Business Ethics

HND in Business Management
Business Ethics
Acknowledgement
First of all, I would like to thank Almighty God for guiding me through this semester,
giving me the strength and blessing to overcome my difficulties.
I wish to express my sincere thanks to Ms. Pamudya, lecturer of Business Ethics for
clearing and helping my question regarding the assignment. I am indebted to you, for
without you I would never have accomplished the task I was given to complete.
I place on record, my sincere gratitude to the E-Soft institute for giving me such a
wonderful opportunity to utilize my skills and talents. I not only learned many things
through this assignment but now I have a proper intellect about the life outside the books. I
was able to learn and study about the practical world as well.
I take this opportunity to thank all the faculty members and staffs of this organization
for all their help and encouragement, especially Mr. Raam, our coordinator for his support
and dedication he had towards us.
Last but not least, I would like to thank my friends and family for their support and
help. No matter when or what I wanted, they were there to help me out without saying a no
for an answer. I wouldnt be here writing this acknowledgement if it wasnt for their belief in
me and my works.
This is the first step of the journey I am taking for a successful life. Thank you for all
your support and I humbly ask you to keep on believing and encouraging me for, I am no-one
without any of you.
THANK YOU.
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Business Ethics
Executive Summary
The purpose of this report is to provide an understanding business ethics and how a
company or an organization should act in the industry and with their stakeholders. This
report is based on the case study of a manufacturing company trying to pass on its defect
product purposefully into the market in order to gain profit.
The study covers the areas of the ethical issues, importance of ethics, laws and
regulations, environmental issues, moral obligations and organizational integrity. These are
very important to in order to run a successful and healthy business.
Profit can be gained in anyways, but doing it in the right way is what an organization
should look into. Unethical behaviours do not only harm the organization but all its
stakeholders directly and indirectly.
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Business Ethics
Contents
Acknowledgement ................................................................................................................................... i
Executive Summary................................................................................................................................. ii
Task 1 ...................................................................................................................................................... 1
1.1.Theories of Ethics.......................................................................................................................... 1
1.1.1.Consequentialism................................................................................................................... 1
1.1.2.Deontology:............................................................................................................................ 1
1.1.3.Virtue Theory: ........................................................................................................................ 2
1.2.Importance of Business Ethics ...................................................................................................... 3
1.3.Ethical Issues Prevailing in Business ............................................................................................. 4
1.3.1.Ethical Issues in the Scenario ................................................................................................. 5
Task 2 ...................................................................................................................................................... 6
2.1. Effects of Unethical Business Practise ......................................................................................... 6
2.1.1. Negative Environmental Circumstances ............................................................................... 6
2.1.2. Legal and Regulatory Problems ............................................................................................ 7
2.2. Stakeholders: ............................................................................................................................... 8
2.2.1. Stakeholders of the Organization ......................................................................................... 9
2.3. Shareholder Theory Vs Stakeholder Theory ..............................................................................11
2.3.1. Theory used in the Organization.........................................................................................11
2.3.2. The method the organization can follow............................................................................12
2.4. Ethical Pressure..........................................................................................................................13
2.4.1. Implementing an Ethical Behaviour....................................................................................14
Task 3 ....................................................................................................................................................15
3.1. Moral Obligation ........................................................................................................................15
3.1.1. Moral Obligations of an Employer ......................................................................................15
3.1.2. Moral Obligations of an Employee .....................................................................................16
3.2. Whistleblowing ..........................................................................................................................17
3.2.1. Impact of Whistleblowing ...................................................................................................17
3.2.2. Consequence that might occur due to whistleblowing in the scenario .............................19
3.3. Integrity......................................................................................................................................20
3.3.1.Organizational Integrity .......................................................................................................20
3.3.2.Benefits of organizational Integrity .....................................................................................21
3.3.3.How Organizational Integrity Help the Scenario .................................................................21
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Business Ethics
Task 4 ....................................................................................................................................................22
4.1. Code of Ethics.............................................................................................................................22
4.1.1. Importance of Code of Ethics in a Business ........................................................................22
4.1.2. Benefits of Code of Ethics ...................................................................................................23
4.1.3. Developing a Suitable Code of Ethic for the Business ........................................................24
4.2. Ethical Implications of Individuals in the organization ..............................................................25
Conclusion.............................................................................................................................................26
Reference ..............................................................................................................................................27
Bibliography ..........................................................................................................................................28
