Business ethics

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Contemporary Business Ethics

Business ethics is a form of applied ethics that examines

ethical principles and moral or ethical problems that arise
in a business environment.

The field is vast, often encompassing such concerns as

corporate governance, reputation management, accurate
accounting and audits, fair labor practices and
environmental stewardship

Business ethics continues a rich tradition of leading the

way with new ideas about business and the intersection of
business and society.
Nature of Ethics

The word ethics is derived from the

Greek word ethos means character.

Ethics is a major branch of philosophy, encompassing

right conduct and good life. It is significantly broader
than the common conception of analyzing right and
wrong. A central aspect of ethics is "the good life."

Every profession has its own unique set of standards

called Code of Ethics like legal ethics, medical ethics,
and business ethics.
 Two Systems of Ethics

There are two systems of Ethics

Formalism and Consequentalism.
Both systems are not mutually
exclusive in the outcomes of their
moral analysis. They begin from
different assumptions.
 Formalism

Formalism is also called Deontology which is

an approach to Ethics that affirms absolute
morality. A particular act is in itself right or
wrong always in every situation. For
example lying is wrong so there is no
justification for end, because wrongness
does not depend on the situation in which
the lie is told.
 Consequentalism

The Consequentalism is also called

Teleology, it is concerned with moral
consequences of actions rather than with
the morality or the actions themselves. For
consequentalist lying itself is not unethical.
It is consequences, as a result of lying, that
must be evaluated for their ethical
implications. It is the lost of trust for firm
done by lying i.e. unethical.
The dominant form of consequentalism ,
utilitarianism, judges actions by usefulness,
by whether they served to increase the
common good.
 Sources of Values for
Business Ethics
There are four sources of values for business
ethics.

Legal Regulation
Professional Codes of Ethics
Organizational Code of Ethics
Individual Values
 Legal Regulation

Ethical Legal Relationship is to realize that

in our society Ethical Values frequently
become law and that legal regulation can
reflect societys ethical values.
For example insider trading fraudulent
practices and conflict of interest are often
cited as examples of Ethical failures. These
practices are illegal.
 Professional Codes of
Ethics
Professional Codes of Ethics has historical
background of Professional Codes like
medicine and law. Other professions
recently developed their own code of ethics
to regulate the profession in accordance
with the Regulatory Framework of the State.
Professional Codes of Ethics also regulate
the conduct of professionals for example
Pakistan Bar Council and Pakistan Medical
Dental Council.
 Organizational Codes of
Ethics
All the organizations operating in any State
are subject to enforcement of legal system,
so all business organizations now have
developed their own code of business ethics
which is also called CODE OF CONDUCT
The Code of Conduct is dealing with honesty,
compliance with laws safety and security of
employees customer relationship and
protection of the company business.
 Individual Values
The sources of Ethical values for business
decision making comes from the individuals
Ethics are used by Managers as guidelines in
decision making that affect employees,
organization, consumers and stakeholders.
Managers should look at existing ethical
norms and trends in the industries in order
to determine what decision and actions are
right or wrong.
 Achieving an Ethical Business
Corporation

The primary object of Modern Business

Organization is to earn profits because
profits motivate the entire organization,
corporate culture and it promotes the
common good by providing incentives for
job creation and results in organizational
growth and success.
 The Control of Resources by
Non-owners
In the corporate world the owners of business
organizations are not in position and control of
their business resources.
This produces the problems of corporate
governance.
Managers, who are the agent of the owners,
have ethical and legal duties to manage the
organization for the benefit of their owners.
As managers are controlling the organization
resources so it is easy for them to misuse their
authority or to infringe upon the property of the
organization. It includes fraud, embezzlement
and misrepresentation of financial data.
 Consideration of All
Stakeholders
The Investors, owners, shareholders,
employees and consumers having interest
with business organization have their
interest at stake because the company may
take any action which is against its
stakeholders.
So ethical corporate behaviour of
organization is based on managers who
recognized and tact into account the
interest of various stakeholders.
 Property as a system of Personal
Ethics
Property provides an ordering relationship between
people. Legally and morally owners of the property
must respect the equal right of others to what is
proper to them.
It is unethical for an employee to fail to warn
employees of safety risk in the work place for the
employees to embezzle money from the employer.
The property system does not explain which
resources fall in the first instance within the
exclusive right of property protection.
The rule of law and property are fundamental not
only to structure but also to the values of the
private market and of ethical behavior in the
corporate sector
 Key ingredients of Business Ethics

1. Corporate Compliance
Particularly related to government contracts - gave rise to
corporate compliance, which is most often narrowly focused
on complying with national and local laws and regulations.
2. Corporate Responsibility
Corporate responsibility refers to fulfilling the responsibilities or
obligations that a company has towards its stakeholders.
3. Corporate Social Responsibility
Corporate social responsibility can be understood in terms of
corporate responsibility, but with greater stress laid upon the
obligations a company has to the community, particularly with
respect to charitable activities and environmental stewardship.
4. Corporate Governance
Corporate governance refers to the oversight of company
operations by bodies (e.g., board of directors) that bear the
responsibility to oversee, direct, and evaluate company
operations on behalf of the companys investors.
 Business Ethics as Discipline

