UNIT -2 Business Ethics

Principles of personal Ethics

Personal values are the conception of what an individual or a group regards as desirable.
Personal ethics refer to the application of these values in everything one does. Personal ethics
might also be called morality, since they reflect general expectations of any person in any
society, acting in any capacity. These are the principles we try to instil in our children, and
expect of one another without needing to articulate the expectation or formalize it in any way.
The principles of personal ethics are:

1. Concern and respect for the autonomy of others.

2. Honesty and the willingness to comply with the law.
3. Fairness and the ability not to take undue advantage of others.
4. Benevolence and preventing harm to any creature.

People are motivated to be ethical for the following reasons:

1. Most people want to maintain a clear conscience and would like to act ethically under
normal circumstances.
2. It is natural for people to ensure that their actions do not cause any injury, whether
physical or mental, to others.
3. People are obliged to obey the laws of the land.
4. Social and material wellbeing depends on one’s ethical behaviour in society.

Professional ethics are principles that govern the behaviour of a person or group in a business
environment. Like values, professional ethics provide rules on how a person should act
towards other people and institutions in such an environment.

Principles of Professional ethics

Ethical principles underpin all professional codes of conduct. Ethical principles may differ
depending on the profession; for example, professional ethics that relate to medical
practitioners will differ from those that relate to lawyers or real estate agents.

However, there are some universal ethical principles that apply across all professions,
including:

 honesty
 trustworthiness
 loyalty
 respect for others
 adherence to the law
 doing good and avoiding harm to others
 Accountability.

Codes of conduct

Professional codes of conduct draw on these professional ethical principles as the basis for
prescribing required standards of behaviour for members of a profession. They also seek to
set out the expectations that the profession and society have of its members.
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The intention of codes of conduct is to provide guidelines for the minimum standard of
appropriate behaviour in a professional context. Codes of conduct sit alongside the general
law of the land and the personal values of members of the profession.

Professional codes of conduct provide benefits to:

 the public, as they build confidence in the profession’s trustworthiness

 clients, as they provide greater transparency and certainty about how their affairs will
be handled
 members of the profession, as they provide a supporting framework for resisting
pressure to act inappropriately, and for making acceptable decisions in what may be
‘grey areas’
 the profession as a whole, as they provide a common understanding of acceptable
practice which builds collegiality and allows for fairer disciplinary procedures
 others dealing with the profession, as the profession will be seen as more reliable and
easier to deal with.

Evolution of Ethics Over the years

Social change has more or less followed the more reasoned logic and experiences of
people. Change is not always perfect. However, as people experience more and learn
more about their world through formal education, they have more resources by which
they can make judgments about the behavior of their fellow humans. Knowledge of the
past lends to enlightened minds knowledge of the future.

Common education and experiences inspire the emergence of informal belief systems,
clarifying what appears to be acceptable behavior and what is not. Observations that
endure centuries of reasoned scrutiny integrate ultimately into the cultural ethic. As a rule
of thumb, an action that contributes to the disorganization of society is often considered
"wrong" and that which contributes to the organization of society "right." Behaviors that
corrupt the peace, prosperity, and productivity of a society are generally discouraged as
"wrong," in favor of behaviors which contribute to the well-being of the society and are
generally considered "right." In any event, the evolution of rules in complex societies
addresses the fundamental impulse of the human species to survive in a world of
competing biological systems.

Honesty, Integrity and Transparency are the touchstones of Business

Ethics
Ethical systems and formal laws together serve to bring order to a world that tends to
become disorganized and sometimes violent if ethical views and rules of conduct are not
established. Ethical systems that emerge for any given period of historical development
may not represent the finest of rules ever conceived, but they are sufficient to hold the
growth of humanity in the balance.

Ethical corporate behaviour is nothing but a reiteration of the ancient wisdom that
‘honesty is the best policy’. The dramatic collapse of some of the Fortune 500 companies
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such as Enron and WorldCom or the well-known auditing firm Andersen showed that
even successful companies could ultimately come to grief, if their managers did not
practise the basic principles of integrity. For every profession ‘we would think of a code
of conduct or a set of values, which has a moral content and that would be the essence of
ethics for that profession’. There should be transparency in operations leading to
accountability, which should ensure safety and protect the interest of all stakeholders.

Distinction between Values and Ethics

Ethics and Values together lay the foundation for sustainability. While they are
sometimes used synonymously, they are different, wherein ethics are the set of rules that
govern the behaviour of a person, established by a group or culture. Values refer to the
beliefs for which a person has an enduring preference.

Ethics and values are important in every aspect of life, when we have to make a choice
between two things, wherein ethics determine what is right, values determine what is
important.