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Business Ethics
Table of Figures
Table 1: Ethical Issues in the Scenario .................................................................................................... 5
Table 2: Stakeholders of the Organization ...........................................................................................10
Table 3: Implementing an Ethical Behaviour ........................................................................................14
Table 4: Whistle Blowing Consequences ..............................................................................................19
Table 5: Developing a Suitable Code of Ethic for the Business.............................................................24
Business Ethics
Task 1
1.1.
Theories of Ethics
Ethics are moral principles that always affect a person or a group's actions and decisions. It
can also be defined as the morally correct principles of a certain conduct which is being carried out.
Over the years different ethical theories has been introduce and these theories can be
applied to different situations to inform our thinking and support our decision making. There are
three key theories which are practised. And they are as follows;
1.1.1. Consequentialism
The consequentialism is a moral theory which refers, that an action is determined or judged as
ethical or unethical based on the consequences it produces. This theory is based on two principles,
which are as follows;
Whether an act is right or wrong depends only on the results of that act
The more good consequences an act produces, the better or more right that act
It gives guidance when a person is faced with moral dilemma, where he/she should choose the
action that produces good consequences.
Example:
Lying con be considered wrong if it produces negative consequences
Also murder can be considered ethical if it provides good results like reducing terrorism
1.1.2. Deontology:
The word Deontology is derived from the Greek word Deon which refers to duty. This ethical
theory which is a duty-based ethics, developed by Immanuel Kant is concerned with what people do
and not with the consequences of their actions. This is based on the following two principles;
Do the right thing, because it's the right thing to do.
Don't do wrong things, because they are wrong.
As per the theory, people have to do the right thing regardless of the consequences. Even if that
action produces more harm than good, it is a must that people must do the right thing rather than
doing the wrong thing. Under this form of ethics you can't justify a wrong action by showing that it
produced good consequences, which is why it's sometimes called 'non-Consequentialist'.
Example:
In a situation where you could only save a friend of yours by lying then you should not lie
and tell the truth for telling the truth would be your duty.
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Business Ethics
1.1.3. Virtue Theory:
As per virtue theory, the ethical behaviour is not based on the action or the consequences
but it is based on the virtue or moral character of the individual who is carrying out an action. In
simpler words, virtue ethics is person based rather than action based, it says that an ethical action
would be an action undertaken by a virtuous person.
Following are the principles of Virtue Ethics;
An action is only right if that action is carried out by a virtuous person.
A virtuous person is a person who acts virtuously
A person acts virtuously if they "possess and live the virtues"
A virtue is a moral characteristic that a person needs to live well.
This theory mainly illustrates what kind of virtuous characteristics an individual should possess.
In that way, virtue ethics is concerned with the whole of a person's life, rather than particular
episodes or actions.
Example:
A Young man stops his car and helps a lady change her flat tire refusing money.
A man in a store does not quite have enough money for his purchase and the lady behind
him makes up the difference.
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1.2.
Business Ethics
Importance of Business Ethics
If a business wants to build a good image and strengthen their relationship with their customers,
clients and any other stakeholders, they must follow ethical business principles.
Provides ethical motivation:
It protects and/or improves the reputation and the image of the organization on the
minds of the employees by creating an efficient and productive work environment
for the employees.
Accepted decision making:
Decision making is the door way to success or failure of an organization. A decision
can be taken immediately but if it is not ethical it will lead to the downfall of the
organization rendering it unable to rise up again into the market. When a decision is
made considering all the ethical perspective it will lead to a greater success.
Global challenges:
Due to the increase of globalizations, many organizations tend to do overseas
business. Hence it is a must that they become aware and learn the ethical diversities
and values of other cultures in order to apply them when making business decisions.
An organization cannot afford to ignore the reality of multicultural ethics.
Prevention and reduction of risks:
Business ethics will help reduce and minimize the prevailing risks and thus helping
the business to grow. Following ethical principles will help avoid unnecessary risks
that can occur.
Employee Retention:
Employee retention in a business should be given the utmost priority, for losing an
employee will diversely affect the productivity. When a business/organization
follows ethical business principles, the employee will be motivated and would not
leave the company.
Market leadership:
When an organization integrates ethical values into its culture, the quality of service
and product will arise due to the loyalty and focus of the employees. When
customers realizes that the organization care more about the customer
requirements and satisfaction, they will tend to acquire more market share through
the word-of-mouth of their customers.
Loyal customers:
If the organization follows ethical standards, this will create a positive image and
mind-set on the customers. This image will make the customers loyal and supportive
to the organization through any situation.
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1.3.
Business Ethics
Ethical Issues Prevailing in Business
Fundamental Issues
The most basic or essential ethical issues that many business faces
nowadays are lack of integrity and trust. In simpler term, integrity means conducting
the business affairs with honesty and a commitment to treating every customer
fairly and evenly. When customers think that the company is showing an unwavering
commitment to ethical business practices, a high level of trust can develop between
the business and the people it seeks to serve. Also the opposite reaction could
happen if there was no integrity and the company tend to do business in an
unethical manner.
Diversity Issues
An ethical response to diversity begins with recruiting a diverse workforce,
enforces equal opportunity in all training programs and is fulfilled when every
employee is able to enjoy a respectful workplace environment that values their
contributions. Maximizing the value of each employees contribution is a key
element in leading a successful business.
Decision-Making Issues
Ethical decision-making is a useful method for exploring ethical dilemmas
and identifying ethical courses of action. Ethical decision-making processes should
centre on protecting employee and customer rights, making sure all business
operations are fair and just, protecting the common good and making sure
individual values and beliefs of workers are protected.
Compliance and Governance Issues
Businesses are expected to fully comply with environmental laws, federal
and state safety regulations, fiscal and monetary reporting statutes and all
applicable civil rights laws.
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Business Ethics
1.3.1. Ethical Issues in the Scenario

