Executive Summery

Business and society have been coeval since time immemorial and also have been inter-
dependant. This relationship between business and society is appreciated in Rigveda also :
“Corporate should work like a honeybee, which takes the nectar of a flower without the
flower being losing its shape and fragrance and provides honey for the wellbeing of the
society.” It means that both have to work on a symbiosis manner for each one’s survival and
success. The business history is replete with evidences to believe that business flourishes only
where society thrives. On the contrary, business dies when society condemns and rejects it.
No business can survive without societal approval and sanction. The inter-dependant nature
of relationship between the business and the society is best illustrated by the management
guru Peter Drucker (1954) by the example of a ship and sea. He states that the relationship
between business and society is “like the relationship between a ship and the sea which
engirds it and carries it, which threatens it with storm and shipwreck, which has to be
crossed but which is yet alien and distant.” No doubt, business has been conducted primarily
to earn profit and / or create wealth. However, there are reasons and evidences to believe that
the mindless obsession with profit maximization at any cost carried to any extreme has led to
spurt in sordid activities in business causing harm to both the business and society and
ultimately leading business to flounder and fizzle out. Enrons Parmalats, Union Carbide, and
World.com are to name a few representing examples of such business collapses. Business
history is also replete with examples that only the businesses that are conducted through good
or right practices enjoy societal sanction and survive and last for long. Johnson & Johnson,
Maruti Limited, Reliance Industries Limited, and Tata Iron and Steel Company are such
examples that indicate that being good in conducting business activities proves good for
businesses also. Hence, there has been increasing concern for conducting business in a good
or ethical manner. Though there has been a spurt in research activities on business ethics or
ethics in business, not much research has so far been conducted on what actually makes
business ethics and how being ethical or good is good for business also.

Every business has an ethical duty to each of its associates namely, owners or stockholders,
employees, customers, suppliers and the community at large. Each of these affect
organization and is affected by it. Each is a stakeholder in the enterprise with certain
expectations as to what the enterprise should do and how it should do it.

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Business ethics is applied ethics. It is the application of our understanding of what is good
and right to that assortments of institutions, technologies, transactions, activities and pursuits
that we call business. Ethical behavior is the best long term business strategy for company ,
however this does not mean that occasions may never arise when doing what is ethical will
prove costly to a company nor does it mean that ethical behavior is always rewarded or that
unethical behavior is always punished.
On the contrary, unethical behavior sometimes pays off and the good sometimes lose.
Strategy means merely that over the long run and for most of the part, ethical behavior can
give a company significant competitive advantages over companies that are not ethical.

In an age of liberalization and globalization corporations can grow, survive and prosper in the
long run only if they adopt policies and programmers, which can be considered ethically,
economically, socially and environmentally good to vast sections of society with whom they
are intricately linked. In the wake of revelations of serious scandals, irregularities,
malpractices perpetrated by corporate entities anywhere and everywhere in the world, the
need for good corporate governance and application of ethical values and principles in the
conduct of business operations at every level of a corporate organization right from top level
is felt more relevant now than before to serve the varied needs, aspirations and expectations
of different segments of stakeholders who have a stake in the healthy functioning of a
corporate entity as a socially responsible member of the civil society.

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 Three Pillars of Modern Business
“Business ethics, Professionalism and Corporate Governance”

Business ethics, Professionalism and Corporate Governance are the important imperatives for
survival and growth of a modern business organization confronted with multiple challenges
including financial scams, dying sentiments of investors, fixing accountability, transparency,
independence in decision making, rule of law, fairness in deals, etc. from the different
stakeholders, i.e., investors, creditors, industry, government and society, in the present
knowledge based, global and competitive environment.
In the years to come, not only corporate governance is going to be the major concern of
management but also the basic ingredient of corporate governance is going to change. In
addition to full disclosure of the workings of the company, a professional and good
management has to identify and quantify the risk being undertaken by various stakeholders.
And then the management has to apply all its innovative qualities to ensure that the risk for
each stakeholder is reduced to an accepted level and that each stakeholder is rewarded
properly for the risk undertaken by him. The success of any company would largely depend
on maintaining a business model wherein all the stakeholders are made comfortable. Being
transparent in all the dealings/workings can further enhance the comfort level of the
stakeholders.
A key element of good governance—corporate or otherwise—is transparency projected
through a code of good governance which incorporates a system of checks and balances
between key players—boards, management, auditors and shareholders. Transparency in turn
requires the enforcement of the right to information and the nature, timeliness and the
integrity of the information produced at each level of interface defines the real issue. All of
this can only succeeds if the responsibilities of each entity and their interface is defined with
great clarity and understood by all.
For effective corporate governance, a company must symbolize harmonious alignment of
various interests of individual, corporation and society. In yet another perspective, corporate
reputation, competitive credibility and governance have become increasingly inter-oven.
Therefore, corporate governance must be driven by ethical and philosophical concerns as
well as legal structural imperative. In short, promoting corporate fairness, transparency
and accountability are the hallmark for corporate governance.

