Basics of Business Ethics

The word ethics is derived from the Greek word ‘ethos’, which means character. Ethics is a branch of philosophy concerned with human character and conduct. It is the discipline dealing with ‘what is good and bad’ and with moral duty and obligation. Ethics is the embodiment of moral values, which describes what, is ‘right’ and what is ‘wrong’ in human behaviour and what ‘ought to be’.

The erstwhile-regulated economies necessitated their governments to regulate and control business organisations and economic institutions through law and government mechanisms to enable them to play their role in contributing to the growth and wellbeing of their stakeholders in a balanced way such that the interest of the almost all the people was protected.

Various business management concepts, principles, theories, practices, goals and strategies have been under evaluation, revalidation and constant change consequent upon massive liberalisation, privatisation and globalisation of business initiated towards the end of the 20th Century and geared up in the beginning of the present century.

Governments, which were hitherto discharging the responsibilities of safeguarding the customers’ interest in respect of quality, price, safe and timely delivery of the product etc., protecting the companies from unhealthy competition, restricting the concentration of economic power in the hands of a few which should be otherwise enjoyed by the majority of the population and the like, relegated and shifted the responsibility on to the shoulders of the business organisations, often simply by encouraging trade liberalization and privatisation.

Many social scientists felt that the deregulation of business would encourage the business to reverse back to its orthodox objective of profit maximization by whatever means including practising unethical conduct. But sooner or the later, a number of incidents around the world proved that businesses should carry out their operations ethically for the sake of basic survival. 

Ethics is a “consideration and application of frameworks, values and principles for developing moral awareness and guiding behaviour and action”. Commonly, ethics is also referred to as “moral, good, right, just and honest. Ethical standards are referred to as the principles or ideals of human conduct.” Thus, ethics implies good character and morality and refers to generally accepted human character and behaviour considered as a desirable by contemporary society.

The nature and concept of Ethics, we can say that Business Ethics is nothing but the application of Ethics in business. Business Ethics proves that businesses can be, and have been, ethical and still make profits. Business Ethics was thought of as being a contradiction of terms. Thankfully, not any more. Today, more and more interest is being given to the application of ethical practices in business dealings and the ethical implications of business.

Human beings have been endowed with the freedom of choice and the means of free will. He can distinguish between good and evil, right and wrong, just and proper. He can distinguish between the end he wishes to pursue and the means to gain that end.

Now, what is true for human beings is also true for business, because business are carried on by human beings only, and business organisations are nothing but formal structures for human beings to carry on their businesses. Moreover, businesses are thought of as being living, growing entities. Thus, businesses also have choices-a choice to maximise their profits and a choice to do good for the society in which they live and operate.

However, at most times, profit maximisation and discharging of social responsibilities at the maximum limit, cannot be carried on simultaneously. One is bound to affect the other. For example, Concern for Task (Productivity) and Concern for Human Beings (workers) are bound to pull each other in opposite directions. It is difficult, if not impossible, to maximise both together.

A conflict arises in trying to achieve both simultaneously. Hence, many managerial choices represent Managerial Dilemmas, between the profit consideration (commercial concern) and the social consideration (welfare concern) of the organisation. Many managerial decisions have ethical implications and these decisions give rise to Managerial Dilemmas.

For example, ruining occupations of age-old inhabitants in a particular locality and their ethical way of life, by using advanced technology, is an ethical dilemma. Technological advancements have to come, have to be used; however, what to do with the people whose life and earnings are affected by the utilisation of advanced technology, is a question which is difficult to answer.

Recently an award-winning regional language file of India, depicted the plight of an aged boatman whose occupation was to transport people and goods across the local river, as there was no bridge over the river. However, his occupation gets threatened when a bridge is built over the river.

This does not mean that technology advancement must not be utilised or that modern methods should not be welcomed. Certainly, they should. Science and technology should, by all means, be used to uplift and make better the lives of human beings all over the world, and specially in such backward regions as this boatman lived.

However, consideration should also be given to see whether alternative means of arrangements can be made so that people are not unduly disturbed or that their trauma and upheaval is kept at a minimum. In case of the boatman, an ethical and effective solution lies in providing him with alternative employment on the bridge itself-as a security man, toll tax collector, etc.

