UNIT-I INTRODUCTION TO

BUSINESS ETHICS
BY : MR. MRINAL MISHRA
NFSU, IIT
INTRODUCTION TO BUSINESS ETHICS
• Dated back to Code of Hammurabi [Hammurabi (r. 1792-1750 BCE) was the sixth
king of the Amorite First Dynasty of Babylon best known for his famous law
code which served as the model for others, including the Mosaic Law of the Bible.
The Code of Hammurabi is one of the oldest deciphered writings of length in the
world (written c. 1754 BCE), and features a code of law from ancient Babylon in
Mesopotamia. The Code consisted of 282 laws, with punishments that varied
based on social status (slaves, free men, and property owners ] some 4,000 years
ago, business ethics is a social science, whose main aim is to define and examine
the responsibilities of businesses and their agents as a part of the general moral
environment of a given society.
• The products of this field of research are sets of rules and codes of conducts,
which serve as a means of protection from the possible infringements of moral
codes as a result from the general activities and responsibilities of a firm to its
stakeholders (e.g. generating profits for shareholders and taxes to the
government).
ETHICS AND IT’S NATURE
• Ethics is a branch of social science. It deals with moral principles and
social values. It helps us to classifying, what is good and what is bad?
It tells us to do good things and avoid doing bad things.
• So, ethics separate, good and bad, right and wrong, fair and unfair,
moral and immoral and proper and improper human action. In short,
ethics means a code of conduct. It is like the 10 commandments of
holy Bible. It tells a person how to behave with another person.
ETHICS AND IT’S NATURE
• BUSINESS ETHICS - In short, business ethics means to conduct business
with a human touch in order to give welfare to the society.
• Good V/s Bad Practices (Match the column)
The businessmen must give a regular supply of good quality goods and
services at reasonable prices to their consumers. They must avoid indulging
in unfair trade practices like adulteration, promoting misleading
advertisements, cheating in weights and measures, black marketing, etc.
They must give fair wages and provide good working conditions to their
workers. They must not exploit the workers. They must encourage
competition in the market. They must protect the interest of small
businessmen. They must avoid unfair competition. They must avoid
monopolies. They must pay all their taxes regularly to the government.
ETHICS AND IT’S NATURE
• According to Andrew Crane,
• “Business ethics is the study of business situations, activities, and
decisions where issues of right and wrong are addressed.”
• According to Raymond C. Baumhart,
• “The ethics of business is the ethics of responsibility. The business
man must promise that he will not harm knowinfly.”
Nature of Ethics
• Code of conduct : Business ethics is a code of conduct. It tells what to do
and what not to do for the welfare of the society. All businessmen must
follow this code of conduct.
• Based on moral and social values : Business ethics is based on moral and
social values. It contains moral and social principles (rules) for doing
business. This includes self-control, consumer protection and welfare,
service to society, fair treatment to social groups, not to exploit others, etc.
• Gives protection to social groups : Business ethics give protection to
different social groups such as consumers, employees, small businessmen,
government, shareholders, creditors, etc.
• Provides basic framework : Business ethics provide a basic framework for
doing business. It gives the social cultural, economic, legal and other limits
of business. Business must be conducted within these limits.
Nature of Ethics
• Voluntary : Business ethics must be voluntary. The businessmen must accept
business ethics on their own. Business ethics must be like self-discipline. It must
not be enforced by law.
• Requires education and guidance : Businessmen must be given proper education
and guidance before introducing business ethics. The businessmen must be
motivated to use business ethics. They must be informed about the advantages
of using business ethics. Trade Associations and Chambers of Commerce must
also play an active role in this matter.
• Relative Term : Business ethics is a relative term. That is, it changes from one
business to another. It also changes from one country to another. What is
considered as good in one country may be taboo in another country.
• New concept : Business ethics is a newer concept. It is strictly followed only in
developed countries. It is not followed properly in poor and developing countries.
CONCEPTS AND THEORIES OF BUSINESS
ETHICS
• In our daily lives, we come across various ethical dilemmas. These ethical
dilemmas that we confront in our personal lives tend to become more
complex in managerial decision-making in the business world. In our
personal lives, we enjoy more autonomy since our decision-making affects
a limited number of people. In the world of business, managerial decision-
making involves many stakeholders. The manager must identify not only
stakeholders but also prioritize their importance.
