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Unit 1Introduction to Ethics and Business Ethics Q1) Write the meaning of Ethics.A1) The term ‘ethics’ has been derived from the Greek word ‘ethos’ which implies character, ideas and standards of behavior practiced within a society. Personal ethics define right and wrong behavior for an individual. In the business sense, ethics describe what constitutes good or bad in human conduct in organizational context. We can also say that business ethics are concerned with making life, not just living.Business ethics is the study of appropriate business policies and practices regarding potentially controversial subjects including corporate governance, insider trading, bribery, discrimination, corporate social responsibility, and fiduciary responsibilities. The law often guides business ethics, but at other times business ethics provide a basic guideline that businesses can choose to follow to gain public approval. Business ethics refers to implementing appropriate business policies and practices with regard to arguably controversial subjects. Some issues that come up in a discussion of ethics include corporate governance, insider trading, bribery, discrimination, social responsibility, and fiduciary responsibilities. The law usually sets the tone for business ethics, providing a basic guideline that businesses can choose to follow to gain public approval. Q2) What is the importance of Ethics? A2) The importance of business ethics reaches far beyond employee loyalty and morale or the strength of a management team bond. As with all business initiatives, the ethical operation of a company is directly related to profitability in both the short and long term.The reputation of a business in the surrounding community, other businesses, and individual investors is paramount in determining whether a company is a worthwhile investment. If a company is perceived to not operate ethically, investors are less inclined to buy stock or otherwise support its operations.Companies have more and more of an incentive to be ethical as the area of socially responsible and ethical investing keeps growing. The increasing number of investors seeking out ethically operating companies to invest in is driving more firms to take this issue more seriously. The system of moral and ethical beliefs that guides the values, behaviors, and decisions of a business organization and the individuals within that organization is known as business ethics. Some ethical requirements for businesses are codified into law; environmental regulations, the minimum wage, and restrictions against insider trading and collusion are all examples of the government setting forth minimum standards for business ethics. What qualifies as business ethics in history has changed over time and the different areas of ethics are important to every business. The management team sets the tone for how the entire company runs on a day-to-day basis. When the prevailing management philosophy is based on ethical practices and behavior, leaders within an organization can direct employees by example and guide them in making decisions that are not only beneficial to them as individuals, but also to the organization as a whole. Building on a foundation of ethical behavior helps create long-lasting positive effects for a company, including the ability to attract and retain highly talented individuals, and building and maintaining a positive reputation within the community. Running a business in an ethical manner from the top down builds a stronger bond between individuals on the management team, further creating stability within the company. When management is leading an organization in an ethical manner, employees follow in those footsteps. Employees make better decisions in less time with business ethics as a guiding principle; this increases productivity and overall employee morale. When employees complete work in a way that is based on honesty and integrity, the whole organization benefits. Employees who work for a corporation that demands a high standard of business ethics in all facets of operations are more likely to perform their job duties at a higher level and are also more inclined to stay loyal to that organization. Q3) What are the objectives of ethics?A3) objectives of ethics: 1. Ethics are a study of human behavior. Makes evaluative assessment about that as moral or Immoral.2. Ethics establish moral standards/norms of behavior.3. Ethics make judgment upon human behavior based on these standards and norms.4. Ethics prescribe moral behavior, makes recommendations about how to or how not to Behave.5. Ethics expresses an opinion or attitude about human conduct in general.6. The very basic objective is to define the greatest good of man and establish a standard for the same.7. Suggests moral behavior and prescribes recommendations about dos and don’ts.8. One’s opinion or attitude about human conduct is expressed in general. Q4) Write the Scope of Business Ethics.A4) Ethical problems and phenomena arise across all the functional areas of companies and at all levels within the company. 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 fueled 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. 2. Ethics in FinanceThe ethical issues in finance that companies and employees are confronted with include:In accounting – 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 3. Ethics in Human ResourcesHuman resource management (HRM) plays a decisive role in introducing and implementing ethics. Ethics should be a pivotal issue for HR specialists. The ethics of human resource management (HRM) covers those ethical issues arising around the employer-employee relationship, such as the rights and duties owed between employer and employee. 4. Ethics in MarketingMarketing ethics is the area of applied ethics which deals with the moral principles behind the operation and regulation of marketing. The ethical issues confronted in this area include:Pricing: price fixing, price discrimination, price skimming. Anti-competitive practices like manipulation of supply, exclusive dealing arrangements, tying arrangements etc. Misleading advertisements Content of advertisements. Children and marketing. Black markets, grey markets. 