Business ethics can be both a normative and a descriptive

discipline. As a corporate practice and a career
specialization, the field is primarily normative. In academia
descriptive approaches are also taken. The range and
quantity of business ethical issues reflects the degree to
which business is perceived to be at odds with non-
economic social values. Historically, interest in business
ethics accelerated dramatically during the 1980s and
1990s, both within major corporations and within academia.
For example, today most major corporate websites lay
emphasis on commitment to promoting non-economic
social values under a variety of headings (e.g. ethics codes,
social responsibility charters). In some cases, corporations
have redefined their core values in the light of business
ethical considerations.
 Issues in Business Ethics

Ethical issues concerning relations between

different companies , like joint ventures,
mergers, acquisitions, take-over, etc.

It also includes leadership issues,

organizational development issues, financial
scandals, misuse of corporate ethics policies
as marketing tool etc.
 Professional Ethics

Professional ethics covers the myriad

practical ethical problems and
phenomenon which arise out of
specific functional areas of companies
or in relation to organized business
profession.
 Ethical issues in Accounting
Information
Creating accounting reports with misleading facts and
figures.
Insider trading, securities fraud, forex scams, and
manipulation of financial market.
Kickbacks, bribery, facilitation payment.
Corporate frauds and fake companies.
 Ethical issues in HRM

The ethics of Human Resource Management (HRM)

covers those ethical issues arising around the
employer-employee relationship, such as the
rights and duties of employer and employee.
Discrimination issues include discrimination on the
basis of age, gender, race, religion, disabilities,
etc.
Issues surrounding the representation of
employees and the democratization of the
workplace: union busting, and illegal strike.
Issues affecting the privacy of the employee:
workplace surveillance and drug testing.
Issues relating to the fairness of the employment
contract and the balance of power between
employer and employee.
Occupational Health and Safety.
Ethical issues in Sales and Marketing

Marketing which goes beyond the mere provision of

information about (and access to) a product may seek
to manipulate our values and behavior. To some extent
society regards this as acceptable, but where is the
ethical line to be drawn? Marketing ethics overlaps
strongly with media ethics, because marketing makes
heavy use of media. However, media ethics is a much
larger topic and extends outside business ethics.
Pricing: price fixing, price discrimination, price skimming.
Anti-competitive practices: these include but go beyond
pricing tactics to cover issues such as manipulation of
loyalty and supply chains.
Children and marketing: marketing in schools.
 Ethical issues in Production

This area of business ethics deals with the duties of a company

to ensure that products and production processes do not
cause harm. Some of the more acute dilemmas in this area
arise out of the fact that there is usually a degree of danger in
any product or production process and it is difficult to define a
degree of permissibility, or the degree of permissibility may
depend on the changing state of preventative technologies or
changing social perceptions of acceptable risk.
Defective, addictive and inherently dangerous products and
services (e.g. tobacco, alcohol, weapons, motor vehicles,
chemical manufacturing).
Ethical relations between the company and the environment:
pollution, environmental ethics, carbon emissions etc.
Ethical problems arising out of new technologies: genetically
modified food, mobile phone radiation and health.
Product testing ethics: animal testing for experimental purpose,
use of economically disadvantaged groups (such as students)
as test objects.
 Ethical issues in Intellectual Property,
knowledge, and skills
Knowledge and skills are valuable but not easily "ownable"
as objects. Nor is it obvious who has the greater rights to an
idea: the company who trained the employee, or the
employee themselves? The country in which the plant grew,
or the company which discovered and developed the
plant's medicinal potential? As a result, attempts to assert
ownership and ethical disputes over ownership arise.
Patent infringement, copyright infringement, trade mark
infringement.
Even the notion of intellectual property itself has been
criticised on ethical grounds.
The practice of employing all the most talented people in a
specific field, regardless of need, in order to prevent any
competitors employing them.
Bioprospecting (ethical) and biopiracy (unethical).
 Ethical issues in International Business
Systems
While business ethics emerged as a field in the 1970s,
international business ethics did not emerge until the late 1990s,
looking back on the international developments of that decade.
Many new practical issues arose out of the international context
of business. Theoretical issues such as cultural relativity of ethical
values receive more emphasis in this field. Other, older issues can
be grouped here as well. Issues and subfields include:
Comparison of business ethical traditions from various religious
perspectives.
Ethical issues arising out of international business transactions; e.g.
bioprospecting and biopiracy in the pharmaceutical industry; the
fair trade movement and transfer pricing.
Issues such as globalization and cultural imperialism.
Varying global standards - e.g. the use of child labour.
The way in which multinationals take advantage of international
differences, such as outsourcing production (e.g. clothes) and
services (e.g. call centres) to low-wage countries.
Thank You