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Profit: Measure of Success

No doubt profit is the yardstick to measure the success of every business enterprise whether it
is run by the Government or a private organisation. Nevertheless a modern business
corporation cannot run its business operations solely with a profit motive, but as an
enlightened corporate citizen to serve the varying needs and aspirations of different segments
of society. This is reflected by the brilliant statement made by Henry Ford at the time of
Dodge v. Ford trial about his company’s philosophy - “I do not believe that we should make
such as an awful profit on our cars. A reasonable profit is right, but not too much. So it has
been my policy to force the price of the car down as fast as production would permit, and
give the benefits to the users and the labourers (meaning workers) with surprisingly
enormous profits to ourselves”.
What Mr. Ryuzaburu Kaku, the dynamic and social oriented President of Cannon said
severally years ago is valid forever under whose visionary leadership that company had made
great strides and progress in every area of its operations. He said “If corporations run their
business with the sole aim of gaining more market share or earning more profits, they may
lead the world with economic, environmental and social ruin. If they work together for the
common good they can bring food to the poor, peace to war torn areas and renewal to the
natural world. It is our obligation as business leaders to join together to build a foundation
for world peace and prosperity”.

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Importance/Advantages of Business Ethics

Profitability & Morality

Frequently the impression of most people is that ethics and profits are mutual, opposed to one
another and that if a company is ethical, it may forget about making profits. People also
frequently seem to believe that a profitable company must necessarily be unethical. This is
like saying that a company can make profits only through unethical means. Nothing can be
more have ethical companies made profits, but more importantly it is, only ethical companies
which discharged its social responsibilities, that have survived competition and turbulent
changes through the years and have contributed to social welfare and have contributed to
flourished undiminished.
In fact, considered from all angles, it is unethical, NOT to make profit. It is unethical, for a
company, to make losses. Because, a company which can not make profits and makes losses,
misutilises scarce national resources can not pay back creditors, does not make wealth for its
shareholders, make huge liabilities, upsets the economy, promotes inefficiency and most
importantly, can not, at any cost discharge its social responsibility, meet its welfare
commitments and jeopardises the future of its employees. Such a loss- making company
becomes a nuisance and a burden to the economy and has not right to exist in the market
place. Moreover, it has no business to force its employees into economic insecurity, which is
highly unethical.
Thus instead of profits being contradictory to ethics, business ethics dictates that the first
responsibility of business is to remain profitable and generate revenue from the shareholders
and the society. Rather, it is unethical, not to make profits. Hence, the first and foremost
ethical obligation of every business is to make profits for its shareholders, for its employees,
for its creditors and most importantly, for itself, so that it can discharge its social
responsibilities and welfare commitments. But how much profits to make, the means and
methods of making it, and at what cost- that is the ethical question.
No business, however great or strong or wealthy it may be at present, can exist on unethical
means, or in total disregards to its social concern, for very long. Resorting to unethical
behaviour or disregarding social welfare is like calling for its own doom. Thus business
needs, in its own interest, to remain ethical and socially responsible. As V.B. Dys in "The
Social Relevance of Business " had stated-

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"As a Statement of purpose, maximising of profit is not only unsatisfying, it is not even
accurate. A more realistic statement has to be more complicated. The corporation is a creation
of society whose purpose is the production and distribution of needed if the whole is to be
accurate: you cannot drop one element without doing violence to facts."
Business needs to remain ethical for its own good. Unethical actions and decisions may yield
results only in the very short run. For the long existence and sustained profitability of the
firm, business is required to conduct itself ethically and to run activities on ethical lines.
Doing so would lay a strong foundation for the business for continued and sustained
existence. All over the world, again and again, it has been demonstrated that it is only ethical
organisations that have continued to survive and grow, whereas unethical ones have shown
results only as flash in the pan, quickly growing and even more quickly dying and forgotten.
Business needs to function as responsible corporate citizens of the country. It is that organ of
the society that creates wealth for the country. Hence, business can play a very significant
role in the modernisation and development of the country, if it chooses to do so. But this will
first require it to come out from its narrow mentality and even narrower goals and motives.