Ethical Issue
Consequences
Legal Issues
When the unethical action comes to light, it will affect the legal
perspective of the company. The company might have to face
and go through various regulations and procedures regarding
their actions. The government might levy a penalty on them
for passing on falsified documents. If this action had led to
great crisis, then the company might have to shut down.
Employer Employee Relationship
This will affect the relationship that an employer and

employee have. The employee might lose the trust he had on
his/her employers, whereas this will result in decrease in
performance. In some instances if the action is far beyond the
employees morale, he/she might leave the organizations.
Where the company may face loss due to the absenteeism or
termination of the employee.
Customer Trust
When the customer finds out about the fraud, they will lose
the trust in the company. They will retract their contract where
as it will lead to a huge loss. Also if the other customers who
already do business with the company finds out about their
actions, they will lose their trusts and will not do any further
business transactions with them.
Image of the Company
Once an unethical action has been conducted, the possibility of

it being spread is high. The mode of communication and
information sharing has been greatly advanced. Such actions
will be publicised in medias and social networks such as
Facebook, twitter and Myspace which will spread like a virus
and affects the brand image of the company. This will not only
affect the higher management but also the lower staffs who
are part of the company.
Table 1: Ethical Issues in the Scenario
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Business Ethics
Task 2
2.1. Effects of Unethical Business Practise
When a business involves in unethical practise such like producing defective product to their
customers as per the scenario, there will certain problems that the company will have to face. Such
behaviours will;
Form negative environmental circumstance
Create legal and regulatory problems to the company
2.1.1. Negative Environmental Circumstances
Defective goods are prone to make negative impacts on the environment sooner or later.
This will harm the organization directly indirectly in many ways. Below are some environmental
circumstances that will occur if this company tends to keep producing the product.
Pollution:
When the organization continues on producing these defect products, it will eventually
pollute the environment during the process of manufacturing and even after manufacturing.
Toxic air emission and chemical waste produced by the process will pollute the environment
causing people to fall in ill.
Wastage of resources:
The resources available for producing goods are limited in the world. Hence it would be
wise to spend these scarce resources on proper useful goods. When it those resources are used
to produce defect good it will end up wasting the materials and proving them useful for any use.
Harm to consumers:
As per the scenario is reveals that this is a technology related product. Products such as
these tend to emit radiation and other harmful waves normally. If this product is defect, the
probability of those harmful factors being emitted will increase and it will harm the consumers
who use the product.
Job loss:
When resources are wasted, it means the cost increases and when cost increases,
organization tend to downsize it employees in order to cut the costs. This will result in job loss of
many individuals and will affect the society. Whereas there will be many unemployed
individuals.
Loss of confidence:
Consumers who use the products and customer who bought the product will lose their
confidence with the company. This will result in decrease in business and it will eventually stop
bringing in business. This will decrease the profit and the business will run on loss.
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Business Ethics
2.1.2. Legal and Regulatory Problems
While many businesses will do almost anything to gain an advantage on the competition and to earn
profit, it is important to understand that there are certain laws to uphold, so that you do not risk
your business's integrity while doing your day to day business activities. An unethical action will
always lead to legal and regulatory problems. When the organization continues to provide this
defect product, sooner or later they will be confronted by laws and regulation pertaining for
manufacturing.
Since the company is a product manufacturing organizations, there are various rules they have to
look into. But among them Product Liability is the most important law that guides the production
of goods.
Product Liability
Product liability is the area of law in which manufacturers, distributors, suppliers, retailers,
and others who make products available to the public are held responsible for the injuries those
products cause.
Product liability covers three areas in producing defect product. Which are as follows;
Design Defect
This type of defect is inherent in the design of the product. If the product is not met
with the required standards, it falls under this category.
Manufacturing Defect
These are unplanned and random defects that occur during manufacturing the
products.
Marketing Defect
These are defects in the manner in which a product is sold to the customers. This
type of defect can include inadequate warnings, instructions and/or hiding
important details.
As per the scenario and product law, the unethical behaviour conducted by the company will fall
under design defect and marketing defect. They will have to confront this law if any of the end
consumers get harmed due to the defect.
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Business Ethics
2.2. Stakeholders:
Individuals/groups/organizations which are affected and/or have an interest towards the
company are the stakeholders of that certain company. Each stakeholder have certain interest and
power level towards the company and it is the duty of the company to take on appropriate
measures in order keep those stakeholders satisfied and happy.
Also stakeholders can be dived into two categories;
Internal Stakeholders:
Internal stakeholders are the people who are within the organization and they are
related closely with the organization.
External Stakeholders:
External stakeholders are the people who are outside the organization but those
who have an impact on the organization.
Business Stakeholders: Internal and External - Overview of Key Elements of the Business. 2014.
[ONLINE] Available at: https://www.boundless.com/accounting/introduction-toaccounting/overview-of-key-elements-of-the-business/business-stakeholders-internal-andexternal/. [Accessed 05 May 2014].
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Business Ethics
2.2.1. Stakeholders of the Organization
As per the scenario, there are certain stakeholders associated with the organization. These
stakeholders will be affected in certain ways at the prevailing situation.
Stakeholder
Customer:
As per the scenario, the current
situation is a B2B transaction
where as their customer would
be another business which is
purchasing device which will be
integrated in its own product.
Impact
Positive
Negative
They will be able to