5. Ethics of ProductionThis area of business ethics deals with the duties of a company to ensure that products and production processes do not cause harm. Some of the more acute dilemmas in this area arise out of the fact that 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.Defective, addictive and inherently dangerous products and Ethical relations between the company and the environment include pollution, environmental ethics, and carbon emissions trading. Ethical problems arising out of new technologies for e.g. Genetically modified food Product testing ethics. The most systematic approach to fostering ethical behavior is to build corporate cultures that link ethical standards and business practices. Q5) Write the objectives of Business Ethics.A5) Objectives of Business Ethics: (i) Personal level:At personal level the policy should be set that not to misuse the properties of the others or of the organization keeping the promises and extending the mutual help, not to seek quick gains and not to indulge in politics to gain power. (ii) Internal policy level:The business organization should follow fair practices in dealing with employees and other stakeholders. The organization should have open and better communication at all levels. The organization leadership should motivate employees for better productivity and for common good. (iii) Societal level:The social concerns like no discrimination concerned for the downtrodden be the prime concerns of the business organizations. Optimal use of scarce resources, clean environment and ensuring better quality of life to all the stakeholders should be stressed in the internal policies. (iv) Stakeholder’s level:The organization should take care of the maximum number of stakeholders and follow ethical means with shareholders, customers, suppliers, employees, banks and financial institutions, government and all others that relate to the organization Q6) Write a note: Scope of Business Ethics towards Society and StakeholdersA6) What is ethical and unethical in general society may not be the same in business as the latter operates in different environments. Business ethics is “concerned primarily with the relationship of business goals and techniques to specific human needs. It studies the impact of acts on the good of the individual, the firm, the business community and the society as a whole. “Business ethics study the special obligations that a man and a citizen accept when he becomes a part of the world of commerce”. Business ethics are the norms and moral values of human behavior desired by the contemporary society exclusively and inclusively dealing with commercial transactions. These definitions on business ethics are not comprehensive but they provide an idea of what business ethics is. In fact, defining the term business ethics comprehensively is very difficult.Business ethics means the behavior of a businessman while conducting a business, by observing morality in his business activities.The behavior of a businessman has more impact within the business organization than outside. So, he should obey the laws even though he may personally believe them to be unjust or immoral. If the businessman feels that the provisions of laws are unjust, he can take steps to change the provisions instead of disobeying them. A businessman should observe morality not only in business activities but also in non-business activities. Such observation of morality is not required out of fear for punishment. He should observe ethics inspired by his own interest in his business and society as a whole. The reason is that there is no distinction between a businessmen and his business. According to Drucker, every individual and organization in society should abide by certain moral codes and that there is no separate ethics of business.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 organizations 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 maximize their profits and a choice to do good for the society in which they live and operate. However, at most times, profit maximization 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 maximize 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 organization. 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 utilization 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 utilized 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 especially 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.What are the obligations of a business, is open to interpretations. The list of obligations that a company must perform is long and complex and hence, are costly to the company; yet they must be discharged, if a company wants to survive and grow in the long run and is not satisfied in making profits only in the short ran. While discharging its obligations to the society, the company not only fulfils its own duties, but also paves the way for a stronger and more ethical foundation. Q7) Explain the role of Government in Ensuring Business EthicsA7) One of the central purposes of the government is to enforce the law. The law represents the will of the people who have their own cultural and ethical perceptions of reality. As a result the government enforces the ethical and moral values of the people it governs. In other words it can be rightly said that the government serves to accomplish the people’s perceptions of reality as represented in their ethical and moral values. This makes the role of the government more complex not forgetting that not all values of ethical and moral consideration can be enforced by the government. However, the government remains the prime custodian of people’s values. Ethics and moral values have a great influence on the operation of the society. It is therefore true that the government exercises control over the society. This is true in light of the task of enforcing laws. In order to get a better understanding of the role of the government as far as ethics and morality is concerned; more focus should be on the law (Preston & Bishop 2000). The law is the government’s instrument of power. To perform its functions, the government relies majorly on the law. On the other hand, the law is perceived as being representative of the ethical, cultural and moral values of the people. Therefore, as much as the law might not be the perfect tool of enforcing ethical and moral values, it remains the governments’ chief weapon against unprincipled practices and immorality. The law describes what is right and acceptable in society and therefore provides a blueprint towards an ethical and just society. In order to affirm their quest for a just society, citizens are expected to adhere to the provisions of the law. Therefore, the law binds the society together bringing harmony among different people. Failure to conform to the law is perceived as breaking ethical standards established and is thus punishable. Therefore, the law is perceived as the people’s will to be enforced by the government. There are a lot of challenges the government faces in its ethical and moral roles. First and foremost are the different perceptions of ethics and morality. This is coupled by the practical reality that the law does not fully represent ethical and moral standards. Perceptions are a great threat to the government’s role. This is since certain parameters which are legal are sometimes perceived as violating ethical and moral standards. A good example is the issue of abortion. As much as abortion might be legalized, it remains a debatable ethical issue. This is due to the fact that it is seen by some members in society as unethical. Other issues