Similarly, when Mergers take place between companies, or Acquisition of one company by a bigger company, where Job positions are duplicated, instead of employees losing their jobs for no fault of their, ethical solutions lies in Job Reassignment or Retraining for alternative Job Assignments.

A business or company is considered to be ethical only if it tries to reach a trade-off between perusing its economic objectives and its social obligations, i.e., between its obligations to the society where it exists and operates; its obligations to its people due to whom it can even think of pursuing economic goals; to its environment, from whom it takes so much without it demanding anything back in return; and the like.

There are several characteristics or features of business ethics.

Some of them are discussed here:

1. Business ethics are based on social values, as the generally accepted norms of good or bad and ‘right’ and ‘wrong’ practices.
2. It is based on the social customs, traditions, standards, and attributes.
3. Business ethics may determine the ways and means for better and optimum business performance.
4. Business ethics provide basic guidelines and parameters towards most appropriate perfections in business scenario.
5. Business ethics is concerned basically the study of human behaviour and conducts.
6. Business ethics is a philosophy to determine the standards and norms to make mutual interactions and behaviour between individual and group in organisation.
7. Business ethics offers to establish the norms and directional approaches for making an appropriate code of conducts in business.
8. Business ethics are based on the concepts, thoughts and standards as contributed as well as generated by Indian ethos.
9. Business ethics may be an ‘Art’ as well as ‘Science’ also.
10. Business ethics basically inspire the values, standards and norms of professionalism in business for the well-being of customers.
11. Business ethics is to motivate and is consistently related with the concept of service motives for the customers’ view point.
12. Business ethics shows the better and perspective ways and means for most excellences in customisation.
13. Business ethics aims to emphasise more on social responsibility of business towards society.

Ethical Principles in Businesses from an Indian Perspective

Essentially, any businesses that run in India comprises of these ethical principles.

Integrity

Whenever there is great pressure to do right instead of maximizing profits, this principle is tested. The executives need to demonstrate courage and personal integrity, by doing what-what think is right.

These are the principles, which are upright, honorable. They need to fight for their beliefs. For these principles, they will not back down and be hypocritical or experience.

Loyalty

No ethical behavior can be promoted without trust. And for trust, loyalty needs to be demonstrated. The executives need to be worthy of this trust while remaining loyal to the institutions and the person. There should be friendship in the time of adversity and support and devotion for the duty.

They should not use or disclose personal information. This leads to confidence in the organization. They should safeguard the ability of a professional to make an independent decision by avoiding any kind of influence or the conflicts of interest.

So, they should remain loyal to their company and their colleagues. When they accept the other employees, they need to provide a reasonable time to the firm and respect the proprietary information attach to the previous firm. Thus, they should refuse to take part in any activity that might take the undue advantage of the firm.

Honesty

The ethical executives are honest while dealing with their regular work. They also need to be truthful and do not deliberately deceive or mislead the information to others. There should be an avoidance of the partial truths, overstatements, misrepresentations, etc. Thus, they should not have selective omission by any means possible.

Respect and Concern

These are two necessarily different forms of behavior in the organization. But they go in tandem that is why they have been put under one principle. When the executive is ethical he is compassionate, kind, and caring.

There is one golden rule which states that help those who are in need. Further, seek their accomplishments in such a manner that the business objectives of the firm are achieved.

The executives also need to show respect towards the employee’s dignity, privacy, autonomy, and rights. He needs to maintain the interests of all those whose decisions are at stake. They need to be courteous and treat the person equally and rightly.

Fairness

The executives need not be just fair in all the dealings, but they also should not exercise the wrong use of their power. They should not try to use over each or other indecent manners to gain any sort of advantage. Also, they should not take undue advantage of anything or other people’s mistakes.

Fair people are inclined more towards justice and ensure that the people are equally treated. They should be tolerant, open-minded, willing to admit their own mistakes. The executives should also be able to change their beliefs and positions based on the situation.

Leadership

Any executive, if ethical, should be a leader to others. They should be able to handle the responsibilities. They should be aware of the opportunities due to their position. The executives need to be a proper role model for others.

