Topic 5

• ETHICS

  • Branch of social science.

  • Means Code of Conduct.

  • Deals with moral principles and social values.
• ETHICS

  • Separates the good and bad, right and wrong, fair and unfair, moral and immoral and proper and improper human action.
• ETHICS

  • Means Code of Conduct.
• BUSINESS ETHICS

  • Conduct business with a human touch in order to give welfare to the society.

  • Give fair wages & provide good working conditions to their workers, & they must not exploit the workers.

  • Encourage competition in the market.

  • Protect the interest of small businessmen.

  • Avoid unfair competition.

  • Avoid monopolies.

  • Pay all their taxes regularly to the government.
• Andrew Crane on Business Ethics

  • “Business ethics is the study of business situations, activities, & decisions where issues of right & wrong are addressed.”
• Raymond C. Baumhart on Business Ethics

  • “The ethics of business is the ethics of responsibility. The business man must promise that he will not harm knowingly.”
• CHARACTERISTICS OF BUSINESS ETHICS (BE)

  • Code of Conduct
  • Based on Moral and Social Values
  • Gives Protection to Social Groups
  • Provides Basic Framework
  • Voluntary
  • Requires Education and Guidance
  • Relative Term
  • New Concept
• CHARACTERISTICS OF BUSINESS ETHICS (BE): Code of Conduct

  • BE is a code of conduct

  • It tells what to do and what not to do for the welfare of the society.

  • All businessmen must follow this code of conduct.
• CHARACTERISTICS OF BUSINESS ETHICS: Based on Moral and Social Values

  • BE is based on moral & social values.

  • Contains moral and social principles (rules) for doing business including:

  • Self-control

  • Consumer Protection & Welfare

  • Service to Society

  • Fair Treatment to Social Groups

  • Not to Exploit Others (etc)
• CHARACTERISTICS OF BUSINESS ETHICS: Gives Protection to Social Groups

  • BE gives protection to different social groups:
  • Consumer
  • Employees
  • Small Businessmen
  • Government
  • Shareholders
  • Creditors
• CHARACTERISTICS OF BUSINESS ETHICS: Provides Basic Framework

  • BE provides basic framework for business
  • It gives the social cultural, economic, legal and other limits of business.
  • In which businesses must be conducted within these limits.
• CHARACTERISTICS OF BUSINESS ETHICS: Voluntary

  • BE must be voluntary

  • The businessmen must accept business ethics on their own.

  • BE must be like self-discipline

  • Must not be enforced by law.
• CHARACTERISTICS OF BUSINESS ETHICS: Requires Education and Guidance

  • Businessmen must be given proper education and guidance before introducing business ethics.

  • Businessmen must be motivated to use business ethics.

  • Businessmen must be informed about the advantages of using business ethics.

  • Trade Associations and Chambers of Commerce must also play an active role in this matter.
• CHARACTERISTICS OF BUSINESS ETHICS: Relative Term

  • BE changes from one business to another it also changes from one country to another.

  • What is considered as good in one country may be taboo in another country.
• CHARACTERISTICS OF BUSINESS ETHICS: New Concept

  • BE is a newer concept

  • It’s strictly followed only in developed countries.

  • It’s not followed properly in poor & developing countries.
• (4) ADVANTAGES OF BUSINESS ETHICS:

  • Attracting & Retaining Talent
  • Investor Loyalty
  • Customer Satisfaction
  • Regulators
• ADVANTAGES OF BUSINESS ETHICS

  • Link between business ethics and financial performance.

  • Companies displaying a “clear commitment to ethical conduct” consistently outperform companies that don’t display ethical conduct.
• ADVANTAGES OF BUSINESS ETHICS: Attracting & Retaining Talent

  • People aspire to join organizations that have high ethical values.

  • An ethical company that is dedicated to taking care of its employees will be rewarded with employees being equally dedicated in taking care of the organization.

  • Ethical climate matter to the employees.
• ADVANTAGES OF BUSINESS ETHICS: Investor Loyalty

  • Investors are becoming more aware that an ethical climate provides a foundation for efficiency, productivity & profits.

