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UNIT-6
Introduction:
Ethics and morality are generally used interchange. Ethics from the Greek word Ethos which in
turn means that customary way of acting the character of a people. Morality is derived from the
Latin word Mos which also refer to the customers of a social group.

Definition: The word Ethics is derived from a word ethos which means character of manners.
“Ethics is a set of moral principles or values which is concerned with the right or wrong of
human behavior and which guides the individual conducts in relation to other”.
According to R.Wayne Mondi “Ethics is the discipline dealing with what is good and bad, right
or wrong with moral duty and obligation”.
Features of Ethics:
1. Ethics is to identify the source or a conduct of a specific person.
2. It is a branch of philosophy which is concerned with human character and conduct.
3. It deals with good or bad, moral duty and obligation.
4. It consists of standard of behavior or society accepts.
Objectives:
1. To determine what is good for both individual and society.
2. To develop moral standards and norms of behavior.
ETHICS IN BUSINESS AND MANAGEMENT
Management is an art in managing men, money, machine and material towards fulfilling the set
of objectives leading to human development, excellent performance, social benefits and global
welfare.
Business ethics refers to the usage of ethics to business by identifying the good, right and wrong
and just and unjust action of business man. In a broad sense, business ethics is simply an
application of every day moral or ethical norms in business. It is a study of business situations
activities and decisions where the issues of right and wing are addressed.
According to David J.Fitzsche “Business ethics is the process of evaluating decisions, either pre
or post with respect to the moral standards of the society’s culture”.
Objectives of management ethics: For business leaders and managers Managing ethically
means managing with integrity also. Integrity passed throughout the organization. Ethics in
business and management is needed due to following reasons:
 To treat all employees and customers justly and fairly.
 To change fair price to customers.
 To improve the working environment and maintain a good reputation.
 To earn reasonable profit.
 To develop long term relationship.
Importance of ethics in business and Management:
 Easier Change management: Attention of business. Ethics is also critical during times of
fundamental change, continuing attention to ethics in the work place sensitizes leaders and
staff for maintain constant action.
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 Detect Ethical issues and violations: Ethical programmes help to detect ethical issues and
violations early so that criminal acts of “omission” may be avoided.
 Manage values: Ethical values help to manage values associated with quality management,
strategic planning and diversity management.
Nature of Business Ethics:
Ethics can protect society: where law fails, ethics can succeed i.e the things which are not
covered by law can be governed by business ethics.
Equality: It has a significant place in business ethics. According to this everybody should be
given equal treatment in business. It means that there should be no difference on the basis of
Rich, Poor, Caste or Region.
Self imposed Discipline: The important feature of the business ethics is the self imposed
discipline. In other words, nobody tells us to observe discipline, but the people having faith in
ethics are self disciplined.
Guiding force: Business ethics guide the business unit regarding what is to be done, what is
not to be done, what is right and what is wrong.
Honesty: Business ethics stress on honesty on the part of business man. In other words,
business ethics believe that every business man will be having honesty with all the parties
concerned.
Objectives of business ethics:
o To operate business within the society: Business acts as an important and the most significant
of a society as its functioning helps in improving the welfare of the society, if business
undergoes either expansion or diversification, then it is able to attract more no: of customers.
o For long term success, business is requires existing on ethical grounds: For achieving the
long term success, business needs to be ethical and socially responsible. For the survival of
business profit alone is not the essential it is also requires taking necessary actions for the
improving of standards in the society.
o To acts as a responsible corporate citizen: It acts as the driving forces for the society which
are responsible for bringing its economic development. The narrow scope and restricted goals
needs to be avoided.
Advantages:
1. Long term interest: it is the long term interest of the business to observe business ethics.
By following moral principles, business unit will create favorable environment. Long run
success of business depends on fair and honest dealings with the public.
2. Protect society: business ethics are important, because government cannot protect
society, only with the help of legal frame work. Where law fails ethics can succeed.
3. Ethics help better decision making: ethical attitudes help the management in taking
better decisions. Such decisions take care of interest of public, their employees, suppliers
etc.
4. Self satisfaction: In the dynamic world, businessmen are seeking self satisfaction, mental
relief, free from anxiety, release tension. To attain the inner satisfaction certain people
consider only good ethics can promote good business.
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Disadvantages:
1. Self interest: It is the responsibility of business managers to act according to the interest
of their firms without giving due importance to the ethical considerations.
2. General profits: the firms is said to have generated profits in a perfectly competitive free
markets, if it is able to cater the needs of the members of the society in a socially
beneficial manner.
3. Obey law: sometimes, objections are made on the application of ethics in a business. A
business firm is found to be ethical is requires to follow and obey the law.
ETHICS IN MARKETING

