5 Introduction to Business Ethics UNIT UNIT I Global Business Ethics Introduction to Business Ethics LESSON 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 8 Global Business Ethics The character of a man is expressed in terms of his conduct (Figure 1.1) Decided by Character of a man Conduct of a Person Taken together considered as Leads Series of Actions Good or Bad, Right or Wrong, Moral Known as Moral Judgement By which we can judge again Moral Standard Requires 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 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 Introduction to Business Ethics 10 Global Business Ethics Check Your Progress Define the following: Ethics …………………………………………………………………………… …………………………………………………………………………… 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 Business Ethics Moral Issues in Ethics Figure 1.2: Understanding of Business Ethics By what method we decide on answers to questions of moral right and wrong in business? There is no special or unique process to 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 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: 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 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 Fill in the blanks: _ refer to the code of conduct that guides an individual while dealing in a situation _ concentrate on moral standards as they apply to business policies, institutions and behaviour _ and _ schemes have become very common and penalise honest business firms 11 Introduction to Business Ethics 12 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 1.9 QUESTIONS FOR DISCUSSION Define Ethics What is business ethics? Explain the concept of business ethics Highlight the need for Business Ethics Check Your Progress: Model Answers CYP 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 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 CYP Ethics Business ethics 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 13 Introduction to Business Ethics ...6 Global Business Ethics Introduction to Business Ethics LESSON INTRODUCTION TO BUSINESS ETHICS CONTENTS 1.0 Aims and Objectives 1.1 Introduction 1.2 Meaning of Ethics 1.2.1 Definitions of Ethics. .. conduct Business Ethics: It is application of ethics in business 1.9 QUESTIONS FOR DISCUSSION Define Ethics What is business ethics? Explain the concept of business ethics Highlight the need for Business. .. 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