Ethics at Market Place

Free markets are justified because they allocate resources and distribute commodities in ways
that are just, that maximize the economic utility of society’s members and that respect the
freedom of choice of both buyers and sellers. These moral aspects of a market system depend
crucially on the competitive nature of the system. If firms join together and use their
combined power to fix prices, drive out competitors with unfair practices or earn
monopolistic profits at the expense of consumers, the market ceases to be competitive and the
results are injustice, a decline in social utility and a restriction of people’s freedom of choice.

Fairness is getting paid fully in return for what one contributes and it is this form of justice
that is achieved in perfectly competitive free markets. Perfectly competitive markets embody
capitalist justice because such markets necessarily converge on equilibrium point and the
equilibrium point is the one point at which buyers and sellers on an average receive the value
of what they contribute.

In a monopoly market situation, however conditions change as compared to perfectly

competitive market conditions particularly with respect to the number of buyers and sellers

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and also the entry is not so easy. Unregulated monopoly markets fall short of the values of
capitalist justice and economic efficiency. The high prices the seller forces on a buyer in a
monopoly situation are unjust and these unjustly high prices are the source of the sellers,
excess profits. The high profits in a monopoly market indicate a shortage of goods. Other
firms are blocked entering the market, their resources cannot be used to make up the
shortages indicated by the high profits. Thus monopoly market results in a decline in the
efficiency with which it allocates and distributes goods. Oligopoly markets which are
dominated by a few large firms are said to be highly concentrated i.e. there are relatively
small number of firms. It is relatively easy for the managers of these firms to join forces and
act as a unit. By explicitly or implicitly agreeing to set their prices at the same levels and to
restrict their output accordingly , the oligopolist can function like a single giant firm. This
uniting of force together can create barriers to entry and result in the same high prices and
low supply levels that are characteristics of a monopoly markets. As a consequence oligopoly
market, like monopolies can generate a decline in social utility and can fail to respect basic
economic freedom.
What do you do when you find yourself confronted with an opportunity to learn exactly what
a competitor is doing or is about to do. What Mr. John E. Pepper, the Former Chairman and
Chief Executive of The Procter & Gamble Co. (P&G) narrated in his talk on 30th January,
1997 at the Florida University about the philosophy of business ethics practiced by P&G by
two live cases will be of great interest and relevance for our discussion.
Case No.1 : An individual made a call from Europe to a Senior Manager of P&G informing
him that he had in his possession very sensitive and useful documents about the future plans
of its competitor – a Lever brand– which he was willing to sell to P&G. The Senior Manager
of P&G immediately passed on the information to the Head of Security at Unilever, who in
turn alerted the police. The police swung into action and arrested the culprit.
Case No. 2 : A Senior Executive of one of the advertising agencies of P&G while travelling
in a cab in New York found lying on the floorboard, a computer disk that included the
marketing plans of the P&G’s main competitor who was giving serious headache to one of
P&G’s flagship brand in the market place. The Senior Executive immediately sent back the
disk to the Chairman of the competitive company and assured him that neither the agency
nor anyone at P&G had looked at the contents of the disk. In his letter he said “We will
always compete with commitment and intensity but will never compromise our ethics to win”.

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Ethics of Consumer Production and Marketing

People are exposed daily to astonishingly high levels of risk from the use of consumer
products. Each year people suffer serious accidental injuries and few others are killed due to
accidents involving consumer products. Examples are often reported of injuries requiring
hospital treatment inflicted on youngsters and adults using toys, nursery equipment and
playground equipment, people using home, workshop equipment, people requiring treatment
for injuries involving home construction materials.
Now the dilemma which arises is where does the consumer’s duty to protect his or her own
interests end and where does the manufacturer’s duty to protect consumers’ interest begin?
Three different theories on the ethical duties of manufacturers have been developed, each one
of which strikes a different balance between the consumer’s duty to himself or herself and the
manufacturer’s duty to the consumer – the contract view, the ‘ due care’ view, and the social
cost view. The contract view would place the greater responsibility on the consumer, whereas
the due care and social costs views place the larger measure of responsibility on the
manufacturer. Consumers are also bombarded daily by an endless series of advertisements
urging them to buy certain products. Although sometimes defended as sources of
information, advertisements are also criticized on the grounds that they rarely impart
additional information and only give the barest indications of the basic function a product is
meant to serve and sometimes misrepresent and exaggerate its virtues.
Economists argue that advertising expenditure is a waste of resources while sociologists
bemoan the cultural effects of advertising. The advertising business is a massive business.
The question however is who pays for these advertising expenditures? In the end, the prices
consumers pay for the goods they buy must cover advertising costs–the consumer pays. What
does the consumer get for his or her advertising rupee? According to most consumers, they
get very little. However, the advertising industry sees things differently. Advertising, they
claim is before all else communication. Its basic function is to provide consumers with
information about the products available to them – a beneficial service. The question to be
discussed therefore is whether advertising is a waste or a benefit? Does it harm consumers or
help them? Discussion of the ethical aspects of advertising can be organized around the
various features like its social effects, its creation of consumer desires and its effects on
consumer beliefs. Studies have shown that advertising frequently fails to stimulate