• For instance, exchanging gifts in a managerial capacity in the USA is strictly
prohibited and comes under the law’s ambit. The Foreign Corrupt Practices
Act (FCPA) deals with corrupt activities like exchanging gifts in international
business. However, in a country like China, exchanging gifts is an accepted
way of doing business and developing networks and relationships. (Called
guanxi in Mandarin). In fact, in China, developing your networks and
relationships in business is impossible without engaging in gift exchanges
TRADITIONAL ETHICAL THEORIES
• There are two schools of ethical theories: consequentialism (teleology)
and non-consequentialism (deontology).Teleological theories derive their
name from the fact that these theories are based on the consequences of
the moral judgment we make and the actions we perform in resolving
ethical dilemmas. The word ‘teleology’ is derived from ‘teleos,’ meaning
consequences or purpose (of our judgement/action), and ‘logus,’ meaning
study.
• On the other hand, deontological theories advocate for moral
judgement/actions based on a sense of duty and responsibility.
‘Deontology’ comprises two words: ‘deont,’ meaning duty/responsibility,
and ‘logus’, meaning study. To illustrate the difference between the two
theories, one can cite the following example.
• Let’s say that we are taking an examination in an examination hall. Invigilators
oversee the whole process by keeping strict vigil. Imagine that the invigilator
steps out of the examination hall for a minute or two, providing a window of
opportunity to cheat. It is fair to say that there is a universal consensus that
cheating is an unfair practice. However, assuming one is tempted to cheat,
what can be the moral reasoning to arrive at a moral judgment? Consider a
student’s reasoning that they should not be cheating because they can be
dismissed from the program, debarred from the placement process, or even
rusticated. One can reason that this kind of ethical or moral reasoning is
teleological. The student doesn’t cheat due to the likely consequences rather
than the conviction that cheating is unethical. Suppose the same student
reasons that irrespective of the results, they will not cheat because they must
be ethical in not cheating and securing better grades. One can say that their
moral reasoning is non-consequential or deontological.
• As depicted in the above diagram, the theories based on
outcomes/purposes/ consequences are consequentialist ethics. As
explained earlier, moral judgement is based on intended outcomes in
consequentialist approaches. In contrast, in the case of non-
consequentialist theories, moral judgement is based on rights and
duties and not on intended outcomes. In other words, the means take
priority over the ends/ consequences.
TELEOLOGICAL ETHICAL SYSTEMS/
CONSEQUENTIALIST ETHICAL THEORIES
• According to teleological ethics, ethical decision-making is determined by
measuring the probable consequences or outcomes.
• The most cited teleological ethical system is Utilitarianism
• Jeremy Bentham, an English legal scholar, and philosopher originally
advocated the utilitarian school of thought. According to Bentham, human
actions are determined by the consequences of an action and are based on
the pleasure pain principle. The same principle in economics and
management has been interpreted as cost-benefit analysis.
• Some other ethical theories associated with teleological ethical systems are
egoism and distributive justice theory put forward by John Rawls, one of
the most influential political thinkers of the twentieth century.
TELEOLOGICAL ETHICAL SYSTEMS/
CONSEQUENTIALIST ETHICAL THEORIES
• Egoism
• The idea of egoism dates to Greek times and is attributed to some
great Greek philosophers like Plato. In the more recent times
following the renaissance and reformation in Europe, people like
Adam Smith were deeply influenced by egoism.
• According to egoism, the decision maker’s short-term and long-term
interests determine the moral rightness of an action. Adam Smith
reasoned that there should be no moral qualms with the pursuit of
self-interest by individuals. Smith argued that the goal of individual
self-interest produces morally desirable outcomes for society through
the ‘invisible hand of the marketplace.
• For instance. Let us take the case of a good or service provider
producer. It is in the self-interest of the manufacturer or service
producer to deliver the best possible quality of goods and services
because satisfied customers are going to repeat the orders due to the
satisfaction, they derive from quality products and services. In such a
case, better quality products and services not only work in favor of
the customers but are directly associated with the self-interest of the
producer or service provider.
• In other words, proponents of ethical egoism contend that those
actions which lead to the ‘greatest good of the greatest number’ are
morally desirable.
• Though based on enlightened self-interest, ethical egoism has been subject
to criticism. The most compelling criticism of egoism is that it is impossible to
determine objective parameters to draw distinctions between enlightened
self-interest and the desire to pursue selfish objectives.
