3

1. Meaning

of Ethics:-

Ethics in Latin Language is called

Ehicus and in Greek, it is called Ethicos.
In fact this word has originated from ethos
meaning Character or Manners.
Ethics is thus said to be the source
of morals -------- moral principles, recognised
rules of conduct. The character of a man is
expressed in terms of his conduct.

Ethics refer to the code of

conduct that guides an individual while
dealing in a situation. It relates to the
social rules that influence people to be
honest in dealing with the other people.
Ethics are the principles of
behaviour that distinguish between the
right from the wrong.
According to Oxford Dictionary,
Ethics is related to morals. It is the science

of morals which is concerned with human

character and conduct, capable of
knowing right and wrong.
Ethics concern the rightness
or wrongness of human conduct. It
describes what is right and what is wrong
in human behaviour. These rules tell us
when our behaviuor is acceptable and
when it is disapproved and considered to
be wrong. These are a set of rules that
define right and wrong conduct.
2. Meaning

of Business Ethics:-

Business Ethics is the Evaluation

of business activities and behaviour as right
or wrong. Ethical conduct confirms with what
a group or society as a whole considers right
behaviour.
In the simplest forms, Business Ethics
are moral principles that define right and wrong
behaviour in the world of business. What
constitutes right and wrong behaviour in business

is determined by the public interest groups,

and business is organizations, as well as an
individuals personal words and values.
Business Ethics are the desired norms
of behaviour exclusively dealing with commercial
transactions. Business Ethics, in short, can be
described as the systematic study of moral
matters pertaining to Business, industry or related
activities, institutions or practices and beliefs.
These are rules of business conduct by which the
proprietary of business activities may be judged.
But also relates to the behaviour of managers.

Business Ethics concentrate on moral standards

as they apply to business policies, institutions
and behaviour. It is a specialised study of moral
right or wrong. Today, more and more interest is
being given to the application of ethical practices
in business dealing and the ethical implications
of business as Business Ethics are nothing but
the application of ethics in business.

Introduction to Business Ethics

Character
of
a Man

Leads To
Conduct of a

-------- Decided by person

Service of

Taken together Good or Bad

Right or

action

considered as Wrong

Moral or Immoral

By which we can
Judge again

Moral
Standards

Know as
Moral
Requires Judgment

Ethics thus can be considered as the source of Character of

a person expressed as Right or wrong conduct or Actions.

An understanding of Ethics:In
any
organization,
from
top
management to Employees at all levels, Ethics is
considered as everybodys business. In business it is
not just only achieving high levels of economic
performance, but also to conduct one of businesss
most important social challenges, ethically.
The problems in a business are multifold. Many
of the vendors offer Kickbacks to the buyers, for the
purchase of their goods and securities. These bribes are
many a times hefty and within a short period, the buyers

make plenty of money.

Ethical Rules:Ethical rules are guides to moral behavior.

For example, all Societies have ethical rules and these
are all basic rules of behavior which are of much use
for the presentation and continuation of organised life.
I.Forbidding
AI. Buying
BI. Stealing
IV. Deceiving and
V.Harming others.
Similar to these, other ethical rules are.:1.
Honesty
2.
Keeping Promises
3.
Helping Others and
4. Respecting the right of others.

Sources of Ethics

The earliest recorded Codes of Conduct found in

the Bible are:-

1. Honour your father and your mother, that you may

have a long life in the land which the Lord, your God
is giving you.
2. You shall not kill.

3.
4.

You should not commit Adultery.

You shall not steal.
5You. shall not bear false witness against your
neighbours.
6. You shall not covet your neighbours house; you
shall not covet your neighbours wife, nor his male
or female slave, nor his ox or ass, nor anything else
that belongs to him or her.
Primary Sources of Ethics:-

1.
2.
3.
4.
5.
6.

The legal system.

Religion
Genetic Inheritance.
Philosophical System
Code of Conduct
Cultural Experiences.
1. The legal System:Laws represents a rough approximation of societys ethical standards. Thus
the laws serves to educate about the ethical causes in life.

2. Religion:Religious morality is clearly a primary force in shaping our societal ethics.

The applicability of religious ethics to the business community is the concern.

3. Genetic Inheritance:-

In recent years, Socio- Biologists have lots of evidence and arguments to

suggest that the evolutionary forces of natural selection influence the development of
traits such as cooperation and alteration that lie at the core of our ethical systems.

4. Philosophical System:To the Epicureans the quality of pleasure to be derived from an act was
the essential measure of its goodness. Philosophies have been instrumental in our
societys moral development.

5. Code of Conduct:The primary categories of codes are ,(1) Company codes, (2) Company
operating policies, (3) Codes of Ethics.

6. Cultural Experience:The rules, customs and standards transmitted from generation to

generation are considered as guide lines for appropriate conduct. Individual values are
shaped in large measure by the norms of the society.

Objectives of Ethics:The primary objective is to define the highest good of man and set a standard for the same.
Here we have to consider ethics to deal with several interrelated and complex problems which may
be of psychological, legal, commercial, philosophical, Sociological and political in nature.

The other objectives are:1.

2.
3.
4.
5.

Study of human behaviour, making evaluative assessment about them.

Establishing moral standards and norms of behaviour.
Making judgment upon human behaviour based on these standards and norms.
Prescribing moral behaviour and making recommendations how to behave or vice-versa.
Expressing an opinion or attitude about human conduct in general.

objectives Business Ethics:Ethical issues exist at all levels of business activity. As per Peter Pratley, Business
Ethics has a two fold objective:1. Evaluates human practices by calling upon moral standards.
2. Gives prescriptive advice on how to act morally in a specific kind of situation.
The first objective implies Analysis and Evaluation. It leads to an ethical diagnosis
of past actions and events.

The second objective is to provide the Therapeutic advice. It suggests slowdowns

and policies when facing the present dilemmas and future dangers, based on wellinformed opinions. This specially requires an identification of relevant stakeholders and a
clear understanding of the vital issues at stake.