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consumption of a product and consumption in many industries has increased despite minimal
advertising expenditures. Thus advertising appears to be effective for individual companies
not because it expands consumption but only because it shifts consumption away from one
product to another. If this is true then economists are correct when they claim that beyond the
level needed to impart information , advertising becomes a waste of resources because it does
nothing more than shift demand from one firm to another. The moral issues raised by
advertising are complex and involve several still unresolved problems. However there are
few factors like its social effects, its effect on desire, effects on belief that should be taken
into consideration when determining the ethical nature of a given advertisement. Advances in
computer processing power, database software and communication technologies have given
us the power to collect, manipulate and disseminate personal information about consumers on
a scale unprecedented in the history of the human race. This new power over the collection,
manipulation and dissemination of personal information has enabled mass invasions in the
privacy of consumers and has created the potential for significant harms arising from
mistaken or false information.
The purpose of rights is to enable the individual to pursue his or her significant interests and
to protect these interests from the intrusion of other individuals. It is also important because it
has several enabling functions. Privacy enables certain professional relationships to exist. In
so far as the relationships between doctor and patient, lawyer and client, and psychiatrist and
patient all require trust and confidentiality, they could not exist without privacy. It is clear
then that our interest in privacy is important enough to recognize it as a right that all people
have, including consumers. However this right must be balanced against the rights and
legitimate needs of others. For example, consumers benefit from having life insurance
available to them. However there are significant consumer benefits that businesses can
provide but they can provide only if there exists agencies that can collect information about
individuals and make that information available to businesses. Thus consumers’ rights to
privacy have to be balanced with these legitimate needs of businesses.

Ethics in HRM
Ethics in Accounting
Ethics in Marketing
Ethics in Advertising

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Corporate Objectives

To achieve a planned, orderly and consistent growth in a competitive environment and a free
market economy, a company must try to improve its methods of production, processes and
systems by using updated and relevant technologies using its vast financial and human
resources judiciously. Naturally every company must conduct its affairs economically,
efficiently and progressively on ethical lines to serve the public interest, with probity,
accountability and transparency of company finances in a socially responsible manner. A
company incorporated in a particular country has the nationality of that country though like a
natural person it cannot change its nationality. The era of corporate autocracy is coming to an
end. In simple terms the success or failure of a corporation in the long run will be based on
cherished values and ideals acceptable to society as an enlightened corporate citizen and
which understands, appreciates and recognizes its pivotal role to look after the rights and
interests of various segments of society such as shareholders, employees, consumers, local
community and society at large. Spiritual health of an organisation is based on internal and
external connectivity. Level of cohesion, co-operation, partnership, community involvement
and social responsibility are important indicators to measure the spiritual health of a
company.
In order to enable everyone dealing with a company to understand its basic objectives and
aims, a company must define its vision, mission and value statements in a clear cut manner
for the benefit of various segments of society and also frame a business code of conduct
based on ethical values and principles analysed above. These should be integrated into the
organization’s systems, procedures and practices. Let us briefly discuss and understand the
relevance and purpose of these statements.
Vision statement : Essentially every vision statement brings to the notice of everyone
dealing with the company what is its intention with regard to the future it desires to create by
using all its resources at its command more so by its motivated and inspiring human
resources. It will assure the society that the company will take up of social issues and make
its contribution for a meaningful living of mankind.
Mission statement : Every mission statement is meant to keep the energies of the company
rightly focused around its core business areas, which can ensure robust growth and
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sustainable profits. Often every mission statement is very concise, inclusive and easily
memorized. Every mission statement is addressed to various segments of society such as
shareholders, employees, customers and society at large.
Tom Chappell, co-partner and CEO of Tom’s of Maine present values in the form of credo
about his organizational goals and beliefs as under which cover the best one can think of in
every organization:-
“We believe that both human beings and nature have inherent worth and deserve our
respect.
We believe in products that are safe, effective and made of natural ingredients.
We believe that our company and our products are unique and worthwhile and that we can
sustain these genuine qualities with an ongoing commitment to innovation and creativity.
We believe that we have a responsibility to cultivate the best relationships possible with our
co-workers, customers, owners, agents, suppliers and our community.
We believe in providing employees with a safe and fulfilling work environment and an
opportunity to grow and learn.
We believe that our company can be financially successful while behaving in a socially
responsible and environmentally sensitive manner”.