Basic Concept of Business Ethics:

The basic concepts of business ethics are involved with three different types of moral or ethical issues. Some concepts focus on the issues covering the function of business within the environment where the business activates i.e. political, economic, legal and other social factors. Other concepts focus on the corporate issues, i.e. the issues pertaining to the functioning of a certain business or company. While the other concepts focus on the individual issues, i.e. the issues pertaining to the conduct or behavior of individuals within a business or company. In this discussion the following concepts will be briefly explained:

• Businesses as a “Corporate Entity”
• Business Ethics considered as “Good”
• Unethical Business Practices
• Moral Rights
• The Concept of Justice

Businesses as a “Corporate Entity”:

Business corporations in most of the nations are considered legally as entities or persons, i.e. the rights and liabilities legally applicable to persons or citizens are also applicable to business corporations.

The eventual objective of individual ethics is developing a set of ethical standards which can be held as acceptable after considering everything carefully in a particular situation. These individually accepted ethical standards can also be applied to different situations such as personal, social and even in a business. Most of the consumers agree that a business should follow the same moral standard while interacting with an individual customer as well as interacting with all customers locally, nationally or globally.

Business Ethics considered as “Good”:

Business ethics considered as “Good” requires containing and following a norm of moral values keeping the expectations and rights of people ahead of the profit maximization of business. A business’s main goal is to make a profit but peoples’ rights and expectations should not be ignored. Good business ethics is beneficial for businesses in the following three ways:

• It Discourages the breaking of laws in business activities.
• It assists businesses to avoid steps for which the company may come under costly civil lawsuits.
• It demotivates companies to engage in actions which can damage the image of the company. Good business ethics helps to improve businesses profitability as following ethical values prevents loss of revenue and company reputation.

Though moral standards are something which goes beyond the legal requirements, some of them are ascertained by the legal system. There are various laws against fraudulence, stealing, killing, sexual harassment, and so on.

Unethical Business Practices:

Many big companies have been fined a large amount of money for following unethical business practices. Unethical business practices go far beyond functions breaking the law. Many renowned companies are engaged in unethical and questionable practices without breaking any laws. They follow practices just to increase their profits ignoring the rights of the consumers, such as, giving less in quantity or quality, selling old or low-quality products with free gifts, etc.

The businesses have to make a profit but not at the cost of moral or ethical values. Businesses are ethically responsible for their activities as individuals are responsible for theirs.

Moral Rights:

Generally, a moral right refers to a person’s claim to something. When a person is entitled to a right, he or she is able to make a decision whether or not to claim such right without anyone’s permission. The entitlement of moral or ethical rights implies that others have particular duties towards the person bearing the right.

Negative rights enforce duties on other people not to interfere in your activities which are right for or important to you. For example, your right to make your own decisions or right to express your own opinion about anything.

Positive rights generate duties on others to give something to the person bearing the right. They state that others must contribute some benefits to the bearer of the right. For example, education, you have the right to educate yourself. If you are eligible to get yourself admitted to a varsity to get an education on a specific subject or do a specific course, the varsity has to provide you the benefit of education.

The Concept of Justice:

The concepts of justice are based on ethical principles that determine just means of allocating benefits and burdens to all people of the society. The following beliefs are utilized to distribute the benefits and burdens in a just or fair way to the people of the society.

Egalitarianism states that all human beings are equal. According to this belief, all the benefits and burdens of the society should be circulated according to this principle:

“Every person should be given exactly equal shares of a society’s or a group’s benefits and burdens.”

Utilitarianism states that a just society’s laws and institutions promote the best overall or average welfare of its members. According to this belief, the greatest benefits for all, and the society should be organized in such a way that its wealth is allocated to meet everyone’s basic needs.

Socialist justice, states

“work burdens should be distributed according to people’s abilities, and benefits should be distributed according to people’s needs.”

 It is focuses on equal justice for everyone whether they are poor, middle class or rich.

Capitalist justice states that a person should receive the benefits proportionate to his or her contribution to the society.

Libertarian justice states that the free market is naturally just, and that redistributive taxation breaches the property rights of people. This belief is founded on two principles: Principle 1 (Principle of equal liberty) and Principle 2 (Difference principle) both referring how everyone is responsible for one’s own future not regarding of what happens.