Scope of Business Ethics:1. Stakeholders

Level:-I.
Employees:-

Security of Job
Better working condition
Better Recommendation
Participative Management
Welfare Facilities.
II. Customers: Better quality of goods.
Goods and services at reasonable price.
Not to corner stocks and create securities.
Not to practice discriminatory pricing.
Not to make fake claims about product in advertisements.
III.Shareholders: Ensure capital appreciation.
Ensure steady and regular dividends.
Disclose all relevant information.
Protect minority shareholders interest.
Not to window dress balance sheets.
Protect interest in times of merges, amalgamations and takeovers.

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IV. Bank and other lending institutions: Guarantee safety of borrowed funds.
Prompt repayment of loans.
V. Government: Complying with rules and regulations.
Honesty in paying taxes and other dues.

 Acting as Partner in the progress of the country.

2.

Personal Policy level: Not to use office Car, Stationary and other facilities for personal use
Not to fall prey to short ends.
Not to misuse others for personal.
Not to indulge in policies to gain power.
Not to spoil promotional chances to others.
Promise keeping
Mutual help.

3.

Societal level: Concern for poor and downtrodden.

No discrimination against any particular section or group.
Concern for clean environment.
Preservation of scarce resources for prosperity.
Contributing to better quality of life.

4.

Internal policy level: Fair practices relating to requirement, compensation, layoffs, perks promotion etc.
Transformational leadership to motivate employees to aim at better and higher
things in life.
Better communication at levels.

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Case Study No. 3: COLD ANNEALING OF STEEL
Work on bridge construction was going on over the river Ganga. The contractor who had been
awarded the contract had quoted the lowest rates on the condition that the Executive Engineer would
allow him to use hot annealing of steel, where he would save nearly Rs. 2, 00,000/- per ton. The
bridge required fifty thousand tons and the contractor was to save ten crore of rupees, if the Engineer
overlook the provision of cold annealing. The Contractor was ready to share half of the Extra profit
with the Engineers. The Executive Engineer Incharge had agreed to the stipulation. He knew that a
lay person would never be able to decipher the difference between cold and hot annealing of steel.
Usually the auditing and costing people belonged to that category and the Executive Engineer was
sure that he would be able to keep the audit team happy by looking after

them and by giving expensive gifts.

The Executive Engineer had not considered the possibility of a new young Assistant
Engineer joining the team for the bridge project. On his first inspection tour, the Engineer
stopped the work on the bridge site after finding out that hot annealing was being carried
out. When the contractor told him that before stopping the work he should consult his
boss the Executive Engineer, who in fact authorised the hot annealing by explaining that
the hot annealing would yet take care of the bridge for at least the next 10 years and by
that time he would have retired from service. The assistant Engineer remained adamant
on his decision and decided to report the matter to the Executive Engineer.

Assistant Engineer:
You may not be aware that on the bridge site, the Contractor is
cheating the Government by using not annealed steel. Thereby risking the safety of the
bridge. I have stopped the work, although the contractor was justifying hot annealing as
you had approved it. Of course, he could not show any written approval given by you.

Executive Engineer:
I believe what you did was the right decision from a youngster like you.
You have no experience of building bridges, while I am veteran in this game. I can
recount at least ten bridges which I got constructed and all of them have stood the test of
time, by being in use for 10 years or more.
The Assistant Engineer had read the reports of the collapse of the
Mandovi river bridge in Goa, which was constructed by the Executive Engineer but he
kept quiet about it. The Executive Engineer said you have had a tiring day. Go home and
relax. You will find your wife in quite a good mood tonight.
The Assistant Engineer found a new Thirty inch TV had been installed
in his house, courtesy the Contractor.

9
Question for the students:1.

Accept the gift and fall in line with the Executive Engineer.
2. Politely return the TV and yet kept protesting with the boss
about the Un-ethical practice of the contractor.
3. Report the matter to the Chief Engineer; even though he has a sneaking
suspicious that perhaps even he was involved in the
racket. 4. Report the matter to the Minister and the Police.

Conclusion:-

It is the job of the CEO to organize training programmes in ethical business for the new entrants
in the organization and also have refresher course for the existing employees. Such training
programmes need the total support and the approval of the Board of Directors. The training
should be done by using real life case studies, where free and frank views need to be expressed
by the participants without any fear of persecution at a later date. The HR Department should
ensure that no training programme is organised without an element of training on Ethics. The
employees must be encouraged to report on unethical behaviour of any employee (at whatever
level he or she works in the organisation) found guilty. For this purpose the CEO has to build the
organisational culture, which is conducive to ethical behaviour and of non tolerance of unethical
behaviour. Each member of the company, new and old, must be given a copy of the code of
conduct for the employees with continuous updates to it as and when made. The CEO plays an
integral role in the conduct of business of the organisation and in todays competitive world he
can servive in the market place only by conducting himself ethically and creating the
organisational culture, which fosters such behaviour among other employees.

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Case Study No. 4: The marketing manager is visiting a top office of his customers firm, who has to place a
large order on the firm.
Top Officer:- I think you have come on a wrong day. I am very disturbed today. My college
going son has been pestering me to buy a new Motorcycle, worth Rs. 50000/-. I do not have
spare money today to buy it. Even my wife joined my son and I do not get any peace at
home. Naturally, I am in no condition mentally to take a decision on your tender.
Marketing Manager:- Sir, why do you worry? Just give me a cheque in the name of Ram
Automobiles for Rs. 50000/- and the Motorcycle will be at your house by tomorrow.

Top Officer:- Why do you want the cheque? It May bounce!

Marketing Manager:- Sir, these days the Vigilance has become active and I am only booking at
your safety. The cheque will be encashed, please keep that much money in the Bank.

Next day the Motorcycle receipts for the cheque and an envelope with Rs. 50000/- cash
was delivered at the officers house.
Case Study No. 5: Distributor:- I know my quota is only 7 tons per month. If you can allot 70 tons instead, I
promise to place Rs. 1000/- per ton, that is Rs. 70000/- per month in any Bank account you
name in India or even in Switzerland.
After 6 months, if you keep starving other distributors, I will double the amount. We both will
become richer by your decision and since other distributors will keep getting some quantities,
they will not complain. If any one complains I will settle with him by going him some quantities.
Top Officer:- Mr. Distributor, you have come to the wrong place. I do not play such games. Now you
better leave the place or I will have you thrown out of my office by calling our security guards.