Meaning: Marketing ethics is the area of applied ethics which deals with the moral principles
behind the operation and regulation of marketing. Marketing managers should help to determine
which products are produced and which products are indirectly affecting the environment.

 The natural resources and materials used.

 The amount of energy required in the production process.
 The consumption of resources and energy that is required to use products
(cars, air conditioners).

Objectives:

1. To makes the business good i.e. at what level can be done in a better way.
2. To avoid any kind of misuse which may harm the both the people and organization.
3. To implement the ethical values focus on product delivery of its customers.
4. Honesty, integrity and quality is more important than quick profit.

Important Ethical Issues in Marketing:

 Unfair Marketing practices: Marketing practices are deceptive (misleading). If customers

believe they will get more values from a product or service than they actually receive.
Deception which can take the form of a misrepresentation, omission or misleading practices
can occur when working with any element of the marketing mix.
 Marketing over force on Materialism: Consumers develop an identify in the market place
that is shaped both by who they are and by what they see themselves as becoming. There is
evidence that the way consumers view themselves influences their purchasing behavior. This
identify is often reflected in the brands or products they consume or the way in which they
lead their lives.
 Ethical product and distribution practices: several product related issues raise questions
about ethics in Marketing, most often concerning the quality of products and services
provided. The most frequently voiced complaints are ones about product that are unsafe that
are of poor quality in construction go out of style.
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ETHICS IN HUMAN RESOURCE MANAGEMENT

Human resources management ethics is the statement of moral obligation of the employer
(business) towards the employees to maintain equality and equal justice. Ethics in HRM can be
defined as functioning and performing HRM policies and practices with some standard norms,
managing human resources so that mutual benefits can be achieved.

Ethics in business may involve everything including hiring decisions, pricing decisions, strategic
decisions and soon. The HR department must operate will ethical standards that are clear and that
are clear and that address the kinds of issues that shall be faced by this department.

In most of the countries strict law are imposed on those employee who act against set principles
and behave an unethical way. Employers also have to implement the various ethical law and
promote ethical and profitable situations at work place.

Reasons for unethical behavior by an employee:

1. Pressure: It is an important reason which mainly affects the behavior of an employee in an

unethical way. Eg: pressure to reach the work in dead line to achieve success, pressure from
bosses, colleagues.
2. Right Path: Some people do not make any constant decisions at the situations i.e unaware of
what is right or wrong.
3. Misguided loyalty: To make a position in the eyes of the boss some employees lie for some
circumstances.
4. Careless behavior: Some employees in an organization do not care about ethical values they
does not think what is right or wrong. They only consider his/ her own benefits and how to
overcome from the situations.

Important ethical issues in HRM:

Cash & Incentive plans Performance Appraisal

ETHICAL ISSUES

Privacy Issues Safety & Health

Cash and Incentive Plans: These include base salaries, annual incentives plans, long term
incentives plans.
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Base salary: The HR function is often presumed to justify a higher level of bases salaries or a
higher percentage increase than what competitive practice calls for.
Performance Appraisal: It lends itself on ethical issues assessment of an individual’s
performance is based on observations and judgment. HR managers are expected to observe the
performance in order to judge its effectiveness.
Privacy issues: It refers to protecting a person’s private life from unwarranted actions. The
employee believes that his/her religious, political and social beliefs as well as person’s life style
are private matters and should be safeguarded from being analyzed
Safety and Health: It has both intrinsic as well as instrumental value. Except in the most extreme
circumstances, life is better than death, health is better than illness.

ETHICS IN FINANCIAL MANAGEMENT

The ethic of financial and accounting practices as prevalent at present need significant attention.
The role of charted accountants in examining and passing the accounting and audition practices
of their client firms may be examined for their effectiveness and social commitment.

