Global business ethics lesson 01

7 Introduction to Business Ethics LESSON 1 INTRODUCTION TO BUSINESS ETHICS CONTENTS 1.0 Aims and Objectives 1.1 Introduction 1.2 Meaning of Ethics 1.2.1 Definitions of Ethics and Bus

5 Introduction to Business Ethics

UNIT I

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Global Business Ethics

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Global Business Ethics

7 Introduction to Business Ethics

LESSON

1

INTRODUCTION TO BUSINESS ETHICS

CONTENTS

1.0 Aims and Objectives

1.1 Introduction

1.2 Meaning of Ethics

1.2.1 Definitions of Ethics and Business Ethics

1.3 Introduction to Business Ethics

1.4 Need for Business Ethics

1.5 Importance of Business Ethics

1.6 Let us Sum up

1.7 Lesson End Activity

1.8 Keywords

1.9 Questions for Discussion

1.10 Suggested Readings

1.0 AIMS AND OBJECTIVES

After studying this lesson, you should be able to understand:

z Meaning of Ethics

z Need for Business Ethics

z Importance of Business Ethics

1.1 INTRODUCTION

In any organisation, from top management to employees at all levels, ethics is

considered as everybody's business It is not just only achieving high levels of

economic performance, but also to conduct one of business's most important social

challenges, ethically, at the same time simultaneously What are the ethical problems

which arise in business and how to solve them or what can be done about them are

explained in this module

The problems in a business are multifold Many of the vendors offer kickbacks to the

buyers, for the purchase of their goods These bribes are many a times hefty and

within a short period, the buyers make plenty of money

1.2 MEANING OF ETHICS

Ethics in Latin language is called 'Ethicus' and in Greek, it is called 'Ethicos' In fact,

this word has originated from 'ethos', meaning character or manners Ethics is thus

said to be the source of morals; a treatise on this; moral principles; recognized rules of

conduct

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Global Business Ethics The character of a man is expressed in terms of his conduct (Figure 1.1)

Decided

Taken together considered as

By which we can judge again

Requires

Conduct

of a Person

Series of Actions

Known as Moral Judgement

Good or Bad, Right or Wrong, Moral

Moral Standard

Character

of a man

Figure 1.1: Meaning of Ethics

Ethics thus can be considered as the source of character of a person expressed as right

or wrong conduct or action

1.2.1 Definitions of Ethics and Business Ethics

z We will examine different definitions given for ethics in the dictionaries as well

-as in books

z According to Concise Oxford Dictionary, 'ethics' is relating to morals; treating of moral questions; morally correct; honourable

z It is the study of morals and moral choices It focuses on standards, rules and codes of conduct that govern the behaviour of individuals and groups

z The other dictionary meaning of 'ethics' is that it is the 'science of morals'; it is that branch of philosophy, which is concerned with human character and conduct

It is a treatise on morals (capable of knowing right and wrong)

z 'Ethics' refer to the code of conduct that guides an individual while dealing in a situation It relates to the social rules that influence people to be honest in dealing with the other people

z Ethics are the principles of behaviour that distinguish the right from the wrong Business ethics is the evaluation of business activities and behaviour as right or wrong Ethical conduct conforms to what a group or society, as a whole considers right behaviour

z According to R.Wayne Mondy, 'Ethics is the discipline dealing with what is good and bad, or right and wrong, or with moral duty and obligation.'

z Ethics is that branch of philosophy, which is concerned with the lightness or wrongness, goodness or badness of human conduct Ethics provides the basis for deciding that a particular action is morally good or bad

z Ethics describes what is 'right' and what is 'wrong' in human behaviour, and what 'ought to be' Business ethics are the desired norms of behaviour exclusively dealing with commercial transactions Ethics is a description of 'observed' as well

as 'desirable behaviour' and 'conduct' that attempts to articulate moral values

z Ethics concern the rightness or wrongness of human conduct

9 Introduction to Business Ethics

z According to John Donaldson, Business ethics, in short can be described as the

systematic study of moral (ethical) matters pertaining to business, industry or

related activities, institutions, or practices and beliefs It can also refer to the

actual standards, values or practices or beliefs (An example of the latter use is

seen in the title of Max Weber's book, 'The Protestant Ethic and the Spirit of

Capitalism') Business Ethics is the systematic handling of values in business and

industry

z In the simplest terms, business ethics are moral principles that define right and

wrong behaviour in the world of business What constitutes right and wrong

behaviour in business is determined by the public interest groups, and business

organisations, as well as an individual's personal morals and values

z The word 'ethics' is derived from the Greek word 'ethos' which refers specifically

to the "character" and "sentiment of the community."