The story does not end here. The Distributor writes letters to the concerned
Minister, the Prime Minister and the Managing Director of the firm saying that the office is
depriving him of his legitimate quota because on the last visit to his office, the officer had
asked for Rs. 2000/- per ton on being allotted minimum quota of 70 tons.
Lucky for the officer, his implacable reputation as a rare honest officer came to
his rescue, when the Managing Director assured the concerned persons about his honesty.

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Case Study No. 6: The boss of an International Firm in India orders supply of 10 Tank Wagons of white oil (used in
dry cleaning process) to be delivered to one of the Major Distributors of the of the Firm. This high
demand came up because the boss came to know that the white oil can be mixed to the extent of up
to 50%in petrol and the cars would run smoothly for at least 3 years is long enough period, and cars
mostly go bad in this period anyhow. On the financial side, the distributor would make Rupees
hundred thousand per wagon and he was agreeable of giving the boss Thirty Thousand per wagon.
It would amount to Three hundred thousand per month and in the next 4 years; the boss would have
enough money to retire in peace. All went well till some wise guy the bosss junior, stated prying into
the deal and in less than 3 months, the boss who was to take over as the Top Boss in the country,
was given the sack. It was his good luck that he was not handed over to the Police.

The students have to analyse the case for the following:1. The junior who disclosed the fraud risked his job. Was it the right thing to do?
2. Other juniors also had come to know about it and some had in fact abetted in the crime.
How should the firm treat them, in view of the fear under which they use operating?
The boss in India rules supreme as he keeps a sword hanging over the head of his employees,
especially, those who are not part of a union, and with this fear psychosis the employees are
ready to do anything ordered by the Boss. These are people, who are extremely honest in their
private life, while they succumb to the bosss orders during office operations. Then these are
others, who do the illegal tasks ordered by the Boss willingly, almost eagerly, ready to deliver the
bribe to the right person as they would take a handsome cut from the bribe as personal
insurance against any problem they may face as a result of the act of giving the bribe.

Conclusion of the Case Study:There are two types of firms: Some firms have stayed on the right track of ethical business for a long
time. These are a few elite firms, who have been carrying on their operations on ethical moral and even
religious lines. Such firms keep a steady but slow growth since they do not believe in get rich quick.
th

Techniques of the present day business. In fact in the 18 century, rarely a firm could be found indulging
in unethical operations. They were turned to their social responsibilities. The emergence of unethical
firms can be traced to the twentieth century in India for the following reasons:-

1. Government controls on Private Business, which result in quota, permit raj.

2. Powers vested with even the junior government officers who demanded benefits each
time the firms wanted a favours, even if it was strictly under the law.
3. The Government departments like the public utility offices had an axe to grind with the firms

operations and they had to pay these people money for letting the firm carry out its
legitimate operations.
4. Government approvals, Licenses, No objection certificates all had a price and some of
them are still present giving opportunities to Government officers to make money.
Most persons are quick to blame the system, the Government for the state of affairs. They believe
that the laws are made for letting the Government officers make as much money as they can.

Today, the first kind of honest firm has become a rarity as the others have taken over
the business world. It must be argued that it is the businessmen who have corrupted the
Government officers for their benefit and in the process unleashed a major Frankenstein,
who they find different to tie down.

Types of Ethics:There are normally three types of Ethics.

1. Transactional Ethics are performed on the basis of connected interests of Equality,
Honesy and reciprocity.

2.

Participatory Ethics are privileged part of Business Ethics for common good and
common interest.
3. Recognitional Ethics are ones moral rights vis a vis moral duty. For example, the
Employees aged 57 to 60 years morally obliged to retire to give way to some younger
colleagues, who being in the midst of their careers can rise to more weighty claim to a job.

There are also 3 other important Ethics as below:-

Personal Ethics:-

1.
2.
3.
4.
5.

The Personal Ethics reflects general expectations of any person in any society, acting
in any capacity.
The Principles of Personal Ethics include:Concern for the well being of others.
Trustworthiness & Honesty.
Willing compliance with the law.
Refusing to take unfair advantage.
Preventing Harm.

Professional Ethics:1.
2.
3.
4.

The Professional Ethics are written codes containing rules of conduct and
standards of behaviour based on the principles of Professional Ethics, which include: Impartiality.
Objectivity.
Confidentiality.
Avoiding potential or apparent conflict of interest.

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Business Ethics:The Business Ethics are desired norms of behaviour exclusively dealing with actions
related to performance of duty.
1.
Moral principles that define right and wrong behaviuor in the world of Business.
2.
The desired norms of behaviour exclusively dealing with commercial transactions.
3. Systemic study of moral matters pertaining to Business, Industry or related activities
or practices and beliefs.
4. It is a specialised study of moral right or wrong and the application of Ethics in Business.

Values of Ethics:Values are a set of principles that will govern behaviour in the pursuit of a vision.
Values are a general term referring to those things which people regard as Good, Bad, Right,
Wrong, Desirable, Justifiable etc. We can speak of truth Values (true or false) and the value of
judgments which are statements about what is Valued, Sound, Deplorable, Skilled etc.
Business is driven by Values. Values determine :- (I) What Business people
do? (II) How other react?
Values are potent sources of conflict as well as of Co-Operation, Control and Self control.
Through values, business can and does create value in the form of goods, services,
employment etc. It is also noted that in extreme cases business and whole industries can cease
to function because their continued existence to inconsistent with certain powerful values.

Values are of many types, like Cultural values, Moral Values, Ethical Values, Managerial
Values. Hence, values are collective representations of what constitutes a good life or a
good society. Health is a value and self respect and so are democracy, tolerance and
freedom. The basic premise is that these values not across culture and time.

Norms of Ethics:Norms are expectation of proper behaviour. These are criteria of behaviour. Each
individual within the society has a set of norms, beliefs and values that together form his or her moral
standards. Norms are the ways an individual expects all people to act with a given situation.

In India lower level employees address the higher level at the time of
starting the discussions as SIR to show respect to them. The same is not found in USA, as
they call their bosses by name as MR. This may look awkward in the beginning for the
Indian students or Indian employees who go for employment to USA.
The norms are not published, may not be obeyed and cannot be enforced. It
is not consistent nor universal. Norms are just the way we feel about behaviour. Norms are
collective expectations regarding a certain type of behaviour, for example, Brush your teeth
twice a day, keep your premise clean, Chew the food properly while eating, etc.