Mostly the financial crises are overlooked as a matter of law rather than ethics of the following
reasons:

1. Vast finance industry which includes banks, financial institutions, security firms,
insurance companies etc.
2. Huge transfer of money in the form of online transaction done in billion of money
transfer may be risky at one place.

Fundamental principles of ethics in Finance: according to Institute of charted accounts of India

certain fundamental principles need to be follow with the behavior in ethical manner they are:

 Principle of Integrity: The dictionary meaning of integrity is veracity. Accordingly the

principle calls upon all accountants and finance professionals to strong to honesty and straight
forwardness while discharging their respective professional duties.
 Principle of Objectivity: This principle requires accounting and finance professionals to stick
to their professional and financial judgment. They should not allow bias, conflicting interests
of their business judgments. They should communicate information fairly and objectively in
such a way that the communications with end user is complete and transparent.
 Principles of Confidentiality: It requires practitioners of accounting and financial
management to retrain from disclosing confidential information related to their work.
 Professional Behavior: it requires accounting and finance professional to comply with
relevant laws and regulations avoid such actions which may result into discrediting the
profession.
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Reasons for unethical behavior in ethics:

1. Emphasis on Short term results: This is one of the primary reasons which has led to the
downfall of many companies like Enron and WorldCom. Manipulating accounting entries
to depict good profitability can help companies and rise further capital from the market.

2. Accounting Rules: in this globalization the flow of capital accounting rules are changing
faster than ever before. The rules have become more complex and it is difficult to identify
deviations from those complex set of requirements.

BUSINESS ETHICS AND LAW

Law and ethics have the common aim of seeking to define the boundaries of proper and
improper behavior. However these two are not identical. Laws are society’s attempt to formalize
or reduce to a set of written rules ideas about what is right and what is wrong. Ethical concepts
are far more complex and therefore are incapable of being reduced to a simple set of rules.

Definition: law can be defined as a consistent set of universal rules that are widely published,
generally accepted and usually enforced. These rules describe the ways in which people are
required to act in their relationships with others in a society. The government establishes law;
the government can use police power to enforce laws. The following terms are involved as
features:
Consistent: if two requirements contradict (variations) each other both cannot be termed a
law, because peoples cannot obey both.
Universal: The requirements must be applicable to everyone with similar features facing the
same set of circumstances.
Published: The requirements have to be published, in written from so that they are accessible
to everyone within the society.
Accepted: The requirements have to be generally obeyed.

Relationship between Law and Ethics: Ethical values and legal principles are usually closely
related but ethical obligations typically exceed legal duties. Eg: the application of law or policy
to ethics includes employment law, federal regulations and codes of ethics. Law often embodies
ethical principles law and ethics are far from co extensive.

Eg: 1. Lying or betraying the confidence of a friend is not illegal, but most people would
consider it unethical.2. Speeding is illegal but many people
do not have an ethical conflict with exceeding the speed
limit.
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Establishing a set of ethical guidelines for detecting resolving and forestalling ethical breaches
often prevents a company from getting into subsequences legal conflicts.

Ethical behavior in Law: Laws have been enacted to protect employees against what society
perceives as unethical behavior in work place. In India there are minimum wages act and
provisions of trade union acts to protect against exploitation and ensure a security of
employment.

The employer is bound to pay to every employee engage by their wages at a rate does not less
than the minimum rates of wages fixed fort that class of employer without making any
deduction.

Employer must furnish the necessary returns to the provident funds commissioner. Employer’s
legal obligations to the employees are:

 To provide each employee a copy of the service rules and a copy of standing orders.
 To provide each employee a copy of the appointment letter or employment contract.
 To pay the wages/ salary in time.
 To pay bonus to eligible employees, under the provisions of the bonus act of 1985.
 To ensure security of staff and tools while on duty.
 To provide tools those are functional.

So other obligations are held. The National rural lab our Employment guarantee Act provided
minimum 100 days compulsory employment opportunities in India to the rural people who are
below the poverty line.

The objective of the act is to enhance the livelihood security of the people in rural areas by
generating wage employment through works that develop that develop the infrastructure base of
that area.