Basis for
Ethics Values
Comparison
Ethics refers to the Value is defined as the principles
guidelines for conduct, that and ideals, that helps them in
Meaning
address question about making judgement of what is more
morality. important.
What are they? System of moral principles. Stimuli for thinking.
Consistency Uniform Differs from person to person
What is morally correct or
Tells incorrect, in the given What we want to do or achieve.
situation.
Extent of rightness or
Determines Level of importance.
wrongness of our options.
What it does? Constrains Motivates

Key Differences between Ethics and Values

The fundamental differences between ethics and value are described in the given below
points:

1. Ethics refers to the guidelines for conduct, that address question about morality. Value
is defined as the principles and ideals, which helps them in making the judgement of
what is more important.
2. Ethics is a system of moral principles. In contrast to values, which is the stimuli of our
thinking.
3. Values strongly influence the emotional state of mind. Therefore it acts as a
motivator. On the other hand, ethics compels to follow a particular course of action.
4. Ethics are consistent, whereas values are different for different persons, i.e. what is
important for one person, may not be important for another person.
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5. Values tell us what we want to do or achieve in our life, whereas ethics helps us in
deciding what is morally correct or incorrect, in the given situation.
6. Ethics determines to what extent our options are right or wrong. As opposed to values,
which defines our priorities for life?

Roots of unethical Behaviour

Ethical Decision – Making

1. Gather the facts

 Don’t jump to conclusions without the facts

 Questions to ask: Who, what, where, when, how, and why.
 However, facts may be difficult to find because of the uncertainty often found around
ethical issues
 Some facts are not available
 Assemble as many facts as possible before proceeding
 Clarify what assumptions you are making

2. Define the ethical issues

 Don’t jump to solutions without first identifying the ethical issue(s)in the situation.
 Define the ethical basis for the issue you want to focus on.
 There may be multiple ethical issues –focus on one major one at a time.

3. Identify the affected parties (stakeholders)

Identify all of the stakeholders
 Who are the primary or direct stakeholders?
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 Who are the secondary or indirect stakeholders?
Why are they stakeholders for the issue?
 Perspective-taking--Try to see things through the eyes of those individuals affected

4. Identify the consequences

 Think about potential positive and negative consequences for affected parties by the
decision (Focus on primary stakeholders to simplify analysis until you become
comfortable with the process).
 What are the magnitude of the consequences and the probability that the
consequences will happen.
 Short term vs. Long term consequences –will decision be valid over time.
 Broader systemic consequences –tied to symbolic and secrecy
 Symbolic consequences –Each decision sends a message.
 Secrecy consequences –What are the consequences if the decision or action becomes
public?
 Did you consider relevant cognitive barriers/biases?
 Consider what your decision would be based only on consequences–then move on and
see if it is similar given other considerations

5. Identify the obligations (principles, rights, justice)

 Obligations should be thought of in terms of principles and rights involved

A) What obligations are created because of particular ethical principles you might use
in the situation? Examples: Do no harm; Do unto others as you would have them do unto
you; Do what you would have anyone in your shoes do in the given context.

B) What obligations are created because of the specific rights of the stakeholders?

 What rights are more basic vs. secondary in nature? Which help protect an
individual’s basic autonomy?
 What types of rights are involved –negative or positive?

C) What concepts of justice (fairness) is relevant –distributive or procedural justice?

 Did you consider any relevant cognitive barriers/biases?

 Formulate the appropriate decision or action based solely on the above analysis of
these obligations.

6. Consider your character and integrity

 Consider what your relevant community members would consider to be the kind of
decision that an individual of integrity would make in this situation.
 What specific virtues are relevant in the situation?
 Disclose rule–what would you do if the New York Times reported your action and
everyone was to read it.
 Think about how your decision will be remembered when you are gone.
 Did you consider any relevant cognitive biases/barriers?
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 What decision would you come to based solely on character considerations?

7. Think creatively about potential actions

 Be sure you have not been unnecessarily forced into a corner

 You may have some choices or alternatives that have not been considered
 If you have come up with solutions “a” and “b,” try to brainstorm and come up with a
“c” solution that might satisfy the interests of the primary parties involved in the
situation.

8. Check your gut

 Even though the prior steps have argued for a highly rational process, it is always
good to “check your gut.”
 Intuition is gaining credibility as a source for good decision making –knowing
something is not “right.”
 Particularly relevant if you have a lot of experience in the area –expert decision-
making

9. Decide on the proper ethical action and be prepared to deal with

opposing arguments.

 Consider potential actions based on the consequences, obligations, and character

approaches.
 Do you come up with similar answers from the different perspectives?
 Do the obligation and character help you “check”the consequentialist preferred
action?
 How can you protect the rights of those involved (or your own character) while still
maximizing the overall good for all of the stakeholders?
 What arguments are most compelling to you to justify the action ethically? How will
you respond to those with opposing viewpoints?