appropriate business practices.  
• Business ethics also serves as a backbone to study basic human behavior and conduct in the workplace.  
• It defines the norms of mutual interactions among individuals and a group.  
• Business ethics provides the framework for designing a code of conduct in business.  
• Business ethics generate from the principles, standards, and ideas defined by the Indian ethos.  
• They are a part of both ‘Art’ and ‘Science’.  
• Business ethics drive customers’ well-being by promoting values, standards, and norms of professionalism.  
• They are closely interlinked with the motive of consistently reassessing goals to align them with the motto of excellent customer service.  
• Business ethics visualizes alternative ways to achieve optimum customizable outcomes.  
• They stress more on increasing the societal value of the business by directing their efforts towards improving society .  

Need for Ethics in Business  

Incorporating ethical practices in everyday business is necessary for the following reasons:  

• Maintaining Market Reputation: It’s common for businesses with substantial ethical grounds to possess a positive brand image in the market. A good image helps retain a loyal customer base and gives the company a competitive advantage.  
• Establishing Trust: Business ethical practices help build trust among internal and external stakeholders, which is an essential component to ensure long-term and sustainable business profitability.  
• Building a Productive Workforce: Business ethics also help maintain a productive workforce by driving positive culture. An engaging and transparent workplace helps drive employee loyalty and attract the market’s top talent.  
• Improving Customer Satisfaction: Ethical companies often build a loyal customer base by offering high-quality products, maintaining transparency in business practices and processes, and addressing customer concerns promptly.  
• Long-term Sustainability: Ethical in business helps increase the longevity of business by taking the environmental, social, economic, and political factors into account. So, they help build business resilience in the dynamic business world.  

Importance Of Business Ethics  

Every company should have its moral principles and guidelines. Following business ethics has more benefits than you think. It will help keep and attract employees, customers, and investors.  

For example, consider that you are an “energy drink” manufacturing company, and you’ve proclaimed on the labels and advertisements that you don’t add preservatives. You should adhere to the claims you’ve made. If you disobey your claims and sell the product by adding preservatives, it is considered unethical business practice. It will deteriorate your brand, and eventually, you will lose customer trust. It also damages the reputation and keeps away the stakeholders. Therefore, following business ethics is very important.  

Reputation is a company’s most important asset and one of the challenging tasks to rebuild once lost. You will start building a good reputation with consistent ethical behavior. Potential investors and shareholders are likely to get attracted to the companies that adhere to their moral guidelines and promises they’ve made; this keeps the company’s share price high.  

To retain a positive reputation and image, businesses must be committed to operating on an ethical foundation related to respecting the surrounding environment, treatment of employees, and good market practices regarding customer treatment and price.  

Employees also feel comfortable and want to stay in business for the long term when working with a company that has strong business ethics. This increases productivity and reduces the labor turnover. They are also bound to follow in the footsteps of the organization. When an employee does his work with integrity and honesty and by following the guidelines, it will eventually benefit the company.  

Leadership Ethics  

The conduct of the management team sets the tone for how all the employees behave at the workplace. If people at the top follow ethical practices and behavior, others will do the same. Leading by action and example helps employees make better decisions. In turn, it helps the organization do well as a whole.  

It improves the ability to retain and attract top-performing individuals. It even elevates the performance of people that could be doing better at work.  

Employee Ethics  

As we said in the last point, employees follow what they observe around them in the company. If business ethics are set in order, employees make better decisions quickly. It increases productivity.   

Work driven by honesty and passion benefits everyone. Employees that care about integrity take more responsibility. Also, perform at a higher level and don’t require handholding to finish their tasks.  

Here are a few other benefits of business ethics :  

• Stops malpractices in business  
• Improves confidence of the customers  
• Helps in making business a robust one  
• Protects employees and their interests  
• Develops good relations among stakeholders  
• Allows for smooth functioning of operations  
• Promotes healthy competition among stakeholders  

Role of Business Ethics in the Organization  

Business ethics play a crucial role in various operations of the organization. They are essential to foster a positive culture which helps in sustaining long-term excellence of the organization.   

Ethics in Finance  

Ethical practices in finance help cultivate strong relationships with stakeholders and enhance firm’s long-term viability by preventing financial fraud, manipulation, and misleading information.  

Ethics in Human Resources Development  

Human Resources ethics helps in creating a diverse and inclusive workforce by incorporating ethics in hiring, performance evaluation, training, and development. In addition, it also enhances employee morale, productivity and retention.  

Ethics in Marketing  

Adopting ethical marketing practices helps companies build ever-lasting relationships with their customers and a positive brand reputation. These ethics rest upon honesty, integrity, and responsible advertising practices, avoiding deceptive strategies and false claims.  

Ethics in Production  

Ethics in Production can be ensured by deploying ethical manufacturing practices, like fair labor conditions, safe work environments and green production methods. They help in meeting consumer expectations while minimizing ecological footprint.  

Advantages of Managing Ethics in the Workplace  

Ethical business practices have the following benefits:  

Trust and Reputation  

Upholding ethical standards helps organizations ensure transparency, reliability and integrity in their day-to-day operations. It leads to strong bonds with internal and external stakeholders like investors, customers, employees, etc.  

Employee Morale and Engagement  

Employees develop a feeling of value, support and loyalty towards their employers when they follow ethical practices and behavior. They lead to increased productivity, reduced turnover rates, and movement towards a sustainable work culture.  

Attracting and Retaining Talent  

Business ethics are a strong magnet to attract top talent as they help align individual and organizational objectives. They also help strengthen employee retention strategies as employees are happy and satisfied with their work.   

Mitigating Legal Risks  

Business reduces the likelihood of long costly legal battles, hefty fines, and reputation damages by adhering to ethical laws, regulations and guidelines. They also help organizations stay afloat in moral dilemmas.  

Enhancing Customer Satisfaction and Loyalty  

Long-term customer loyalty is easier for companies committed to an ethical code of conduct. This also leads to an increase in positive publicity and new business opportunities.  

Create Ethical Culture in Organization  

Define company ethics  .

Every company has spoken and unspoken rules on how to act within the environment, which vary across companies. However, they commonly include the norms of ‘right’ and ‘wrong’ behavior towards the stakeholders in the organization.    

Ensure that you have the necessary tools  

HR professionals can use HR software to equip employees with the right tools to ensure their continued ethical behavior within the organization.  

Strengthen the Behavior You Want  

Offering awards and recognition is one of the best ways to encourage the ethical behavior, you want to reinforce in an employee. In addition, an efficient communication system that promotes business ethics helps create ethical organizational culture.  

Focus on building skills  

It is the organization’s duty to build and develop ethical skills among the members rather than just stating the behaviors you encourage and those that you do not.

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Meet the author

Anwesha Panja

Content Writer

Anwesha Panja is a Content Writer at Keka Technologies. She has a passion for crafting captivating pieces around the latest HR trends. With a love for mysterious and spine-tingling things, she spends her free time exploring haunted locations. She is also a bookworm and an avid Sherlock fan.

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