z Shea, in 1988 defines ethics as the principles of conduct governing an individual

or a profession and "standards of behaviour."

z Ethics are the 'rules or standards that govern behaviours.' As per Brian Harvey,

ethics stands for a practice as well as a reflection on that practice As a practice, it

can be described as the conscious appeal to norms and values, to which, on

reasonable grounds, we hold ourselves obliged, as, reciprocally, we hold others

obliged to the same norms and values As a reflection, ethics is the methodical and

systematic elaboration of the norms and values, we appeal to in our daily

activities

z Ethics are about norms and values of a certain seriousness, about standards and

ideals, i.e., ones that people cannot easily neglect without harming others, or

without being looked at disdainfully by significant others It is about keeping your

promises, respecting sentiment of beings, and distributing benefits and burdens in

a fair and equitable way

z Business ethics are the application of general ethical rules to business behaviour

z According to Keith Davis and associates, ethics are a set of rules that define right

and wrong conduct These rules tell us when our behaviour is acceptable and

when it is disapproved and considered to be wrong Business ethics are the

application of general ethical rules to business behaviour

z Business ethics concentrate on moral standards as they apply to business policies,

institutions and behaviour It is a specialised study of moral right or wrong It is a

form of applied ethics It includes not only the analysis of moral norms and moral

values, but also attempts to apply the conclusions of the analysis to that

assortment of institutions, technologies, transactions, activities and pursuits that

we call business

z Business ethics are nothing but the application of ethics in business It proves that

businesses can be, and have been ethical and still make profits Today, more and

more interest is being given to the application of ethical practices in business

dealings and the ethical implications of business

z Business ethics are rules of business conduct, by which the proprietary of business

activities may be judged It also relates to the behaviour of managers

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Define the following:

1 Ethics ……… ………

2 Business Ethics ……… ………

1.3 INTRODUCTION TO BUSINESS ETHICS

Ethics is commonly defined as a set of principles prescribing a behaviour code, explains what is good and right, or bad and wrong It may even outline moral duties and obligations There is a combination of two familiar words, namely business and ethics in 'Business ethics' Business ethics are concerned with moral issues in business just as medical ethics are concerned with morality of medical practices and pedicles,

or political ethics are concerned with the morality of political affairs In business ethics, we arrive at two things:

z Looking at the problems which raise moral issues in business

z Critically examining the various problems for solving them

Includes

Figure 1.2: Understanding of Business Ethics

By what method do we decide on answers to questions of moral right and wrong in business? There is no special or unique process to do this, nothing more or less than is involved in any disciplined enquiry into complex problems, whether in business or anywhere else

We can subject this to three different kinds of tests

z Test of agreement with the evidence: Does the evidence support or deny the explanation we have put forward? Example, we are arguing for the benefits of greater worker participation in the running of companies, what is the evidence that employees actually want such involvement?

z Test of internal coherence: Are all the parts of the explanation in agreement with each other or is itself contradictory in some way? Does it say things which are somehow in opposition and so cannot be or are unlikely to be, equally true at the same time?

z Example: We cannot accept the workers who are exclusively interested in maximising wages and argue for the importance to them of an enhanced self esteem that would come from participation in decision making

z Test of its compatibility (with our more general system in belief): Does it fit in with what we generally take to be true in this area or does it somehow contradict our assumptions, or at least test uncomfortably with them? How well, for

11 Introduction to Business Ethics

example, does the claim that the workers are exclusively interested in maximising

wages, fit in with what we generally accept about human motivation?