Beliefs of Ethics:The beliefs in an ethical code are standards of thoughts. These are the ways
that the Senior Executive in the organisation wants others to think. The intention is to
encourage ways of thinking and patterns of attitudes that will pave way towards the wanted
behaviour. It is expressed in a positive form in an ethical code. Our first intention to serve
our customer is an example of a positive belief that commonly appears in Code of Ethics.
Beliefs are criteria of thought. They are the ways an individual expects people
to think about given concepts.

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For Example:- (i) I believe in the present method adopted by University regarding teaching. I
expect others to recognise the worth of that concept and accept it as a form of teaching.

(ii) Similarly, I believe I energy conservation or afforestation and I

expect other people to recognise the importance of that idea and accept it as a good worth
preceding in that direction.

Morality In Ethics:Morality is the standards that an individual for a group what is right and wrong, good
and evil. The term morality is derived from the Latin root Morales means Behaviour Moral
standards examples could be Integrity is good Dis honesty is Bad. It is right to tell the truth and
wrong to endanger the lives of others. So, Moral standards includes the norms we have about the
kinds of action we believe are morally right and wrong as well as the values we place on the kinds of
objects we believe are morally good and morally Bad. Moral Norms are expressed as general rules

or statements such as, Always tell the truth. It is wrong to kill the innocent people etc.
Moral Value are expressed as statements describing objects that have worth, such as,
Honesty is good. Anger is bad.
Moral Actions pertain to set of actions engineered by the characters and
expressed through behaviours. In Gandhiji or J.R.D Tata we find certain set of activities like
(I) Honesty, (II) Truthfulness, (III) Sincerity, (IV) Generosity, (V) Transparency, (VI) CoOperation, (VII) Integrity and (VIII) Strong will power etc.

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HOW DOES ETHICS HELP:1.

2.
3.
4.
5.
6.
7.

Help maintain a moral Course at all times.

Take right decisions at all times.
Cultivates strong teamwork and productivity.
Supports employee growth and meaning.
Helps excuse that policies are legal.
Promotes a strong public image.
Helps to pursue Business Excellence.

8. Helps commitment towards equal opportunity

personal recognition and career development.

for

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Normative Ethics in Management:A Normative Study is an investigation that attempts to reach
normative Conclusions.
- Conclusions about what things are good or bad?
- About what actions are right or wrong?
A normative study aims to discover what should be Ethics are the study of
moral standards whose explicit purpose is to determine as far as possible
which standards are Correct or supported by the best reasons. It attempts to
reach conclusions about moral right and wrong and moral good and evil.

Though Ethics are a Normative Study, the Social Sciences engage

in a Descriptive Study of Ethics. A descriptive study is one that does not try to
reach any conclusions, about what things are truly good or bad or right or
wrong. Instead, it attempts to describe or explain the world without reaching
any conclusions about whether the world is, as it should be.

Normative Ethics in Management

The Holistic
Theory

Eternal
Ethics

Empirical
Ethics

Teleological
Theory

Ethical
Egoism

Uttitariam
Principal

Deontological
Theory

Rights
Principal

Justice
Principal

Principals of Eternal Ethics believe in the core divinity of individuals.

Holistic Theory believes that these are two different approaches in Ethics.
The eternal and empirical. These could be read in the Bhagwad Geeta
shlokas 15 and 16.
The world consists of the empirical and the externals. All the worldly
things come under the empirical self, whereas the timeless, spaceless
dimension comes under the Eternal.
Empirical is the one whose knowledge is got from experiences and
induction only whereas Eternal is ever lasting, an appettation of God.
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Man is not only potential divine but also divine in all our behaviour and
actions. It is this intrinsic divinity that takes place not only in human dimension
but also in other dimensions also. Man is considered as an embodiment of the
divine. It is the divine who thinks and gets in the garb of man. Biodiversity is
the diverse revelation of the same divine in different directions and proportions.
The Teleological and Deontological theories are utilitarianism and
Kantianism. Teleological Theory determine ethics of an act by looking to the
consequences of the decision. Rightness of actions is determined solely by the
good consequences they produce.
Deontological theory determines the Ethics of an act by looking at the
process of the decision. It does not appeal to consequences (Kantian Ethics).

Ethical Decision Making:Ethical issues arise out of every day business decisions. An individuals
Personal benefits and the moral atmosphere of the organisation in which one works
significantly after the behaviour one exhibits. Many philosophers, organizational
relationship and opportunity influence behaviour as does the organizational

Opportuni
ty

environment.
Organisatio
nal
Environmen
t

Individual
Behaviour

Organisatio
nal

Moral
Philosoph
y

Behaviour

Individual Behaviour components, The factors influencing Behaviour.

Example:If any garment manufacturer selects a small place in
India where these is no Industry and make improvements in the
place through:Brought a higher standard of living to the local people.

19
Provided with opportunities.
Provided Skill.
Produce quality products at a competitive price.

 Products used by local people also to meet their requirements.

But paid kickback to the local State Government officials for
operation.
To discuss the Role of Moral Philosophies in decision
making:-

Moral Philosophy is a set of principles setting forth what is

believed to be the right way to behave.
Role is something that is moral conforms to a standard
of
accountability.
A philosophy is a study of the general principles of a
subject such as Morality. Individuals learn the principles through
socialization by family members, social groups and formal
education.
SUGGESTIONS FOR ETHICAL DECISION MAKING:1.Top Management can improve behaviour. The managers
should be quick to consider ethical principles in their decision
making by improving their understanding to develop their
moral philosophies.
2.

Code of Ethics improves decision making: - Business

establish codes of Ethics and corporate policies on ethics to foster
ethical decision making by reducing the opportunity for unethical
activity. Enforcement of corporate policies is a common way of
dealing with ethical problems. The establishment of corporate
policies and codes of ethics helps employees understand what is
expected of them. Understanding how individuals choose their
standards of Ethics and what prompt a person to engage in
unethical behaviour may reverse the current trend towards
unethical activity in Business.
3. Interactions with Peers and other colleagues: - People
learn ethical behaviour from interacting with individual also
in Social, Business
and other groups. Thus Business should examine their
see

to

how policies, rewards and punishments affect ethical

beahaviour. Without companywide standards for behaviour
employees generally base ethical decision on their on their

observation of Peers and Management.

