OF BUSINESS ETHICS
Some years ago, one sociologist
asked business people, "What does an ethic mean to you?" Among their
replies were the following:
"Ethics has to do with what my
feelings tell me is right or wrong." "Ethics has to do with my
"Being ethical is doing what the
"Ethics consists of the
standards of behavior our society accepts." "I don't know what the
Definition & Nature of business ethics:
term "ethics" is derived from the Greek word "ethos" which
refers to character or customs or accepted behaviors. The Oxford Dictionary
states ethics as "the moral principle that governs a person's behaviour or
how an activity is conducted". The synonyms of ethics as per Collins
Thesaurus are - conscience, moral code, morality, moral philosophy, moral
values, principles, rules of conduct, standards.
refers to well- founded standards of right and wrong that prescribe what humans
ought to do, usually in terms of rights, obligations, benefits to society,
fairness, or specific virtues.
is a set of princ iples or standards of human conduct that govern the behavior
of ind ividua ls or organizations. Using these ethical standards, a person or a
group of persons or an
organization regulate their behavior
to distinguish between what is right and what is wrong as perceived by others.
It is not a natural science but a creation of the human mind. For this reason,
it is not absolute and is open to the influence of time, place and situation.
In bygone times, kings used to keep
food testers who ate the food prepared for the king before it was offered to
him. This was royal clinical research to find out if the food was poisoned. The
practice did not raise eyebrows because the king was regarded as the most
important person in the kingdom, and his life was more precious than that of
anyone else. It was the ethics of the time.
— Ethics can be defined as the
discipline dealing with moral duties and obligation, and explaining what is
good or not good for others and for us.
— Ethics is the study of moral
decisions that are made by us in the course of performance of our duties.
— Ethics is the study of
characteristics of morals and it also deals with the moral choices that are
made in relationship with others.
— Ethics is concerned with truth and
justice, concerning a variety of aspects like the expectations of society, fair
competition, public relations, social responsibilities and corporate behavior.
Business ethics is a form of applied
ethics. In broad sense ethics in business is simply the application moral or
ethical norms to business. Business ethics refers to a 'code of conduct' which
businessmen are expected to follow while dealing with others. 'Code of conduct'
is a set of
principles and expectations that are
considered binding on any person who is member of a particular group. The
alternative names for code of conduct are 'code of ethics' or 'code of
Business ethics comprises the
principles and standards that guide behaviour in the conduct of business.
must balance their desire to maximize profits against the needs of the
stakeholders. Maintaining this balance often requires tradeoffs. To address
these unique aspects of businesses, rules - articulated and implicit, are
developed to guide the businesses to earn profits without harming individuals
or society as a whole.
coverage of business ethics is very wide as it deals with norms relating to a
company and its employees, suppliers, customers and neighbors, its fiduciary
responsibility to its
shareholders. It reflects the
philosophy of business, one of whose aims is to determine the fundamental
purposes of a company.
ethics stands for the saneness or purity of p urpose that is upheld through
carefully designed actual practices of business enterprises. It is an
embodiment of conscience concern
towards execution of business
processes in tune with the nobility of the purpose.
SCOPE OF BUSINESS ETHICS
Ethical problems and phenomena arise
across all the functional areas of companies and at all levels within the
company which are discussed below:
Ethics in Compliance
Compliance is about obeying and
adhering to rules and authority. The motivation for being compliant could be to
do the right thing out of the fear of being caught rather than a desire to be
abiding by the law. An ethical climate in an organization ensures that
compliance with law is fuelled by a desire to abide by the laws. Organizations
that value high ethics comply with the laws
not only in letter but go beyond
what is stipulated or expected of them.
Ethics in Finance
The ethical issues in finance that
companies and employees are confronted with include:
— In accounting - window dressing,
misleading financial analysis.
— Related party transactions not at
— Insider trading, securities fraud
leading to manipulation of the financial markets.
— Executive compensation.
—Bribery, kickbacks, over billing of
expenses, facilitation payments.
— Fake reimbursements
Case of unethical practice
Mr. A, is a respected senior officer
in the company, he enjoyed all the benefits and
perquisites from the company
including car with driver, medical facility, reimbursements of certain
During the months
September, October, December
it was observed that his telephonic
reimbursements were on a ris ing
note, fro m Rs. 500 p.m it we nt up to Rs. 2500 p.m. The matter was reported
and was investigated. It was found that Mr. A has made arrangements with
the Telephone Company for making a
single bill for two telephone numbers at his residence.
Case of unethical practice
A middle level executive, Mr. X,
based in Delhi, opts for a 3 day training programme in Bangalore, which happens
to be his hometown. He also applies leave for 3 days immediately following the
training which is granted to him. Mr. X reaches the venue of the training. On the
first day, registers himself, takes the training kit, attends the training for
two hours, befriends a dealing officer and arranges to have the presentations
etc. sent to him. He does not attend the training programme thereafter.