distribute their final product
into the market and will be
able to gain more market
share. This will increase their
profit. Also they will tend to
do more business with the
supplier.
Their product will not

function when it is used in
a high humidity area,
where this will result in the
increase product return
rate and will lose their
market share. This will
make them a huge loss in
profit.
If the product goes out, that

mean the managers have
done their assigned duty by
their superiors. This will help
increasing their growth and
success
within
the
organization.
If the product fails, it will

greatly
affect
their
performance. They will
have
to
face
the
consequences
for
approving the product
knowing it is faulty. This
will lead them to lose their
job.
They will be able to gain a

huge amount of revenue
from the contract and will
help the company to achieve
market dominance which
was their primary target.
This will bring in more
business and will result more
profit.
The failure of the product

will tarnish the name of
the company and will leave
a black spot on their
records. This will result in
increase in cost and loss of
future business.
Manager:
The managers are the individuals
responsible for planning and
directing the work of low level
employees.
The
managers
mentioned in this scenario are
the General Manager & the
Immediate Manager.
Shareholders/Owner:
Shareholders or the owners are
the ones who have invested on
the business. Their primary
motive is profit and will ensure
that the organization runs
efficiently.
End Users:
The end users will be the
customers who will be buying the
final product which is integrated
with the device we manufacture.
They may not have direct interest
towards us but will be affected
by our product.
They will not be able to

use the final product in
They will be able to get the areas where humidity is
product on time and will be high. The product will
able to use under normal become useless and might
conditions.
stop functioning. Users will
face loss due to the
purchase of the product.
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Business Ethics
Employees:
Employees are the individuals
who undertake the daily
operations in order to run the
company successfully. In return
they expect to be rewarded for
their inputs.
Table 2: Stakeholders of the Organization
For fulfilling such a major

contract, the employees will
be awarded for their hard
work and will be given
incentives. This will motivate
them and help them work
even harder.
The
employees
who
designed and those who
approved the product will
have
to
face
the
management
regarding
why the product did not
meet
the
requested
standards. This will be a
major impact on their
career and they might also
lose their jobs.
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Business Ethics
2.3. Shareholder Theory Vs Stakeholder Theory

Shareholder Theory
The shareholder theory was introduced by Milton Friedman in the year 1970, as the name
suggests this theory focuses on the shareholders and maximizing their interests. As per the theory,
the sole purpose of the business is to increase its profit. Managers are hired with a primary duty to
maximize shareholders interests in the way that is still permitted by law or social values.
The shareholder theory is considered as a historic way of doing business with companies
realising that there are many disadvantages to concentrating solely on the interests of shareholders.
A focus on short term strategy and greater risk taking are just two of the inherent dangers involved.
Stakeholder Theory
As mentioned earlier, stakeholders are individuals/group which are affected or has interests
towards the business. These stakeholders can be internal and external.
The stakeholder theory was introduced by Edward Freeman in the year 1988. As per his
theory stakeholders are very important to a business in various ways and it is the duty of the
business managers to focus on the interest of the stakeholders and ensure that both the interests of
stakeholders and shareholders are balanced. In other words this theory demands that the interest of
all stakeholders should be considered when making a decision.
2.3.1. Theory used in the Organization
As per the scenario, it clearly states that they are following shareholder theory for they are
only trying to maximize their profit regardless of their customers (stakeholder) interests. Even
though knowing that the product designed did not meet the requested standards, the managers
want to pass the product for use. They fear that delay in production will lose the contract where as it
will result in loss of the profit. This clearly shows that their interest is profit and hence they are
following shareholder theory.
But as per the shareholder theory of Milton Friedman, shareholders primary motive is profit
and in order to achieve that motive they have to follow proper rules and regulations in an ethical
manner. But as mentioned in the scenario they are not following ethical principle in order to achieve
that target. This states that even though they are following shareholder theory, they are not
following it in an ethical manner. They thrive to achieve their profits by any means necessary.
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Business Ethics
2.3.2. The method the organization can follow.
It would be advisable for the organization to follow stakeholder theory for when running a
business, each and every stakeholder is important. Shareholders may be important in order to start
a business but if you neglect the interests of your stakeholders, you will have to shut the
organization.
Hence if the organization can focus on their shareholders in a long-run process and focus on
the stakeholders in their short-run process will help improve the organization to have a sustainable
growth which will generate a steady and increasing profit. Whereas we will be able to meet both the
interests of the shareholders and other stakeholders.
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Business Ethics
2.4. Ethical Pressure

Ethical pressure is when an individuals or groups moral were having been challenged in a
manner that forces that certain person or group to consider what is right and what is wrong and act.
In this scenario, the ethical pressure levied on me is to whether to follow the orders of my
managers and pass on the product with its defects or to find other ways to stop this unethical
behaviour. I have to consider all the possible outcomes of my choices and value it before carrying
out the action.
If I obey my managers and pass on the product, it might affect our company, our customers
company and the end product users. When the end users find the defect (or the product stops
functioning due to the defect) there will be many complains and returns of the customers product,
where the customer will return us the product or/and sue us requesting compensation for their loss.
This will not only result in a short term monitory loss but will ruin the companys name and result in
a long term monitory loss. When such a situation happens, it will go viral sooner than expected and
when it does, it will affect the brand image of our company. The prevailing customers who do
business will tend lose their trust in us and will slowly reduce doing business with us. Also any new
opportunities we were able to grab would be lost from our grasp. Eventually, the goal of gaining
dominance in the industry through that contract would no longer help them and will make them lose
the market itself.
If I do not obey my managers and take on actions such as going to the higher management
this will affect the relationship I have with my immediate superiors. Since I am new to the company,
it is my responsibility to build up a good relationship with all my colleagues, but if I act disregarding
them, it will affect my future stay in the company. If I pull this off, the higher management might be
strict on my managers where as they might pressurise me with many works for what I did.
These are the ethical pressure I, the Quality Manager has been levied upon.
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Business Ethics
2.4.1. Implementing an Ethical Behaviour