20

4. Control System:- If a Company is to maintain ethical

behaviour, its policies, rules and standards must be worked
into its control system. Reducing unethical behaviour is a
business goal, not very much different from increasing
profits. The business set a goal achieving greater ethical
behaviour among company employees and measures
the out come.
Control System
Number
of
Employee
s

Not
Making

Ethical
Decision

Strengthen
the
standards and

Take
corrective

Policies

Decision

Then
Company to
Investigate

Wh
y?

Ethical behaviour occurs only when a plan is developed and

successfully
implemented, through stronger re-inforcement of current standards
and
policies.

21
ETHICAL ISSUES THAT ARISE FOR MANAGERS:The Ethical issues that arise for Managers are indeed for all
people, including Employees, Customers, Consumers and Members
of the public.
Corporate activities affects us all and so the conduct of business is a
matter of concern for everyone with a stake in ethical management.
The ethical issues are regularity faced by the Managers in the
Ordinary Course of their works.
These are also major issues debated in the Parliament and
scrutinised by the courts, This is because ethical issues in Business
are closely tied to important matters of Public Policy and to the
Legislative and Judicial Processes of the Government.
REASONS FOR ETHICAL PROBLEMS:1. Cross Cultural Contradiction:These
problems
arise
and
occur
because
Corporations do business in other societies where ethical
standards differ from those at home.
2. Competitive Pressures: When Companies are squeezed by severe
competition, Managers sometimes engage in un-ethical
activities to beat out a competitor.
3. Personal Gain: Personal gain or even greed, causes some ethical
problems.
Business sometimes employs people whose personal values
are less than desirables.
4. Organisational Goals:-

Ethical conflicts in Business frequently occur when a

Company pursues goals or uses methods that are not
acceptable to some of the Employees.

Managers are the key people to investigate

whether a Company will act ethically or un-ethically. As major
decision

makers

and

policy

makers,

they

have

more

opportunities than others to set an ethical time for the

Company.
HOW TO USE ETHICAL REASONSING:What business needs is a set of guidelines for thinking about
ethics. The guidelines should help Corporate managers and
employees.
Identify the nature of the ethical problems.
Decide which course of action is likely to produce the most
ethical results.

22
3. Methods of Ethical Reasoning Are
Utilitarian
Rights
Justice
Utilitarian are comprising benefits and costs where an action is
ethical when net benefits exceeds net costs. Its limitation is, it is
difficult to measure some human and social costs. Majority may disregard rights of minority.
Rights: - The critical determining factor is to respect the basis
human Rights, where it is difficult to balance conflicting Rights.
Justice: - Here an action is ethical when benefits and costs are fairly
distributed. But it is difficult to measure benefits and a cost as these
is lack of agreement on fair shares.

The levels of Decision - making occurs in 3 distinct levels: Level of the Individual.

Individuals in the work place require to make a decision about

their own

response whether to live with the difficult boss or blow the

whistle?
Level of the Organisation.
Problems at the level of the organisation To bring out some
organizational change e.g. Sexual Harassment an individual
matter for the person suffering the abuse.

Level of the Business System.

Problems resulting from accepted business practices cannot
effectively be addressed by any single organisation, much less a
line individual.
The Individuals are faced with questions about ethics in their
relations with customers, employees and members of the larger
society. Frequently the ethical correct course of action is clear and
people in Business act as per that. Exceptions occur, when these is
uncertainty about ethical obligations in particular situation or when
considerations of ethics come into conflict with practical demands of
Business e.g. Sales Representative not sure about the extent to
which he is obliged to provide information about possible delays in
Delivery to Customers.
In deciding on an ethical course if action, we can reply to some
extent on the rules of right conduct that we employ in everyday life.
Deception is wrong (e.g. whether we deceive a friend or a customer)
23
One of the feature that distinguishes business activity is an
economic character. In the world of business, we interact with each
other not as family members, friends or neighbours but as Buyers
and Sellers, employers and
Employees and the like Employment is also recognised as a special
relation with its own standard of Right and Wrong. Employers are

generally entitled to hire and promote whomever they wish and to

lay

off

(or

terminate)

the

workers

without

regards

for

the

consequences. The Ethics of Business, is atleast impart the ethics of

economic relation such as those involving buyers, sellers,
employers, employees.

24

Gandhian Philosophy of Ethics and Wealth

Management:-

Gandhiji

laid

great

stress

on

Personal

integrity. According to Gandhiji it is this characteristic in

human beings which takes them far ahead of others.
However, no one can just hang it on his chest as a medal,
proclaiming his integrity. Integrity is also of thoughts, words
and deed. Integrity is not only about taking bribes, but much
more than that. Given below are a few examples of Integrity
or lack of it.

A person sitting in his office during office time, in his

busy schedule, write a personal letter. He
even uses office stationary for the letter.
A

person

promises

his

colleagues

something

of

corporate importance in private and in office meeting

he just denies ever having given the promise.
A person knowingly gives a torn note (Cash) while
buying a product at a busy sales counter.
So, integrity is a character trait. It is doing what is
right even when no one is looking. It helps maintain a moral
course at all times.

The following areas require safeguards

against unethical behaviour in Business.

25

1.Sales:Supply of products not exactly as per the order or the

sample shown.
Treating two customers differently without valid
reasons.
Delaying the supply of goods, without proper reason
and not communicating the delay to the customer.
Using superlative adjectives to describe the product
when the

actual product will not stand the

customers security.

26

2.Advertising and Promotion:Supplying products which are different than those

advertised. Giving wrong price idea in advertisements
by not including the necessary add-ons.

Exaggerating the product benefits

to the customers.

27

3.After Sales Service :Using

substandard material

during service and charging for

the real material.

Service Engineers not going

by the priority fixed and playing favourites for personal
gain.
Over-billing the service charge when the customer is

not aware of the rates.

When the product comes for servicing, exchanging a
few healthy parts with sub-standard parts. These
removed parts are then sold to other customers.

28

4.Marketing Research:Research

is

conducted

only

to

substantiate

the

Managers view point.