• Second, some scholars argue that ethical egoism is not necessarily a
teleological theory but a hybrid theory. Why hybrid? It is argued that though
the ultimate purpose of ethical egoism is the ‘greatest good of the greatest
number,’ an individual pursues ethical egoism to fulfil the larger good;
therefore, it is considered a hybrid theory.
• Utilitarianism
The utilitarian school was founded by two famous British philosophers, Jeremy
Bentham, and John Stuart Mill. Bentham contended that the ‘pleasure-pain’
principle conditions human beings’ actions. In other words, human beings tend
to follow those actions that give them more pleasure and avoid those that
cause pain.
Whereas Bentham focussed on the ‘pleasure-pain’ principle in quantitative
terms, John Stuart Mill argued that it is not the quantity of pleasure that we
derive from specific desirable actions to maximize pleasure and minimize pain
but the quality of pleasure that matters.
Mill asserted that ‘an Aristotle dissatisfied is better than a pig satisfied’. ‘In
other words, Bentham and Mill associated ethical decision-making with the
quantity and quality of pleasure stemming from a specific action.
• Utilitarianism
• Utilitarianism has been a persuasive philosophy in managerial decision-
making since it puts the ‘utility’ of a decision in terms of cost-benefit analysis
as the moral center. Despite concerns expressed regarding the quantification
of pleasure and pain in philosophical inquiries, the emergence of quantitative
tools in the form of statistical modelling and advanced methodological
approaches have equipped managers to engage in robust cost-benefit analysis
and enable them in managerial decision-making. Furthermore, since the
utilitarian theory advocates the maximization of pleasure at a societal level, it
translates to the objective of achieving the ‘greatest good of the greatest
number.’ Through cost-benefit analysis, managers can also engage in healthy
stakeholder management by measuring the cost-benefit analysis of their
decision making on the various stakeholders and resolving their ethical
dilemmas.
• Utilitarianism
• Despite its merits, Utilitarianism has been the subject of criticism. First,
advocates of Utilitarianism have found it defines difficult owing to the
element of subjectivity. Since every individual is encouraged to maximize
pleasure, justifying the pleasure maximizing tendencies of anti-social
elements is untenable. Second, irrespective of the emergence of advanced
methodological approaches and quantitative techniques, it is impossible to
quantify the quality and quantity of pleasure. Third, the philosophy of
‘greatest good of the greatest number’ can sometimes be interpreted as the
tyranny of the majority. Utilitarian thinking can be invoked to justify the
compromises on the interests of the minorities to advance the cause of the
majority.
• Distributive Justice
• John Rawls, a prominent 20th-century philosopher, advocated for distributive
justice as the basis for ethical decision-making, equating justice with fairness.
In his work Justice as Fairness, Rawls introduced the concept of the "veil of
ignorance," where individuals imagine themselves unaware of their
socioeconomic status and assume they belong to the worst-off group in
society. This perspective encourages decisions that prioritize the least
advantaged.
• Rawls also proposed the "difference principle," which supports unequal
treatment to address inequalities, justifying actions like affirmative action. In
the corporate world, his principles inspire policies that support marginalized
groups, such as childcare facilities and paid maternity leave, to promote
inclusivity and fairness.
DEONTOLOGICAL ETHICAL SYSTEMS
• The deontological (the study of the nature of duty and obligation)
ethical system is based on rules that guide decision-making.
Immanuel Kant is a key figure in this approach, arguing that the
morality of an action is determined by goodwill, not its
consequences. Besides Kantian ethics, deontological systems are
influenced by religion and Asian philosophies like Confucianism.
• For example, if two firefighters set out to rescue 10 stranded people,
and one of them dies on the way, while the other succeeds, both are to
be viewed as equally heroic because as Kant said, they both had the
same moral goodwill, even though the consequences were different for
both of them.
 KANTIAN IDEA OF CATEGORICAL IMPERATIVE
• Goodwill refers to acting from duty. You are morally obligated not to violate a person’s rights. It means following moral
duty for the sake of duty. When Kant proposed his moral theory, he did not claim to invent a new one, rather, he stated
that he is simply explaining and describing our common morality which we possess. Most of us are against slavery and
child abuse, for example.