Corporate Scandals & Corporate Malpractices

There are a number of scandals rocking the corporate world day in and day out anywhere and
everywhere in USA, France, Germany, Japan, South Korea and in our own country relating to
various types of corporate crimes such as falsification of accounts by showing inflated
profits, embezzlement of company funds by dubious ways, siphoning of company’s funds by
entering into fictitious transactions, making fraudulent investments, financial irregularities,
breach of fiduciary duty, breach of trust, breach of confidential information, dishonesty, non-
disclosure of material facts, insider trading, misfeasance, misappropriation, mal-
administration, corruption and bribery and milking the company by fat salaries, amenities,
facilities, stock option schemes, severance benefits without any regard to company’s
performance or profitability to Board Members, CEO’s and other key executives harming the
rights and interests of various segments of society. The World Bank has identified corruption
as “the single greatest obstacle to economic and social development” of the universe hitting
the poor and vulnerable section of the world population.
John T. Noonan, a Judge of the United States Court of Appeals in his book “Bribes” which is
considered one of the most comprehensive book on bribery ever written provides various
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reasons as to why bribery has to be morally condemned. A company, which pays bribes to
clinch a business deal will get itself sucked into more murkier deals in future as it will turn
into a regular practice. In reality it is often found that many multinational corporations in the
business of arms sale, ships, aircrafts, sophisticated plant and machinery which involves
staggering amount of business deals are the real culprits for payment of bribes to people in
power through middlemen. In the circumstances many international business corporations
which attach significant importance to ethical values and principles have prescribed a
corporate code on bribery, which says – “The offer, payment, demand or acceptance of bribes
in any shape or form, in any circumstances is totally unacceptable to this organisation,
discovery will be followed by severe disciplinary and possibly legal action”.
Besides there are a number of misdemeanors exist in our corporate working such as sexual
harassment of women by other employees, employment and exploitation of child labour,
discrimination in employment and pay based on colour, sex, race etc. and wanton destruction
of precious natural resources thereby affecting ecological balance and biodiversity of the
universe. Many of our corporate entities use share buy back by using the funds of such
companies as a device to strengthen the control by the promoter groups or foreign companies
on them (which can otherwise be used for new projects, modernisation or expansion of their
activities) and later go for de-listing in stock exchanges totally disregarding the interest of
small investors. Similarly many companies in India make preferential allotments to promoter
groups or others primarily intended to achieve the same objective.
In the US 2002 can be considered as the year of “whistle blowers” in as much as Sherron
Watkins of Enron and Cynthia Cooper of Worldcom two insiders were responsible to bring in
the open the serious accounting irregularities committed by the said companies. Another
serious impact of the scandals in USA is the exposure of auditing profession to strong
criticism by all about its dubious role in not disclosing vital financial information for public
scrutiny and blindly providing support and assistance to scam related corporate entities. The
Sarbanes-Oxley Act, 2002 which is the outcome of the demise of Enron and the scale of
misreporting of vital financial information at Worldcom is the most sweeping reform of
corporate governance in USA since the Great Depression in 1930s. It is becoming the global
benchmark for all corporate entities for setting up proper internal control systems, framing of
tighter disclosure norms for due compliance, establishment of tough financial reporting
standards and requiring certification by people at the helm of management about the
correctness and accuracy of financial information, appointment of independent audit
committee, disclosure of off–the-books transactions that would have big effect on their
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financial position and putting in place a proper ethical code of conduct to reassure all
stakeholders that corporate organisations will carry on their business activities for common
good. The Public Company Accounting Oversight Board (PCAOB), which was created by
the aforesaid Act, to replace self-regulation of US audit profession has already prohibited
auditors doing non audit work to their corporate clients.