Table 3: Implementing an Ethical Behaviour
The first step is to identify the character of the situation and assess its ethical
aspects. In this stage, the duty would be to how and why the certain action is
Recognize and
unethical and understand its consequences.
Clarify the
Dilemma
Gather all
Posiible
Information
Listing the
Options
Testing the
Options
Making the
Decision
Take Action
Evaluate
In this step, we identify and collect data regardaring the stakeholders who will be
affected and the parties who are involved in the unethical behaviour.
Now that we have collected all the neccessary informations, we must list down all
the possible means of actions we could take on inorder to prevent such an unethical
practise to be carried out.
Since we have listed down some course of actions we can carry out. We have to test
each and every options and indentify the possible outcomes that each of the
actiones may produce when carried out. This involves in testing the success rate of
the actions and the consequences that these actions might arise.
This is the very crucial step, for this is where you decide finally decide what you are
about to do in order to prevent the unethical behaviour. The decision take will be
based on the results obtained from the testings and through their moral obligation.
Now that we have decided what we have to do, it is time to take that plan into
action and make it a success. In this step, there will be many challenges and pressure
you will have to face, but these will be easily met for the preparations were done
inorder to face these challenges.
Once the ethical pressure has been solved and the unethical behaviour has been
prevented, it is the individuals duty to make sure that such a scenario will not take
place again. In order to do things certain precations should be upheld.
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Business Ethics
Task 3
3.1. Moral Obligation
A moral obligation is a duty that one feels they have due to their consciousness of what is
right and wrong. In most jurisdictions, moral obligations are defined as duties that one owes but
which he is not legally bound to fulfil.
When it comes to a business, both the employers and employees have certain moral
obligations that they must fulfil.
3.1.1. Moral Obligations of an Employer
Below are some moral obligations that an employee should have as per the scenario.
Provide safe and healthy environment:
An employer should provide his/her employees with safe and healthy environment
for them to work and carry out their daily tasks. This will ensure that the day-to-day
tasks are carried out without interruption. When it comes to healthy environment it
should also be a place where the employees can work in ethical manner.
Safe guard the company name:
An employer is the owner of a business and it is his sole duty to protect the name
and image of his company. He/she should not let themselves or any of their
employees to conduct unethical behaviour that would tarnish the name of the
company.
Provide quality goods:
It is the duty and responsibility that a company should produce quality goods that
meet the standards to its customers. Overlooking that the company is providing
standard goods to its customers is part of the employers duty. If the company is
producing defect goods, the employer must not let the good to go into the market
and make sure that the products are corrected.
Uphold the employer-employee relationship:
In an organization, the relationship between the employer and the employees are
the key factor for success. If this relationship is broken, it will result in great
consequences in the future. When an employer conducts an action which is
considered unethical by the employees, the employees will lose their trust in the
employer. Hence an employer should not let himself to carry on such actions.
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Business Ethics
Honour the trust of customers:

When a customer gives us an order or buys a product from us, that means that
he/she have trust on us and our product. That is the reason they tend to do business
with us. It is the primary obligation of an employer to honour the trust the customer
has on the company and serve them with quality products.
Obey rules and regulations:
There are certain rules and regulations a company must follow when manufacturing
and producing goods. The employer should be obliged to these rules and must
follow them in order prevent and lead a healthy business.
3.1.2. Moral Obligations of an Employee
As the Quality Manager (employee) of the company, I have some certain moral obligations to the
scenario.
Fulfilling the given responsibility:
As an employee, I have to be honest to the post of Quality Manager which I have
been assigned to. I have to fulfil the responsibilities and not conduct in unethical
behaviours such as passing products which has not met the required quality.
Having a good relationship with co-workers:
Employees should have proper interaction with each other; this will help build a
better bond among them. While working in a company, co-workers are the
individuals who will be involved with you in every task. When a co-worker is
conducting unethical behaviour, even if he/she is in a higher position, it is the duty
of an individual to point it out and correct it.
Honest to the employer:
Every employee must be honest to their employers. When an unethical
behaviour is being conducted, it should be informed to the employer soon in order
to prevent it from happening. Even if the employer is doing something unethical,
he/she should point out the consequences and try to stop it.
Obey company codes:
Each and every employee should be aware of the companys codes and rules and
must always follow them in order to prevent unethical behaviour to take place. This
will guide the employees in the correct path to success.
Being true to self:
When an employee finds that he/she is being forced to do something unethical
which is entirely against their will, they should work towards their own decisions.
The risk of losing the job is far better than losing the morality. If an action is deemed
wrong then it should not be performed.
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3.2. Whistleblowing
Whistleblowing occurs when an individual raises a concern about harmful and illegal activity or
any unethical doing within their organisation.
Whistleblowing involves in disclosing potentially important information and data to the public or
higher management regarding a certain unethical and harmful incident that was occurred or which
will be occurred. It is essential that those actions are addressed immediately, so 'Blow the whistle' as
early as possible to prevent any real damage being done.
Whistle-blowers can be employees, suppliers, contractors, clients or any individual who
somehow becomes aware of illegal activities taking place in a business either through witnessing the
action or being told about it.
A worker/individual can report things that are not right, are illegal or if anyone at work is
neglecting their duties, including:
When someones health and safety is in danger
Damage to the environment
A criminal offence
When the organization is not abiding by the law
Hiding the illegal actions
3.2.1. Impact of Whistleblowing