• An imperative is something you need to do. A hypothetical imperative is something you need to do, but only in certain
circumstances; for example, I have to eat, but only in those circumstances where I’m hungry. A categorical imperative,
by contrast, is something you need to do all the time: there are ethical rules that don’t depend on the circumstances, and
it’s the job of the categorical imperative to tell us what they are.
• The Categorical Imperative- Kant explains in the Categorical Imperative a supreme moral principle, which states that
acting from duty means acting from reason, and this reason is universal and would apply to all people.
• Categorical imperative, is always present. They are not concerned with an individual’s desires and goals. Instead, they
arise from a person’s rational nature. They tell us that actions like lying and stealing are wrong.
Applying Kantian Ethics in Business Decision-
Making
• Universalizability in Business Practices: Imagine a corporation considering cutting corners on
environmental regulations to save costs. Applying the first formulation of the Categorical
Imperative would ask if such an action could be acceptable as a universal law. If every business
were to adopt this practice, the result would be detrimental to the environment, ultimately
harming the community and the business’s own long-term interests. Therefore, by Kant’s
standards, compromising on environmental standards for profit is unethical.
• Respecting Stakeholder Autonomy: Kant’s emphasis on treating individuals as ends in
themselves, not merely as means to an end, also resonates in the corporate setting. For instance,
when managing layoffs, a Kantian approach would require that the process respects the affected
employees’ dignity and autonomy, providing them with support and truthful explanations rather
than treating them as mere numbers to be cut.
• Ethical Leadership and Corporate Responsibility: Leaders who embrace Kantian ethics are likely
to foster trust and loyalty among employees, customers, and other stakeholders. Such leaders
prioritize ethical considerations over short-term gains, promoting sustainable business practices
that benefit society as a whole. This approach not only prevents ethical breaches but also
enhances the corporation’s reputation, making it a more attractive choice for investors and
partners who value corporate responsibility.
CONTEMPORARY APPROACHES
• The contemporary approaches to business ethics are new. Though
these theories are not commonly referred to in business ethics, these
theories offer exciting perspectives in the context of ethical decision-
making from a managerial perspective. Some leading contemporary
approaches are a) Feminist Ethics, b) Discourse Ethics, and c)
Postmodern Ethics. The following sections briefly describe these
current approaches.
Feminist Ethics

• Feminist ethics challenges traditional ethical theories, which are often based on male
perspectives. It argues that women tend to have a more caring orientation, emphasizing an
"ethics of care" rooted in empathy, relationships, and avoiding harm. This approach
focuses on recognizing the unique moral voice of women and promoting emotion-based
virtues (behavior which shows high moral standards). In business ethics, feminist theory
advocates for gender equality, arguing that men and women should be treated equally in
the workplace, free from gender biases and patriarchal stereotypes. It emphasizes the
importance of harmonious relationships within organizations.
• The global gender gap (report by World Economic Forum) score in 2024 is 68.5%,
meaning 31.5% of the gap remains unaddressed. Progress has been extremely slow, with
only a 0.1% point improvement from 2023.
• At the current rate, it will take 134 years to reach full gender parity globally far beyond
the 2030 SDG target.
• The gender gaps remain largest in Political Empowerment (77.5% unaddressed) and
Economic Participation & Opportunity (39.5% unaddressed).
• India has slipped two places in the global rankings to 129th in 2024 from 127th in
2023 out of 146 countries.
Discourse Ethics

• Discourse ethics emphasizes that ethical norms should be developed through

thorough, rational reflection on their impact on all stakeholders, making it a
dynamic approach. Unlike fixed ethical theories, it encourages case-by-case
norm generation based on rational discussion. Stakeholders, including
powerful groups, should collaborate without exerting undue influence to
create fair norms and resolve disputes. In business decision-making, discourse
ethics involves engaging external stakeholders such as consumer groups, civil
society, and regulators, highlighting not only legal but also social
responsibilities. Concepts like environmental ethics, corporate social
responsibility, and shared value creation are increasingly important in today's
corporate decisions.