Corporate Roles
“The next wave of enduring great companies will be built not by technical or product
visionaries but by social visionaries – those who see their company and how it operates as
their ultimate creation and who invent entirely new ways of organizing human effort and
creativity”
– Jim Collins

A socially oriented corporate entity can serve the needs, expectations and aspirations of
various segments of society in many ways. However it is thought it fit to cover three
important segments of society as under with which every company will be more interlinked
than with others.
Shareholders: Every Company should provide all required information under the statute to
the shareholders from time to time to enable them to understand the financial working of the
Company, present and future prospects, level of business competition etc. Similarly every
company should organise, call and conduct general meetings according to the provisions of
the Articles of Association and mandatory legal requirements. Every corporate entity should
reward their shareholders by paying a decent dividend regularly and offer bonus and rights
shares at frequent intervals. It should be the responsibility of every corporate entity to provide
good investor services. Incidentally a recent report of Organization for Economic Co-
operation and Development (OECD) urges Asian Governments to ensure minority
shareholders are adequately protected by strengthening disclosure requirements, ensuring
regulators have real powers and resources to monitor companies and impose substantial
sanctions for any wrong doing, strengthening the fiduciary duty of directors to act in the
interest of all shareholders and provide shareholders who suffer financial losses with private
and collective rights to sue controlling shareholders and directors.
Employees : Since people are the most critical component of every business for its
sustenance, survival, continued growth and success companies are paying more attention how
to attract and retain good talent especially of persons with critical skills and knowledge.
Realising the importance of labour a modern company gives enough importance to human

13
resources development function to frame a realistic salary structure with good benefits and
facilities to their work force but also focuses greater attention for their personal development
and career prospects for future advancement by intensive in house and outside training. Every
company should create a healthy environment for individual development, teamwork, job
satisfaction and a distinct corporate culture by trying to tap and unearth an employee’s hidden
creative energy and innovation to achieve its organisational goals. Employees need to feel a
sense of fairness, commitment, right of privacy, right of meaningful work, equality,
recognition, responsibility and pride in their work. Too much control, use of excessive
authority, exploitation, poor working relationships between employees are sure signs of poor
emotional health of an organisation. Every organisation should encourage its employees to
grow both in their personal and professional lives. Personal growth builds emotional
intelligence and professional growth builds skills and intellect. When employees have a
common identity, common vision and shared values they work for the common good and
develop a strong sense of loyalty to the company. It should be appreciated that true power lies
not in the ability to control staff but in the ability to trust. People like organizations which
encourage them to explore their own creativity because in doing so the company gives them
the meaning of their very existence. Creativity will not blossom in a rigid over controlled
bureaucratic setup and punishes employees severely even for minor failures. Unfortunately
there is a wrong mind set in many organizations to the effect that a worker’s job is to execute
a work in the way the management wants and he cannot use his intuition and latent talent
power to make improvement on it. However if employees are allowed to use their knowledge
and creativity there will be shared feelings for good of the organisation. Every transnational
organisation is uniting people under a single corporate culture with shared values that
transcends cultural, racial and national boundaries. Employees should have adequate
authority, enough independence in their functional area of work and they must be made
accountable for their action. The second preferred employer in India Procter & Gamble
Group spends a lot of money on training and career development opportunities right from
entry level recruitments to develop their trainees as future leaders.
In a booklet titled “A Business and its beliefs” Thomas J. Watson, a former IBM Executive
succinctly states that “the real difference between success and failure in a corporation can be
very often traced to the question of how well the organization brings out the great energies
and talents of its people” .
Consumers : The old rule of caveat emptor is no more valid for sale or provision of services.
A company is required to provide adequate and reliable information to enable a consumer to
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make his own decision to purchase or avail of a service or not. Naturally a company must
produce goods or offer a service of an acceptable standard to suit the needs and purchasing
power of the consumers giving due regard to their safety and quality aspects and price its
products or services on a fair basis with a reasonable profit margin with full back up facilities
for after sale service and maintenance through out the working life of a product. The
company should not try to increase the cost of a product by mere change in style without
adding value to the product to benefit its user. Since a customer relies on the reputation and
integrity of the supplier to provide a good quality product or service, it is the responsibility of
a company to make product improvement on a continuous basis, or introduce new products or
services to match the changing consumer preferences, emerging needs, aspirations and
expectations of the community. Realising the importance of customer goodwill every
company should set up a grievance cell to monitor and understand the feed back and reaction
of its customers with a view to ensure that every product manufactured or service provided
shall be within the accepted norms and standards set out by the company. A company should
not indulge in false publicity, misrepresentation of facts, give false guarantee and
workmanship or tempt to offer substandard goods or services to raise revenues. A company
should provide products or services of high quality and value that improve the life style of
world’s consumers. Companies with a genuine consumer commitment earn the respect and
support of the local community and local governments. A growing numbers of consumers are
choosing products manufactured and or services provided by socially responsible companies.
In France a recent survey conclusively revealed that companies, which produce and market
fair trade products even if they are costing a little more are having ready market demand and
good acceptability from the discernable consumers. In other words consumers are reluctant to
lend support to companies for sale of products produced by exploitation of child labour or by
not providing good working condition according to accepted international labour norms.
Society accepts and rewards companies, which follow strict environmental and ethical
standards in the manufacture and marketing of consumer products.