We attempt to solve ethical problems in much the same way as we would solve any

other complex and contentious questions There is the same range of test available and

the same kind of critical relationship to theory

1.4 NEED FOR BUSINESS ETHICS

Some of the experts in business ethics have stated the following:

1 Business Operates within the Society: It is a part of subsystem of society

Business's functioning must contribute to the welfare of the society In order to

survive, develop and excel, business must earn social sanction of the society

where it exists and functions Without earning social sanctions, business cannot

get loyal customers, cannot operate in the market place It will soon collapse and

die away

Society

Business

Figure 1.3: Business is a Subset of Society

If business grows larger, the public takes more interest in it, since this will lead to

a greater impact on the community Managers are tuned to public opinion and

they react to it They seek to maintain a proper image of their company in the

public mind This leads to the assumption of greater responsibilities:

™ Every business irrespective of size exists more on ethical means or in total

regard to its social concern to survive long: Otherwise, resorting to unethical

behaviour or not concerning with social welfare, it will call for its own doom

Thus, business should be ethical and socially responsible

™ As a statement of purpose, maximising of profit is not only unsatisfying, it is

not even accurate Business needs to remain ethical for its own good

Unethical actions and taking decisions will shorten the life of the business like

a flash in the pan, quickly growing and even more quickly dying and

forgotten

2 Business needs to Junction as responsible corporate citizens in the country: It is

that organ of the society which creates wealth for the country Hence, narrow

mentality and narrower goals and motives are to be avoided

Check Your Progress 2

Fill in the blanks:

1 _ refer to the code of conduct that guides an individual while

dealing in a situation

2 _ concentrate on moral standards as they apply to business

policies, institutions and behaviour

3 _ and _ schemes have become very common and

penalise honest business firms

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Global Business Ethics 1.5 IMPORTANCE OF BUSINESS ETHICS

Business ethics has already been defined earlier However, it is the application of general ethical rules to business behaviour It is not a special set of ethical rules different from ethics in general and applicable only to business For example: If a society's ethical rule says that dishonesty is unethical and immoral, then anyone in business, who is dishonest with employees, customers, creditors, stockholders or competitors is acting unethically and immorally Similarly, if protecting people from harm is considered ethical, then business firm that recall a defective and dangerous product is acting in an ethical way

In most cases, the general public expects business to exhibit high levels of ethical performance and social responsibility Business firms and their employees are encouraged to act ethically is to prevent harm to society "Do no harm" is one of the strongest ethical principles Next is to protect business firms from abuse by unethical competitors Bribery and kickback schemes have become very common and penalise honest business firms High ethical performance protects the individual who work in business

Businesses that treat their employees with dignity and integrity reap many rewards in the form of high morale and improved productivity People feel good about working

in an ethical company since they are protected along with the general public

In spite of the positive benefits of good ethical practices, ethical problems occur for the following reasons:

z Personal gain/dubious character

z Individual values widely differ with organisational goals

z Managers values and attitudes

z Competitive pressures

z Cross-cultural contradictions

1.6 LET US SUM UP

Ethics can be defined as the study of what makes up good and bad conduct inclusive

of related actions and values Business ethics, which is a subject of the study of Ethics and is defined as the study of what makes up good and bad conduct as related to business activities and values (Business is defined as any individual or organisation, a corporation, a partnership, joint ventures or a franchise whose primary goal is to provide goods and services in order to obtain a return on investment) The value of Ethics can be well appreciated if a member of a society realizes that no one can ever live in isolation All the wealth and health is of no value if a man lives in an inhabited island Therefore the happiness come to a man only when he lives in the company of his near and dear ones and the society in harmony This is possible only when a sensible moral frame work that caters to all possible contingencies in a living world, especially in a business world

1.7 LESSON END ACTIVITY

Ethics concern the rightness or wrongness of human conduct Explain with appropriate examples

1.8 KEYWORDS

Ethics: It is the source of morals; recognized rules of conduct

Business Ethics: It is application of ethics in business

13 Introduction to Business Ethics

1.9 QUESTIONS FOR DISCUSSION

1 Define Ethics What is business ethics?

2 Explain the concept of business ethics

3 Highlight the need for Business Ethics

Check Your Progress: Model Answers

CYP 1

1 It is the study of morals and moral choices It focuses on standards, rules

and codes of conduct that govern the behaviour of individuals and groups

2 In the simplest terms, business ethics are moral principles that define right

and wrong behaviour in the world of business What constitutes right and

wrong behaviour in business is determined by the public interest groups,

and business organisations, as well as an individual's personal morals and

values

1 Ethics

2 Business ethics

3 Bribery and kickback

1.10 SUGGESTED READINGS

Manuel G Velasquez, Business Ethics

Laura P Hart Man, Business Ethics

John R Boat Right, Ethics in Conduct of Business

William A Wines, Ethics Law and Business.