Postmodern Perspectives

• Postmodern ethics opposes traditional, overarching theories like

liberalism and Marxism, arguing that reality is too complex to be
understood through singular "grand narratives." It views morality as a
product of emotional impulses and encourages questioning
established norms, promoting decisions based on individual
convictions and instincts. While critics argue that postmodern ethics
lacks clear guidance for ethical decision-making, defenders highlight
its relevance in business, emphasizing the integration of personal
morality into professional decisions. It rejects separating personal
and professional ethics, urging managers to contextualize decisions
based on local circumstances. For example, gift-giving, which is
unethical in the U.S., may be a vital and accepted practice in China for
building business relationships.
LIMITATIONS OF EXISTING THEORIES
• The traditional ethical theories, such as Kantian deontology,
Utilitarianism, and Shareholder theory, are criticized for failing to
address complex, real-world business situations, like workplace
gender biases, gift exchanges, and CEO compensation. These
theories offer limited guidance in dealing with such ethical issues.
Two business ethics scholars propose an "integrated social contract
theory" to better handle such dilemmas, arguing that human beings
operate under "bounded moral rationality." This concept suggests
that humans have finite moral capacities, ethical theories are limited
in capturing moral truths, and economic systems are dynamic.
MORALS AND VALUES
• Ethical behavior can't necessarily be defined by one set of actions or
moral values. As defined by the Encyclopedia Britannica, ethics, is the
discipline concerned with what is morally good and bad and morally
right and wrong. Ethics is not a matter of factual knowledge in the
way that the sciences and other branches of inquiry are. Rather, it has
to do with determining the nature of normative theories and applying
these sets of principles to practical moral problems.
12 ETHICAL PRINCIPLES FOR BUSINESS
EXECUTIVES
• 1. HONESTY
• All personnel must be committed to telling the truth in all forms of communication and in all actions. This
includes never purposely telling partial truths, selectively omitting information, making misrepresentations
or overstatements. Honesty also means reliably sharing both good and bad news with equal candor.
• 2. FAIRNESS
• All dealings and relationships must be founded on a conscious commitment to fairness, treating others as
you would like to be treated. Fairness requires treating all individuals equally and courteously, never
exercising power arbitrarily and never exploiting weaknesses or mistakes for personal or corporate benefit.
• 3. LEADERSHIP
• Demonstrated by a conscious effort to set a positive example of ethical behavior, leadership is a
commitment to excellence through ethical decision-making. Businesses and business executives maintain
their leads by constantly improving operational efficiency, worker satisfaction and customer approval.
• 4. INTEGRITY
• Organizations and personnel demonstrate integrity through a consistency between actions and words that
inspires trust and credibility. Integrity also means keeping promises, honoring commitments, meeting
deadlines and refusing to participate in unscrupulous activities or business dealings.
• 5. COMPASSION
• Fostering a business environment of empathy and compassion requires a commitment to
being kind and caring toward all personnel, business partners and customers. Business
goals must be benevolent, ensured by spending enough time to understand the needs
and sensitivities of others, including the local community.
• 6. RESPECT
• Respect is demonstrated by a full commitment to the human rights, dignity, autonomy,
interests and privacy of all personnel. It means recognizing that everyone deserves equal
respect and support for sharing ideas and opinions, without fear of any penalty or form of
discrimination.
• 7. RESPONSIBILITY
• Employees exhibit responsibility by taking full ownership of their jobs, striving to be
conscious of the emotional, financial and business consequences of their actions. Taking
their responsibilities seriously also demonstrates employee maturity and ability to do a
job without needing strict supervision.
• 8. LOYALTY
• Loyalty is proven by never disclosing information learned in confidence and by remaining
faithful to coworkers, clients, business partners and suppliers. Loyal employees avoid
conflicts of interest, help build and protect the good reputation of their company and
help boost the morale of their coworkers.
• 9. LAW-ABIDING
• Organizations must fully comply with all applicable laws and codes from local, state and
federal agencies. Law-abiding businesses and personnel also adhere to industry and trade
regulations, marketplace standards and any additional mandatory organizational policies,
practices and procedures.
• 10. ACCOUNTABILITY
• Accountability requires a total commitment to the ethical quality of all decisions, actions
and relationships. High expectations for ethical behavior drive business practices when an
organization and its personnel are held accountable to fellow employees, consumers, the
local community and the wider public in general.
• 11. TRANSPARENCY
• Committing to transparency requires making business information and policies available to
appropriate groups, such as financial investors, personnel and consumers. It includes, for
example, sharing criteria for price hikes, wages, hiring, granting promotions, addressing
workplace infringements and firing employees.