15
Ethics And Business: Objections
People taking objections to bringing ethics into business argue that persons involved in
business should single mindedly pursue the financial interests of their firm and not side track
their energies or their firm’s resources into doing good works. Some argue that in perfectly
competitive free markets the pursuit of profit will by itself ensure that the members of society
are served in the most socially beneficial ways. However what experts like Manuel G
Velasquez argue is that often assumptions behind this argument like perfectly competitive
market situation do not exist. Another argument is that business managers should single-
mindedly pursue the interests of their firms and should ignore ethical considerations. This
argument finds its basis in ‘loyal agent’s argument’, which suggests that a manager engaged
in certain illegal or unethical conduct be excused because he did it not for himself but to
protect the interests of his company. However again the assumptions behind this argument
can be questioned on several grounds.
The third kind of objection is that to be ethical it is enough for business people merely to
obey the law. Business ethics is essentially obeying law. It is wrong however to see law and
ethics as identical. It is true that some laws require behaviour that is same as the behaviour
required by our moral standards. However law and morality do not always coincide. Some
laws have nothing to do with morality because they do not involve serious matters. These
include dress codes, parking laws and other laws covering similar matters. Beyond these
arguments for and against the role of ethics in business, discussions happen whether ethical
companies are more profitable than unethical ones. There are many different ways of defining
ethical, many different ways of measuring profits and the findings of different studies remain
inconclusive. However studies do suggest that by and large ethics do not detract from profit
and seems to contribute to profits.

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Conclusion

Change is the only constant factor in everyday life. It is witnessed from the Stone Age to
civilized age. When change affects life it also affects the environment and business. The
business environment becomes extremely complex as change inflicts variety and diversity
leading to deep and fundamental ways. Change in the values, environments of business based
on the expectation of society has alerted business houses to realign its priorities. The
changing economic, political, legal and social environment has also made the business and
businessmen to consider the ethical approach to business. Therefore, there is paradigm shift
from the goal of maximization of profit or wealth to ethical means to achieve them. The last
150 years have been marked the world over for rapidity of change ushered in by the advent of
technology and industrial revolution. This period has also been marked for its attempt to
generate unquestioning faith in human reason and intellect. The last century has witnessed
that the intellect are becoming the cornerstones of the society. The rapid changes have
improved the standard of living, also establishing a lot of sensible relationships in and around
the society.
There is a growing realization all over the world that ethics is virtually important for any
business and for the progress of any society. Ethics makes for an efficient economy. Ethics is
good in itself, ethics and profit go together in the long run and ethics alone can protect the
society. An ethically responsible organization is one, which has developed a culture for
caring for the people and for the betterment of society as a whole. Ethics has a considerable
influence on the economy for efficient and smooth functioning. The government, the laws
cannot always resolve certain key problems of the society and business. Ethical behavior
enhances the quality of life. An ethically based economy can do wonders in the way of
creating wealth or society.
The task of business is to optimize the outcome of economic activity. It is the economic
environment of business, which is the primary consideration in evaluating the business
tactics. The present day economic environment of business is a complex phenomenon. The
economic relations with the government, public, society and community influence the trend
and structure of economy. People and society are part and parcel of an organization. People
want and need to be ethical not only in their private life but also in public. The people are the
ultimate sufferers if the affairs of the organization were conducted unethically which are
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detrimental to the society. Therefore, they have a concern over this. Over the last two
decades, there has been a shift in the attitudes of corporate and their executives towards
ethics. A silent revolution is in under way in business ethics today. The ideas, beliefs and
attitudes associated with the profit ethic are being challenged as never before. The historical
idea of the divine right of capital no longer applies. The changes in the values, cultures and
customs lead to change, which in turn lead to re-engineering of ethics.
The world of business ethics is quite broad and its tentacles spread into a number of areas in
the larger sphere of business society relationship. The social responsibilities of businessmen,
for instance, clearly involve ethics and morality. There is always a doubt in the mind of the
businessmen about what is and what is not ethical. It is difficult to understand business or
business society relationships, without knowledge of the ethics. Business ethics is what
society expects from business. Mark Twain once said: “To be good is noble. To tell people
how to be good is even nobler”.
In short “Corporate Houses can earn Profit with Morality”

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 Annexure I

A Case Study: Profitability with Morality

Mr. Suresh B. Hundre (65), Chairman and Managing Director of Polyhydron Private Limited
(PPL), Belgaum, an entrepreneur running his business for more than 25 years, who has given
his people operational freedom and liberated them in a "Business Ashram".