Break in Trust:
One of the effects whistleblowing can leave on a company or organization is

a break-down of trust within the internal system. This can be counterproductive to a
company, the employees of the company will suspect all the actions of their
employers and the employers will lose faith in their employees as well. Due to this,
there will be a gap between the employee and employer relationship. It can result in
employees quitting the company and being fired.
Isolation:
After the whistle has been blown, employees may continue their careers
with the same organization but will face awkward social environment and strained
relations with their superiors. Even after a certain period of time this will continue,
whistle-blowers may be given less tasks or access to company information and
colleagues may feel reluctant to cooperate with them or share any
personal/negative information.
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Retaliation towards Whistle-Blower:

Whistle-blowers may face hostility and resentment from peers and
superiors. Even though there are rules and regulations preventing the individual
from being harmed or harassed, still a whistle-blower may get the cold shoulder or
be treated like a "rat". This culture of retaliation creates a hostile workplace for the
whistle-blower and distracts employees from their tasks.
Repercussion to Employers:
Whistleblowing often causes financial turmoil and public relations problems
for the employer. Whistleblowing may result beneficial for the individual and their
colleagues at certain times. However, when the information reaches certain
stakeholders (such as customers and investors) potential drawbacks like profit loss
and lowered stock values can negatively impact the whistle-blower and other
employees financially and professionally.
Lawsuit to the Whistle-Blower:
In certain industries and locations whistle-blowers are protected from job
loss, slander lawsuits and other litigation problems. However, in certain organization
after whistleblowing that certain individual may be exposed to lawsuits related to
confidentiality agreements or other aspects of employee contracts. If the company
fires the employee due to law suit such like disclosure of information, other
organization will be reluctant to recruit that individual.
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3.2.2. Consequence that might occur due to whistleblowing in the scenario
As per the scenario if I, the Quality Engineer undertake the action of whistleblowing and disclose the
information that the product which was designed had not met the standards requested and the
manager wants to pass it on to the customer for the sake of profit, it will result in many negative
consequences to the company and its stakeholders.
When such information goes out of the company, it will impact the company negatively in
short-term and might also in the long term. This action will weaken the organizational chain of
command, pose a threat to its effectiveness, unsettle employees confidence in their abilities to
choose an action and creates a sense of uncertainty. When the client gets to know about the
unethical conduct that the company was trying to implement in order to pass the defect product
(which the standards were not met), they will withdraw their contract and cease to do any kind of
business with the company in the future. This will result in huge financial loss for the company.
Also such news like fraud and illegal conduct tend to spread to public as soon as it goes of
the organization. This will result in a major negative impact on the business. All the current clients
and customers will lose faith in them and their product, due to this reason those clients will tend to
leave the company and find other suppliers who can fulfil their requirements. As a result they will
never be able to achieve their goal of obtaining dominance in the market and will lose the market
itself. There are also possibilities where the company might end up shutting down or being taken
over by someone else to rebuild.
Shareholders
Employees
Managers
Customers
Investors
Shareholders will have to face all the consequences head on, for the
management is responsible for the wrong doing of its employees.
They will have to answer many questions of their stakeholders
regarding the issue and will spend all the time trying to clear out the
problem. Also their share value will drop due to the loss of business
caused by the unethical conduct.
The employees of the organization will be questioned by the higher
management for the lack of performance for not meeting the
requested standards. The trust employees had for the managers and
the trust their managers had with their employees will be broken,
not only with the whistle-blower but with the entire employees.
Sometimes certain employees and managers will be fired because of
their misconduct. Even worse, the company might end up downsizing
their employees when it cannot gain profit due to the loss of
businesses.
The customers will lose their trust in the company and will not do any
business with them. Also any of their previous customers who still
conduct business with them will tend to worry and stop their
transactions with the company.
Those who were interested in investing in the company will change
their mind and will invest on other business. They will think that the
same misconduct will occur in the future and will not invest on the
business.
Table 4: Whistle Blowing Consequences
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3.3. Integrity
Integrity is the linchpin of our values system. Integrity means that we should not only know the right
thing but we should also do the right thing. As per Stephen L. Carter, he says that integrity has three
components:
I.
II.
III.
Selecting what is right and what is wrong;