Selling the Research report to competitors.
Research is focused on areas, which need not be
covered, as the manager does not want the truth to
ever come out.

29
5.H.R. Management:Recruitment of kins without assessing their abilities.
Recruitment based on getting financial favours from
the candidates.
Arranging training for only pet employees, whether
they deserve it or not.
Planning training programme without assessing the
training needs of the employees.

30

6.Production Functions:Using substandard material in production.

Delaying the supply of products to the customers to
help competitors.
Purchasing from obliging Firms who give gifts and cash
to the purchase Manager.

Purchasing from Firms owned by

relatives.
Placing orders without verifying
the suppliers credential because
of personal benefits.

31

7.Management of Quality:Accepting

marginally bad

materials.
Allowing substandard materials
to be used in the manufacturing
process.

Rejecting materials from good vendors for reasons that

they are not obliging them.
Unnecessary raising the standards to exclude good
vendors.

32
8.Finance Function:-

 Over budgeting the project costs.

Using under-hand tactics with the financers to gain
benefits.
Showing

inflated

salaries,

getting

receipts

from

Employees for a larger amount than they actually get.

Paying over time bill wages when none needs to be
paid.
Allowing extra TA bill to favourate employees.
Delaying clearing the bills payable to get the maximum
interest for the amount to be paid.
Ignoring the lowest tender for personal gains
Accepting as Official, payments made by the Directors
for personal purchases.

Approving substandard construction by

the contractor and approving his bill for
payment.

33
9.CEO of the Company:

Nepotism in recruitment.

Favouritism in purchasing.

Extra consideration to friendly buyers

Use of position for gaining personal favour from
suppliers and Contractors. Allowing the use of substandard material for personal gains.
Not

keeping

promises

made

to

employees and other stakeholders.

buyers,

suppliers,

Manipulating Records for personal

gains.

34
Ethics in International
Business

Business is being conducted across national

boundaries and increasingly becoming global because of the
mobility of Employment, Capital,

produce and technology. Intense competition is forcing

companies worldwide to enter the global market. In India,
Software companies in
Information Technology have grown tremendously and are
entering globally.
Such developments present a host of ethical problems that
Managers are unprepared to address. Many of these
problems arise from the diversity of
Business standards around the world.
Having the diversity of Ethical outlooks in the world, it is
possible to agree on ethical Convergence or a set of
standards for Business worldwide such a goal is possible if
globalisation is to succeed.

The very phenomenon of globalisation makes it clear

that these must be a globalisation of Ethics. This requires a
commitment to same core standards or atleast a willingness
to abide by them. The United Nations
(UN) has developed a Code of
Conduct

for Multinational

Corporations. These Codes have many guidelines in common

and cover the areas of Employment practices, consumer
protection,

Environmental

preservation,

Involvement

Politics, Including Bribery and Basic Human Rights.

in

MNCs

generally

recognize

Social

Responsibility and attempt to fulfill their responsibilities

everywhere they are located. The major cause of occasional
failure to act responsibly is not because of lack of effort but
the diversity of political and legal systems around the world
and differences in economic development.

Foreign operations create challenges as

well as opportunities for mis- conduct that simply do not
exist for purely domestic enterprises. The question for MNCs
is deciding which standards to follow. The solution to many of
the Ethical problems
of

International

the

development

Business lies in
of International

agreements and Code of Ethics. Some of the Companies

experience difficulty and hence adopt local conditions:Paying low wages (exploitive wages)

Imposing straight or unsafe working conditions

(standards are kept low).
Violation of Human Rights.

May even try to avoid fair share of

Taxes.

Some criticised

practices are

said to be legal in the countries in question and are not

considered to be un-ethical by local standards.

Should global Companies are bound by the prevailing

morality of the home Country?
Should they follow the practices of the host country
and adopt the adage. ( Be a Roman while you are in
Rome)
Are these special Ethical standards that apply when
business is conducted across national boundries.
Business ought to be conducted
in the same way the world over with no double
standards. Hence it is necessary to observe a single
Code of Conduct in their dealing everywhere.

Operating

outside

the

home

country,

create Dilemmas that lead to charges of serious ethical

failings.

MNCs

generally

recognise

social

responsibility and attempt to fulfill their responsibilities

everywhere they are located.
3 kinds of Guidelines have been offered
for global Companies:-

Justice
Human Rights
Welfare
For Justice, one kind of unfairness is offer the one sided
division of the benefits from foreign investment.

The gap between the rich and poor

Countries is an urgent moral concern and MNCs have much
to offer. Another kind of unfairness is violating the rules of
the market place which is to say engaging in unfair
competition and otherwise taking unfair advantage.
Guidelines for Human Rights application:Failing

to

provide

safety

equipment

to

protect

employees from serious hazards (the right to physical

security)
Bribing Government officials to violate their duty or
seeking

to

overthrow

democratically

governments. (the right to political

elected

participation)
Employing child labour as found
mostly in India (the right to minimum
education)

Welfare:Guidelines offered for Welfare are:Do not intentional direct harm.

More good than harm for the host country.
Contribute by their activity to host countrys
development.
Respect the human rights of their employees.
To the extent that local culture does not violate ethical
norms, respect

the local culture and work with and not against it.
Pay their fair share of Taxes.
Coperate with the local government in developing and
enforcing just background organizations.
Global Companies are criticised primarily in cases where
they take more than a fair share by exploiting their
superiors position in an imperfect market.

MORAL EVALUATION OF THE FIRM

Morality is the standards that an individual or a Group has

about what is Right and Wrong, Good & Evil. Like Ethics,
Morality is a similar term that prevails in and many times
considered as Synonymous of Ethics and is derived from the
Latin root MORALES means Behaviour. Moral standards
examples could be Integrity is
Good. Dis-Honesty is Bad. It is right to tell the Truth and
wrong to endanger the lives of others.
Moral Norms can usually be expressed as statements such
as, Always tell the truth.
It is wrong to kill the innocent people etc.
Moral Values are usually expressed as statements describing
objects or features of objects that have worth, such as,
Honesty is good. And Ager is Bad.