• 12. ENVIRONMENTAL CONSCIOUSNESS
• Organizations and personnel demonstrate a commitment to the environment by helping
mitigate the effects of global climate change. Beneficial actions include reducing the
negative environmental impact of doing business by improving energy efficiency to help
lower carbon emissions, reducing water usage and reducing waste.
TRIPLE BOTTOM LINE
• Profit: The financial return your company generates for shareholders
• People: How your company affects customers, employees, and
stakeholders
• Planet: Your company’s impact on the planet and environment
 IMPORTANCE AND NEED OF BUSINESS ETHICS
• Stop business malpractices: Some unscrupulous businessmen do business malpractices by
indulging in unfair trade practices like black-marketing, artificial high pricing, adulteration,
cheating in weights and measures, selling of counterfeit (duplicate) and harmful products, illegal
hoarding, etc. These business malpractices are harmful to consumers and the safety of society.
Business ethics help to stop these malpractices and safeguard society. It creates a healthy
business environment for everyone.
• Improve customers' confidence: Business ethics are needed to improve the customers'
confidence about the quality, utility, reliability, quantity, price, etc. of the products. The
customers have more trust and confidence in the businessmen who follow ethical business
rules or principles. They feel safe that such businessmen will not cheat them. Ethics binds
businessmen to maintain trust by offering quality products and services to customers.
• Survival of business: Business ethics are mandatory or compulsory for the survival of any
business. The businessmen who do not follow it will only have short-term success, but they will
fail in the long run. This is because they can cheat a consumer only once. After realizing being
cheated, the consumer will not buy goods or services from that businessman. He will also tell
others not to buy from that businessman. So, this will defame his goodwill or image and
provoke negative publicity in the market. This will result in the failure and even closure of the
business. Therefore, if the businessmen do not follow ethical rules, he will fail in the market. So,
it is always better to follow appropriate code of conduct to survive in the competitive market.
Hence, ethics is essential for the survival of business.
• Safeguarding consumers' rights: The consumer has many rights such as the right to
health and safety, right to be informed, right to choose, right to be heard, right to
redress, right to be satisfied, etc. But many businessmen do not respect and protect
these rights of their consumers. Business ethics are must to safeguard these basic
rights of the consumers. A business who safeguards its consumers' rights, in fact,
safeguards its own existence.
• Protecting employees and shareholders: Business ethics are required to protect
the interest of employees, shareholders, competitors, dealers, suppliers, customers,
government, etc. It protects them from exploiting each other through unfair trade
practices like cheatings or frauds. Ethics compels each entity participating in the
business activity to properly execute its role by adhering the established code of
conduct. Since everyone is disciplined and function appropriately, business grows
well in the long run.
• Develops good relations: Business ethics are important to develop good and
friendly relations between business and society. This will result in a regular supply
of good quality goods and services at low prices to the society. It will also result in
good profits for the businesses thereby resulting in the growth of the economy. If
the economy keeps growing, it ultimately improves the standard of living of the
society.
• Creates good image: Business ethics create a good image for the business and businessmen. If the
businessmen follow all ethical rules, then they will be fully accepted and not criticized by society.
The society will always support those businessmen who follow the necessary code of conduct and
avoids engaging in unscrupulous activities. If the business succeeds in creating and maintaining its
goodwill in the society, it flourishes well even in the most competitive markets.
• Smooth functioning: If the business follows all the business ethics, then the employees,
shareholders, consumers, dealers, and suppliers will all be happy. So, they will give full cooperation
to the business. This will result in the smooth functioning of business activities. So, the business
will grow, expand and diversify easily and quickly. It will have more sales and eventually more
profits. If even one entity participating in the business activities is unhappy and not fully satisfied
then also the business will not function smoothly. The satisfaction of all involved parties is
necessary for the smooth functioning of a business. Business ethics maintain this safe level of
satisfaction and protects the business from being dysfunctional.
• Consumer movement: Business ethics are gaining importance because of the growth of consumer
movements all over the world. Today, consumers are well aware of their rights. Now, they are
more united and organized, and hence cannot be easily cheated. They take actions against those
businessmen who indulge in bad business practices. They boycott poor quality, unreliable, harmful,
high-priced, and counterfeit (duplicate) goods. They even file lawsuits against bad businesses and
demand huge compensation and stringent legal action. If a business is found guilty of indulging in
illegal activities, it invites huge penalties, revoking of a license, lowers consumers' trust,
downgrades market reputation, and even hurts profits. Therefore, the only way to survive in
business is, to be honest, fair, and loyal to the consumers.