Acting on what you have selected to be right, even at personal cost; and
Saying openly that you are acting on your understanding of right and wrong.
According to Carter, a person should have the ability and knowledge to differentiate between right
and wrong and must select the right action or choice. Once he or she has selected that action, they
must be committed to their right choice and stand strong for his/her judgement so that people can
trust and believe in the person and their choice of action.
3.3.1. Organizational Integrity
Organisational integrity is more than just preventing corruption or having a written code of
conduct. It is when an organisations operational systems, corruption prevention strategies and
ethical standards are fully integrated to achieve the organisations purpose in an ethical manner
which is accepted.
It is very important for an organization to have integrity. Because;
When employees act unethically and/or without integrity, customers will lose their trust and
confidence in organizational products and services.
When the management act unethically and/or without integrity, employees will lose their
trust and confidence in organization and its management.
Ethical issues must be part of the strategic decision planning. Such planning must go beyond
compliance issues and reactive disciplinary policies to actually manage integrity. Organizational
integrity should be a priority not only because it is legally required, but because it is the right thing
to do. Employees who know that particular workplace decisions, behaviours, and processes exist in
an ethically judged context are more aware and motivated to act ethically. Employees who are less
aware of ethical implications and more motivated to act unethically.
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3.3.2. Benefits of organizational Integrity
Organizational integrity has various benefits and the primary benefit will be that the organization
will work better along with the following benefits:
Decision-making process will be easier and more consistent; employees will find it easier to
meet new challenges.
Employees will be more committed their tasks and satisfied
There will be fewer turnovers of staff, and they feel they have better opportunities to
develop in the organization.
The organisation can better serve the public, and set a symbol for ethical behaviour.
Corruption is much less likely to arise or get to a crisis point
The organisations reputation and competitiveness will be improved.
3.3.3. How Organizational Integrity Help the Scenario
If the organizational integrity had been followed in the company and those integrities were
made explicit to all the levels of employees, such a scenario would not have taken place. The
manager will know that acting unethically is not the values of the company and he will prioritize the
need of the customer. Managers act in these ways in order to achieve their targets and safe guard
their career or to grow their career in the company. If the organizations value and code of conduct
were explicit, they would be aware that such actions are the way to their goals and they will not
commit the.
When you look into the employees perspective, they mainly conduct behaviours such like
these due to their superiors command in order to keep their jobs safe. This leaves them no choice
but to go against their own will. But if there was organization integrity, the employees will have
certain guidelines to help them not involving in such activities as well as stopping them.
Hence when organizational integrity is explicit all the staffs and employees, it will help you
to prevent unethical conduct such as this scenario.
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Task 4
4.1. Code of Ethics
It is a written set of guidelines issued by an organization to its workers and management to help
them conduct their actions in accordance with its primary values and ethical standards.
What is code of ethics? definition and meaning. 2014. [ONLINE] Available at:
http://www.businessdictionary.com/definition/code-of-ethics.html. [Accessed 06 June 2014].
4.1.1. Importance of Code of Ethics in a Business
Purpose
A code of ethics acts as a guideline to all managerial decisions, creating a common
and acceptable framework upon which all decisions are made. This can help to create a
cohesive understanding of the limitations within an organization and the standards set for
interacting with external stakeholders.
Scope
It can cover any scope, from the corporate level to the workgroup level. Corporate
level ethics standards speak in grand, idealistic terms, communicating the entire ethical
vision of the organization in a single document. Codes of ethics at the departmental level
often deal with highly specific issues, which are often related to experiences and trends
within the department.
Process
Codes of ethics are simple for an executive to create in the privacy of his own office,
but an individually dictated set of standards can occasionally fail to achieve its target.
Involving a wide range of employees from all levels of an organization in the process of
drafting and formalizing a code of ethics can help to ensure that all employees are on board
with and committed to the standards.
Training and Incentives
Ethical considerations are vital in today's business environment, and smart
companies do all they can to make their code of ethics relevant and important to their
workers. Implement ethics training programs for new hires and existing employees to
increase the effectiveness of your code.
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Business Ethics
4.1.2. Benefits of Code of Ethics
Strategic Decision-Making
A code of ethics in a business will provide a foundation on which to base all
decisions that affect internal and external stakeholders, such as employees or
residents in the local community. By taking all factors onto consideration, an
acceptable and ethical decision can be taken.
Day-to-Day Decisions
Apart from the employers, even the employees have to make decisions in
order to run the day to day business. This makes it even more important for all
employees to fully understand the expectations of the company and the ethical
guidelines in which to make decisions.
Company Reputation
Having a code of ethics will help the company to gain and increase its
reputation and the company image. This will build up trusts within its customers and
other stakeholders to do further transactions with the company.
Legal Considerations
Code of ethics will help you face legal troubles head on. When met with a
situation when the company is accused of doing something wrong, the code of
ethics can help to convince a court that the company does not endorse that kind of
behaviours.
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Business Ethics
4.1.3. Developing a Suitable Code of Ethic for the Business
Step 1
Step 2
Step 3
Step 4
Step 5
Step 6
Step 7
Analyse and review the codes of ethics companies in the same industry undertake. By
going through those external documents and codes, we could bring up an
understanding that could also be used in our organization.
Now that we have got a clear understanding about the industrys code of ethics, we
have to review internal documents related to our organization, including the firm's
mission statement and other policies which were in practise and are still on practise.
These documents can also be used as a guide when we create our formal code of
ethics.
It is time to think of ethical dilemmas which could be faced not only by us, but also by
our competitors. We could also consider all the ethical issues that which were faced
by the company in the past by various stakeholders. These ethical issues vary by
industry, and it is important to directly address them in the company's code of ethics.
When building up a code of ethics, it is advisable to ask the employees for their views,
ideas and feedbacks. This is a vital action, for front-line employees face many ethical
dilemmas on their daily business activities. By asking reviewing their feedbacks and
comments, we can incorporate those details into the code of ethics.
Now we should assign a certain individual or a group to be responsible for arranging