Ethico Moral Actions

Ethica and Morality have different concepts. Ethico Moral
actions pertain to set of actions engineered by the character
and expressed through behaviour. Gandhiji and J.R.D. Tata
have certain set of qualities like: Honesty
Truthfulness
Sincerity
Generosity
Cooperation
Integrity
Strong will Power etc.
Ethics codes in Business Organisations was there even in
earlier 1940s and these are not an innovation of the later
years like

1990s or 2000s. A leading manufacturing Firm of World

Health Care products at that time and even as on today
continued to be one of the leading manufactures had
established Ethical Codes. In the recent years, larger
organizations have adopted this approach to CORPORATE
ETHICS. In order to improve standards of
Behaviour, many American organisations have introduced
codes on their own.
Moral Codes may therefore, be referred to general areas of
Business conduct to increase respect and recognition for the
profession at local, national and International levels.

TATA GROUP OF COMPANIES

In India, Tata Group of Companies are practicing
Business Ethics and Tata Code of Conduct have governed the manner in which Tata Companies and
their Employees should conduct themselves. Tatas code of conduct serves as a Guide to each
Employee on the values, Ethics and Business Principles expected of him or her. Each
Tata Employee take pride in up-holding the high standards of Corporate and
Personal Behaviour on which the Tata Groups reputation and respectability have been built.
Over the past 130 years. For the stages of Ethical Growth and Ethical
organisation, Tata Group of Companies have highest standards and Values in
India.
Some of the Codes in Tata Code of Conduct:1. National Interest.
2. Financial Reporting as per financial
Reporting Standards.
3. Equal opportunity Employer.
4. Gifts and Donations.
5. Political, Non Alignment.
6. Health, Safety and Environment.
7. Quality of Products and Series.
8. Corporate Citizenship.
9. Use of Tata Brands.
10. Shareholders
11. Ethical Conduct
12. Regularly Compliance

13. Conflict of Interest

14. Citizenship and
15. Reporting Concerns.
Every Employee of a
Tata Company shall promptly report to the management any actual or possible violation of the Code
or event he becomes aware of that could affect the business or reputation of his or any other Tata
Company.

CASE STUDY
BRIBE TO GET SUPPLY ORDER
A Director of a company
had to issue a supply order to a company supplying for purchasing of computers. Marketing Manager
of the Computer Supplying Company went to the Director for expediting the supply order. But the
Director had some problems with his college going Son and Wife.
The College going son wanted a Motor cycle and the
Director did not have sufficient money to purchase it. The case went to little more complication when
his wife also justified the need of their son for a Motor-Bike to go to College. So, the Director told to
the Marketing Manager to come on other day since that day was a bad day for him with difficulties
with his family members like his son and his wife. Hearing the difficulties of the Director, the
Marketing Manager of the Computer Supplying Company told to the Director that it did not appear to
be a difficult case and offered to help the Director to meet the need of his son and wife.
The MarketingManager asked the Director to give a cheque of Rs.50000/- in favour of M/s. Ram
Automobiles who would be supplying the Motor cycle. But The Director informed the Marketing
Manager that he did not have sufficient Balance in the Bank. Account and hence, if the cheque is
issued , it would be surely Bunched due to not having sufficient Balance. The Marketing Manager
informed the Director that he would take care of this Banks problem.
Next morning, the Marketing Managers came to the Director and delivered a New Motorcycle, a
packet containing Rs. 50000/- Cash and a payment receipt from M/S Ram Automobiles.
Marketing Manager asked the Director to deposit this cash of Rs. 50000/- in his Bank
Account. So that the cheque is not Bunched. Also informed the Director that Non- a- days vigilance
Department is very efficient and they might check and verify the payment details and hence a proper
Payment Receipt is obtained so that the Director do not have any problem with the Vigilance
Department at any time.

40

CORPORATE SOCIAL RESPONSIBILITY

-------------------------------------------------------Enlightened companies have chosen to embark on the journey
of Corporate Social Responsibility in an effort to broaden the
traditional corporate goals of profitability and

productivity and adopt social trusteeship as a

desirable objective.
Corporate Social Responsibility(CSR) is the process
by which a corporation participates in the welfare activities of
both internal as well as external community by actively
assisting in the improvement of quality of life of the people in
the communities in which it operates. It also aims at building
relationship with all types of public and enhancing the
reputation of the Company.
CSR in practice is being influenced by two major
concepts. One is the stakeholder model, wherein it is
recognized that good business practice entails engaging all
its stakeholders in the companys business. So good
business is not only seen as maximizing shareholder value
but also stakeholder value. The other concept is where
companies would no longer be judged on the conventional
financial bottom-line but also on their performance in the
social and environmental bottom-line.
So, CSR is the commitment of Business to contribute to
sustainable economic development, working with employees
and their families, the local community and society at large to
improve their quality of life, in ways that are both good for
Business and good for development.
Corporate Social Responsibility emerged from
corporate philanthropy. The primary purpose of a business is
to improve the quality of life of people and that a corporate
entity exists to serve society from where it source its

customers and other stakeholders. There is relationship

between a companys needs and the communitys needs.
Here the company feels a level of obligation and discharges
that obligation through contributions to disaster relief,
supporting sustainable development and corporate
philanthropy for the benefit of the community at large. Here
the company is fulfilling its responsibility towards community
and society and does not expect anything in turn for its
contributions. During natural calamities, good companies
invest large amounts to provide relief and rehabilitation
measures to the victims. In such case, the companies want
to help the community and in doing so, they are also seen
involved in the socio-economics development activities for
the benefit of the community.

Companies persue the Triple Bottom Line Reporting

initiative (i.e. Economic Bottom Line, Environment Bottom
Line and Social Bottom Lines) to demonstrate its
commitment to be a good corporate citizen. Man is the social
being and is also a part of the society. He lives in and
constitutes the society. He moulds the morals and norms of
the society and is in turn, moulded by the society. One of the
postulates of citizenship is the conferment of rights and
acceptance of duties towards society including social
responsibility. This responsibility devolves on man as human
being who is part of the society and as a corporate citizen
which owns social responsibility.
The community is central to the core values of Corporate
Social Responsibility and the community

development programmes aim at building trust and improving

the quality of life.Corporate Community initiatives tries to help
communities to become strong and self reliant. Business can
play its part in making a community prosperous. The
company can take care to nurture the community welfare and
the environment in which it does its business. From the
community needs, there arises the need for Corporate Social
Responsibility. Here the companies not only recognize that
they have a responsibility to contribute some of their profits
into the welfare of needy communities in which they operate,
but also take the view that it is also in the interest of
companies to benefit from the community. Community gives
the Corporate World valuable opportunities to learn.