include divorce and promiscuity. These conflicts underline the fact that the law is not a sufficient tool of enforcing ethical and moral values. It underscores the failure of the government to ensure a just society through enforcing the law. Certainly, government has a role in protecting society from unscrupulous business practices. However, businesses also have a fiduciary responsibility to their shareholders and a responsibility to their customers.When government intervention and regulation insert themselves into business activities, the good intentions of regulation cause companies to neglect their shareholders and to fail to provide their customers optimum products and services.For example, Enron and WorldCom are perfect examples of the few forcing draconian regulation, via the Sarbanes Oxley Act, on the many, perfectly legitimate and ethical businesses. This regulation has motivated public companies to go private and private businesses to go public in foreign countries. As a result, society is no better off, and out of concerns of violating Sarbanes Oxley regulations, businesses are failing in their fiduciary responsibility to shareholders. The belief or assumption that pervades societal thought in the United States is that government regulation of business will solve the dilemma of businesses acting to the detriment of society. Since both business and government are competitors and both entities are operated by humans, how is it that the individuals operating government are more ethical than those individuals operating businesses? After all, they both seek power and influence over society. Q8) Write the Principles of Business EthicsA8) 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. LoyaltyNo 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. HonestyThe 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 ConcernThese 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. FairnessThe 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. LeadershipAny 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. Q9) Explain the 3Cs of Business Ethics.A9) 3Cs of Business Ethics: Compliance At minimum, managers must comply with the policies and rules of their companies as well as those of their nation’s legal system. In fact, most corporate codes of ethics are written as compliance documents by spelling out prohibitions and approved responses to ethical situations known from company experience. Research with large organizations suggest about half report taking a compliance approach to ethical issues facing their firm. Many though view the law as the minimum standard, and in so doing are less likely to run into reputational disrepute and consequently maintain their success over the medium to long-term. Consequences Most managers worry about the consequences of their actions. In fact, one set of ethical theories uses the yardstick of whether good or bad consequences will result in deciding whether a decision is ethical or unethical. For instance, a decision to move a manufacturing plant to a lower-cost-of-labor country will likely mean good consequences for the company in terms of lower costs of production. But not all the consequences arising from such a decision will be positive. Contributions Most managers of companies do not look at their position or corporation as just being in the business of making money. They often speak in much more enlightened terms, such as improving convenience for consumers or offering more product choice. Thus, business contributes to a more productive economy and a happier society. Whether this vision is always fulfilled is debatable, but businessmen and women often see themselves as contributing to society and not just in a narrow microeconomic sense. Q10)Elaborate the myths about Business EthicsA10) Practically business ethics at the workplace connotes an alignment between what the organization values and how to go about it. It means that the all the day to day operations or activities carried out by employees are in tandem with the organizational policies without any deviations. There are however lots of myths that surround business ethics and their relevance and effectiveness.Many management thinkers and philosophers believe that business ethics alters people’s values. They cease to be what they are, which comes in way of realization of their full potential. Instead business ethics should be about managing values and conflict resolution. Conflict management is what they stress the most upon.There is a continuous tension between individual and organizational ethics. Many organizations believe that most of their human resources are ethical already and need not be trained upon. When such an ethical dilemma arises, it arises because there is a clash of principles that differ in their result priorities. Again there ethics to counter that are equally reasonable! So what do you choose? One more myth that surrounds business ethics is that it is well managed and the prerogative of philosophers and theologians. They say that there is no such term as business ethics that can decide how organizations go about their day to day activities. Most of this may be attributed to lack of participation of business leaders in ethical decision making process and their interest in the same. Business ethics is also criticized as being nothing new. It is believed to something that only avows what is good and which is logical and known to everyone. But when we look at the same from the perspective of stakeholders, the society and employees who work at the bottom of the pyramid, it safeguards the interests of all these groups. Organizations cannot function in a programmed manner ensuring there is no breach of a certain code in the absence of ethics and values. Business ethics in the context of corporations is recent, but it is fairly old if we talk of general business transactions. Cicero wrote about business ethics in his book ‘On Duties’. It looks recent because of the corporate social responsibility movement that started in early 1970’s. Yet another myth that surrounds business ethics is that business ethics cannot be managed which is totally wrong. In reality business ethics is managed or exercised indirectly in some way. Organizations priorities can also be reflective of the ethics followed in the organizations. For example a sales driven organization is bound to be aggressive naturally, whereas one that is into the business of hospitality is bound to be different.Certain other sections of people in management believe that business ethics and social responsibility are the same. They are not! In fact corporate social responsibility is only a small part of it. Corporate social responsibility concerns itself with managing business dealings and the interface with the society; it does not deal with ethics at the workplace. However both fall under the continuum of business ethics.
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