When Hundre took over the executive responsibility of PPL, managing the organisation was
not easy. There was continuous problem of cash flow due to long pending payments from the
customers; also the inventory was very high leading to high pressure on working capital
management. Hundre analyzed the problems and found the cash flow problem also resulted in
non-compliance of the statutory and regulatory requirements.
He decided to change the system radically. He is stongly influenced by a diverse set of
teachings and the books he has read which incude the scriptures and spirituality, The Gita,
Ricardo Semler's Maverick, Swami Vivekananda and also Japanese Management techniques.
He has picked up the best from all this and runs his organisation like a ‘business
ashrama' as he calls it, where "Honesty is not the best policy, it is the only policy! We are
honest. We are transparent."

Management of Quality, Leadership, Vision & Core Values

"We do not pay bribes" He first decided to comply with all the laws and pay the taxes on
time. Hundre also decided that he would not pay any bribe, as he is not a willful defaulter.
The customers were not given any credit, and the business was to be done only on payment,
He scrapped the material store and established a transparent supplier management system. He
took a policy decision that he would not entertain any price bargain with the customer and
started following a transparent discount policy, known to all.
Quality in PPL is a matter of character building rather than adherence to product or process
specifications.

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The Vision statement of PPL is "To create an island of excellence through focus on customer,
employee empowerment and continuous improvement". Hundre explains that excellence is
about feeling happy about ones work and doing something impossible according to own
standards.
The Mission statement reads as "To nurture an ethically managed organisation and not to
exploit Customers, Employees, Suppliers, Government, Society, and Nature". The Mission is
implemented at every facet of the Company. Workmen are not asked to work in back shifts as
working in odd hours creates unnecessary stress and may adversely affect health and overall
performance, suppliers are also treated with respect.
He does not like pushing people to perform their duties, on the contrary he believes in
creating an enabling environment where people work without compromising ethics and
morality.
He has created an ethically managed organisation. He feels that transparency and ethical
behavior go hand in hand. These are the basic foundations of quality. In PPL transparency is
maintained in all types of data sharing. Hundre does not object to employees looking into the
balance sheets. Information like cost per employee, productivity, profit, growth rate and
many such data are shared among all through displays on the notice board. Any one can
question a financial transaction of the Company.
Hundre strongly opposes debt based business dealings. He believes that businesses should
build their own financial strength then only sustained growth can be achieved. He feels that
the fundamental reason for premature collapse of a company is debt trap.
The Company strongly condemns consumption of any type of intoxicant. People with weak
personalities indulge in intoxication to create an artificial sense of well-being. One should
acquire strength - physical and mental through conscious efforts and not by artificial means.
Consumption of tobacco or cigarette is prohibited within the Company premises.
He believes that trust is an inseparable part of PPL's organizational process. PPL does not
employ watchman at the Company gate as the honesty of people is not to be questioned.
Watchman is there only during night hours when no one is working in the factory. Suppliers
and employees are trusted. No further inspection is carried out once the product quality is
certified by the person concerned.

Organization Structure , Work Practices & People

PPL follows a lean structure. Only one level exists between CMD and the
workmen/operators. This level is of Shop Floor Co-coordinators who are expected to be
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facilitators; they coordinate various activities of the departments/functions. There is no
supervision, the supervisors work as mentors and facilitators.
The workmen are empowered to stop production at any stage in case they notice any product
which will not be accepted by the customer. The suppliers are also made aware about this
practice.
The employees follow a common code of ethics "Each of the employees is responsible for
both the integrity and consequences of one's own actions."

The employees enjoy operational freedom. But they can not take reckless decisions which
can affect many others and can be questioned. But this does not create a fearful atmosphere;
rather the ownership of decisions and the results there of makes every one to take a
responsible decision. In the monthly meeting all issues related to the Company are discussed.
Day-to-day information is shared through notice board displays.
Suppliers & Purchases: There is no store provided for raw materials and incoming products.
They deliver materials directly at the work stations. No inspection is carried out the quantity
is also not formally counted. PPL has developed trust and respect from the suppliers. In case
the workmen find any problems with the material or component, they directly communicate
with the concerned supplier as it is believed that the workmen knows the problem best.
The dates of payments are decided by PPL as per the preference of the supplier. They collect
their cheques directly from their pigeon holes.

Growth plans:
"Business should create wealth," firmly believes Hundre. But he feels that quality of wealth is
equally important and should not be collected by exploitation. According to him, consistent,
sustainable and considerable growth is important. Size or rate of growth is not important.
Hundre says, "Taste of the fruit is the core issue not the size."

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