Hence, Corporate Social Responsibility is also viewed as a

necessary and integral part of the stakeholder approach, an
approach on maintaining good relations with all corporate
public, employees, shareholders, customers and general
community.
The Corporate World should discharge its social
responsibility as a good Corporate Citizen. It is against this
background that planned Corporate Social Responsibilities
demand the same vigour to be applied as to any other
business operation. The process of Corporate Social
Responsibility like any campaign planning lies in a systematic
planned approach such as :

Research
Assessment of the needs of Community

 Identification of problem
Key problems confronting the community out of research
and needs
Set Objectives
Objectives for solving problems.
Design the strategy and levels of investment.
Implementation of community welfare programme to
reach the objectives.
Public Relations Communication programmes to provide
CSR.
Evaluations of Community Programmes
Report to the Management and relevant audiences on
progress based on evaluation and measurement.

To ensure community development in diverse spheres of

the society, it is necessary that the Corporate World
should set their action plan to the task on hand. To
quote Joel Arthur Barker
Vision without action is merely a dream,
Action without vision just passes the time,
Vision with action can change the world

Corporate Social Responsibility programme include

a wide range activities, often far removed from the
corporations economic function. Examples of such
activities include :- Sponsorship of Sport Event or the Arts,

- Donations to charity and contribution in either cash or

kind such as office facilities, equipments, professional
advice, training, technology,
- Public or voluntary Sector activities which includes
education, population control, removal of poverty
illiteracy and ignorance, combating corruption,
ensuring free and fair elections, providing
employment, pushing through reforms, eradicating
communicable diseases and finding answer to
problems pertaining to gender discrimination, child
labour, mother and child health HIV prevention,
energy, conservation etc. The canvas is so large that
there is a need for coordinated action from the
Government, Local and Corporate bodies, NGOs as
well as individuals.
These programmes are also termed as community
relations activities, as social responsibility and
community relations go hand in hand.
In any community development initiatives, it is very
important to understand the meaning and utility of
some of the words like self-help, charity, friendship,
culture,
social
service,
self-reliance
and
Philanthropy.
Self-help is the habit of confidently standing on ones
own legs. God helps those who help themselves. Every man
should bear his own burden. To be dependant on other is a
curse. Living upon charity robs us of independence and
undermines every manly virtue. Efforts from within always
bring out our latent virtues and strengthen our character.

Charity is that disposition of the heart which leads to

think favourably of their fellowmen and do them good. The
practice of charity calls forth all the nobler qualities of the
mind and the right use of it, brings peace on earth and
goodwill among men. It is a form of self-sacrifice without
which society cannot exist.
Friendship is a felling of goodwill and affection between
two persons. Friendship often springs from similarity of taste,
feeling and sentiments; sometimes from gratitude, and
sometimes from close association. Friendship is based on
love and consideration of mutual welfare.

Culture is one of the most frequently used expression in

the world. Perhaps, it means a individuals way of looking at
things or general approach towards life as a whole. Truth is
Beauty and Beauty is truth is the doctrine though universally
accepted seems yet to represent the spirit of Indian culture
more than of any other Satyam, Shivam, Sunderam thus
runs the significant message of Indian culture enjoining the
worship of beauty and truth as the source of all good in the
world.
Social Service is the service rendered to other
members of the society in their need i.e. nursing the sick,
reliving the sufferings of the poor, spreading education
among the illiterate, making people conscious of their rights
and duties. We, social beings, can be really happy if all of us

are individually happy. So, when an individual or a portion of

our society suffers from any trouble we cannot remain idle.
Everybody can render service in his own way, some by
spreading education, other by relieving the sufferings of the
poor etc. Sympathy and fellow-feeling are mainly required.
Self-reliance is the habit of relying on ones own powers
and abilities in the midest of difficulties and dangers. A self
reliant man does not depend on others for help but uses his
own judgment and powers in facing difficulty or carrying out
an undertaking. Self-reliance is great virtue. It is a secret in
life. A self-reliant man has full confidence in his own powers.
Self-reliance contributes very largely to success in life and to
the fulfillment of our ambitions.
We should, therefore, cultivate this great virtue from early
life, as without self-reliance no great undertaking is possible
in life. For corporate Social Responsibility, a Company should
be committed to be a good Corporate Citizen not only in
compliance with all relevant laws and regulations but also to
maintain and enhance its environment and well being to the
advantage of the organization and the community concerned
with the objective of making them self-reliant. Such Social
Responsibility would comprise, to initiate and support
community initiatives in the field of community health and
family welfare, water management, vocational training,
education and literacy and encourage application of modern
Science and Managerial Techniques and Expertise. The
Company would also encourage volunteering amongst its
employees and help them to work

in the communities. Companies are also encouraged to

develop social accounting systems and to carry out social
audit of the operations.
Corporate Philanthropy is the practice of helping the
poor and those in need. The Corporate CSR emerged from
Corporate Philanthropy, the link between a companys needs
and communitys needs. Here the Company feel a level of
obligation and discharges that obligation through financial
contributions usually to non-profit making organizations
which in turn perform important social welfare and cultural
activities for the benefit of the community at large.

Corporate undertake projects in the fields of education,

vocational training, and community health and water
management. The Head of CSR of the Companies is
responsible for creating and enabling condition for every
Employee who chooses to volunteer in community
development work.
A majority of the Indian Companies recognize
social responsibility as core to taking their business
forward. Enlightened companies have chosen to embark
on the journey of Corporate Social Responsibility in an
effort to broaden the traditional corporate goals of
profitability and productivity and adopt social trusteeship
as a desirable objective. Empirical studies have
demonstrated that CSR has had a positive impact on the

business and economic performance of such companies

while also contributing to enhancing shareholders value.
One of the strongest reasons for a company to adopt
social commitment is the ocean of gratitude and goodwill
of the community that is earned, in addition to building
up of corporate image based upon secure local identity
and harmonious interaction with the community.