the code of ethics by providing all the resources and authority required. We should
allow them to solicit feedback from both the management team and the workers free
and openly. Although the chief executive officer, along with the legal team, is
ultimately responsible for the content of the code of ethics, assigning a member of
the management team to draft the document creates a single point of contact for
everyone in the organization.
Before executing the code of ethics into force, we should ask our companys attorney
to review and ask him/her for feedback regarding any necessary changes to the
document.
Put the code of ethics into force and make sure that all the employees from the top
level to the bottom level are aware of them. Also the code of ethics should be in
visible places where the employees and other stakeholders can see.
Table 5: Developing a Suitable Code of Ethic for the Business
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4.2. Ethical Implications of Individuals in the organization

Ethical implication means, how the possible outcomes of an unethical situation or behaviour
will affect everyone's best interests. If the company continues on manufacturing these defect
products, there will be ethical implications faced by the individual of the organization.
Many employees find that discovering unethical behaviour among co-workers or their
employers actually tests their own values and ethical behaviours. Certain individuals prefer to follow
ethical behaviours in order to keep their morality. Some participate in unethical behaviour due to
their own personal interest and gain while some are forced into do that specific actions leaving them
without a choice. In scenarios like this, when an individual involves in unethical practises, he/she will
lose their respect and trust toward both the company and the employer. They will feel uneasiness
between the colleagues they are working with. When employees discover other employees doing
something that they know is wrong by the company's standards, their own sense of what is right and
what is wrong instantly comes into question.
These behaviours will eventually result in;
Low performance
High employee turnover
Lack of trust among the peers
Lack of trust with the employers
Opinion disputes
Production delay
Increase in cost
Therefore in order to prevent such outcomes to occur, it is appropriate for the organization
to stop manufacturing the product and try to go through necessary process and fix the product. This
will help build a better relationship with the employees and the customers who are the primary key
players who are important in running a business.
This will also reduce unethical behaviour which is being conducted by employees themselves
and help enhance the growth of the organization in a stable manner.
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Conclusion
Ethics is an important characteristic of every human beings, it defines each and every one of from
one another. As it is important for individuals, it is also vital for companies in order to run a safe and
healthy business.
As per the scenario the organization, which operates in the manufacturing industry is trying to pass
on a product which has not met the required standards. The reason for this unethical behaviour is to
earn profit instead of losing the business.
Before passing on this product, the manager should give thought into the negative consequences
which will arise from this action. This will result in legal and regulatory problems as well as causing
negative impact on the environment. When this defect has been found by the customers, they might
file against the company; this will cause us to lose money and time. Also when such act is publicised,
all the customers of the company will lose their trust and will cease to do further business with
them. By trying to achieve profit, they will cause the company to go in a loss.
In a business, the most important individuals are the customers and its employees, without either of
them a company cannot operate. When the company involves in unethical behaviour, the
employees will feel uncomfortable to carry on that tasks and will tend to prevent him from involving
in them. It will also bring dissatisfaction to the employee on its employer and they might resign from
the organization. Also we must be loyal to our customers. They do business with a company because
of the trust they have in that company and when the organization practises unethical behaviour, it
will disrespect the trust the customers have on the company.
Unethical such as this and many more should be prevented from happening to safeguard the
business and the image of the company. In order to do so, the company should have a code of
ethics. This code of ethics should address all the employees of the ethical standards that the
company follows and make them aware to follows these codes. This will help any individuals in the
organization from involving in any unethical tasks. Hence it is the responsibility of each and every
business to have ethical practise in their day to day operations.
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Reference
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Business Ethics

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1.1.3. Virtue Theory:

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Importance of Business Ethics

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Ethical Issues Prevailing in Business

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1.3.1. Ethical Issues in the Scenario

Employer Employee Relationship

This will affect the relationship that an employer and

Image of the Company

Once an unethical action has been conducted, the possibility of

Table 1: Ethical Issues in the Scenario

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2.1.2. Legal and Regulatory Problems

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2.2.1. Stakeholders of the Organization

They will be able to

Their product will not

If the product goes out, that

If the product fails, it will

They will be able to gain a

The failure of the product

They will not be able to

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Table 2: Stakeholders of the Organization

For fulfilling such a major

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2.3. Shareholder Theory Vs Stakeholder Theory

2.3.1. Theory used in the Organization

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2.3.2. The method the organization can follow.

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2.4. Ethical Pressure

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2.4.1. Implementing an Ethical Behaviour

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3.1.1. Moral Obligations of an Employer

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