  • Rel with any stakeholder, including investors, based on dependability, trust & commitment results in loyalty.
• ADVANTAGES OF BUSINESS ETHICS: Customer Satisfaction

  • CSat is a vital factor in successful business strategy

  • Repeat purchases/orders & enduring relationship of mutual respect is essential for the success of the company.
• ADVANTAGES OF BUSINESS ETHICS: Customer Satisfaction

  • Company’s name should evoke trust & respect among customers for enduring success.
  • This is achieved by a company that adopts ethical practices.
  • When a company because of its belief in high ethics is perceived as such, any crisis/mishaps along the way is tolerated by the customers as a minor aberration.
• ADVANTAGES OF BUSINESS ETHICS: Customer Satisfaction

  • An org with a strong ethical envi places its customers’ interests as foremost.

  • Ethical conduct towards customers builds a strong competitive position, it promotes a strong public image.
• ADVANTAGES OF BUSINESS ETHICS: Regulators

  • Regulators eye companies functioning ethically as responsible citizens.

  • Regulator need not always monitor the functioning of the ethically sound company.

  • Comp earns profits & reputational gains if it acts within the confines of business ethics.
• ADVANTAGES OF BUSINESS ETHICS: Regulators

  • To summaries, companies that are responsive to employees’ needs have lower turnover in staff.|
  • SH invest their money into a company & expect a certain level of return from that money in the form of dividends and/or capital growth.
  • Customers pay for goods, give their loyalty and enhance a company’s reputation in return for goods/services that meet their needs.
  • EM provide their time, skills & energy in return for salary, bonus, career progression, & learning
• ETHICS IN COMPLIANCE

  • Compliance is about obeying and adhering to rules and authority.

  • An ethical climate in an organization ensures that compliance with law is fuelled by a desire to abide by the laws instead of the fear of getting caught.

  • Orgs 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
• ETHICS IN FINANCE

  Example Issues:

  • Window dressing, misleading financial analysis.

  • Related party transactions not at arm’s length.

  • Insider trading, securities fraud leading to manipulation of the financial markets.

  • Executive compensation.

  • Bribery, kickbacks, over billing of expenses, facilitation payments.

  • Fake reimbursements
• ETHICS IN HUMAN RESOURCES

  • Human resource management plays a decisive role in introducing and implementing ethics.
  • Covers ethical issues around the employer-employee relationship:
  • Such as the rights and duties owed between employer and employee
• ETHICS IN HUMAN RESOURCES

  Example Issues:

  • Discrimination issues i.e. discrimination on the bases of age, gender, race, religion, disabilities, weight etc.

  • Sexual harassment.

  • Affirmative Action.

  • Issues surrounding the representation of employees & the democratization of the workplace, trade.
• ETHICS IN HUMAN RESOURCES

  Example Issues:

  • Issues affecting the privacy of the employee:
  • Workplace surveillance
  • Drug testing
  • Issues affecting the privacy of the employer:
  • Whistle-blowing
  • Issues relating to the fairness of the employment contract & the balance of power bet employer & employee.
  • Occupational safety and health.
• ETHICS IN HUMAN RESOURCES:

  • Companies tend to shift economic risks onto the shoulders of their employees.
  • The boom of performance-related pay systems & flexible employment contracts are indicators of these newly established forms of shifting risk.
• ETHICS IN MARKETING

  • Marketing ethics is the area of applied ethics

  • Deals with the moral principles behind the operation & regulation of marketing.
• ETHICS IN MARKETING

  Example Issues:

  • Pricing
  • Price fixing
  • Price discrimination
  • Price skimming.
• ETHICS IN MARKETING:

  Example Issues:

  • Anti-competitive practices like:
  • Manipulation of supply
  • Exclusive dealing arrangements
  • Tying arrangements etc.
• ETHICS IN MARKETING

  Example Issues:

  • Misleading advertisements

  • Content of advertisements.

  • Children and marketing.

  • Black markets, grey markets.
• ETHICS IN PRODUCTION

  • Deals with the duties of a company to ensure that products and production processes do not cause harm.

  • There is usually a degree of danger in any product or production process and it is difficult to define a degree of permissibility, or the degree of permissibility may depend on the changing state of preventative technologies or changing social perceptions of acceptable risk.
• ETHICS IN PRODUCTION

  Example Issues:

  • Defective, addictive and inherently dangerous products and

  • Product testing ethics.
• ETHICS IN PRODUCTION

  Example Issues:

  • Ethical relations between the company and the environment include:
  • Pollution
  • Environmental ethics
  • Carbon emissions trading
• ETHICS IN PRODUCTION

  Example Issues:

  • Ethical problems arising out of new technologies for
  • Genetically modified food