• Importance of labour: Labour, i.e. employees, workers, or active staff play a very crucial role in the success
of a business. They are the main wheels on which business actually runs. A business must use business
ethics while dealing with its employees. The business must give them timely monetary compensation for
their hard work by releasing appropriate wages or salaries based on working hours. The business must also
provide good working conditions for its employees. The employer must welcome their suggestions,
reasonable demands, and complaints. Good relations between an employer and employees is essential for
the smooth functioning of a business. The employees must also be given proper welfare facilities, holiday
leaves, bonuses, etc. They must be treated with dignity and respect.
• Healthy competition: Today, competition is a part and parcel of our lives and business world is no exception
to this. Competition is essential because it inculcates creativity and innovation, competitive pricing,
affordable services, corporate responsibility, consumer satisfaction, etc in the realm of business. This
competition must be healthy and should not be aggressive, fierce or cut-throat. A business must treat its
competitors as fellows and not as rival enemies. A business must never use unethical means like provocative
adverts to malign the reputation of its competitors. If a competitor is successful his behavior, management,
marketing skills, business tactics, customer handling, etc must be carefully studied. Any suitable lackings or
shortcomings identified must be later assimilated in the business. A business must hire brilliant and
energetic minds to win this healthy competition. The business must use business ethics while dealing with
its competitors. It must give equal opportunities to small-scale businesses. Monopoly must be avoided
because it harms consumers.
• Consumer satisfaction: Today, the consumer is the king of the market. He can make a business or break a
business. His every wish (expectations) should be taken as a command and must be fulfilled as early as
possible. Any business simply cannot survive without its consumers. Therefore, the main aim or objective of
a business must be to achieve the highest level of consumer satisfaction. If the consumer is not satisfied,
then there will be no sales and eventually no profits too. Consumer satisfaction must be taken seriously.
Business must be always ready to adapt itself as per the changing demands of its consumers. The consumer
will be satisfied only if the business follows all the business ethics. Ethics helps to achieve consumer
satisfaction to a great extent and hence are highly needed.
DISTINCTION BETWEEN VALUES AND ETHICS
 EXAMPLE OF ETHICS IN BUSINESS
Johnson & Johnson’s Tylenol Poisonings (Tylenol reduces fever and relieve minor pain caused by conditions such as colds or flu)
• A classic case of ethical leadership in business is “the Chicago Tylenol poisonings.” On September 9, 1982, a Chicago-area 12-year-old girl
woke up with a cold. Her parents gave her a tablet of extra-strength Tylenol to ease her symptoms and, within hours, she died.
• Six more deaths followed—the connecting factor between them was having taken extra-strength Tylenol shortly before passing away. It
was later discovered that the tablets were laced with cyanide, a chemical that interferes with the body’s ability to use oxygen.
• Johnson & Johnson, Tylenol’s parent company, had an ethical dilemma and a public relations disaster to contend with.
• Baffled as to how the cyanide got in the tablets, Johnson & Johnson’s leaders acted quickly and pulled all Tylenol products off the
shelves—31 million bottles worth over $100 million—and stopped all production and advertising.
• The swiftness of their decision, although incredibly costly, put customers’ well-being at the forefront and saved lives.
• Johnson & Johnson partnered with the Chicago Police, the Federal Bureau of Investigation (FBI), and the Food and Drug Administration
(FDA) to track down the perpetrator who added cyanide to the medication. The company offered a $100,000 reward and provided
detailed updates on its investigation and product developments following the crisis.
• When it became clear that the killer had bought the product, laced it with cyanide, and returned it to store shelves undetected, Johnson
& Johnson developed the first-ever tamper-resistant packaging. The “safety seal” that now covers the opening of most food and drug
products was born.
• “Our highest responsibility has always been the health and safety of our consumers,” a Johnson & Johnson representative wrote in a
statement to the Chicago Tribune. “While this tragic incident remains unsolved, this event resulted in important industry improvements
to patient safety measures, including the creation of tamper-resistant packaging.”
• The Tylenol brand recovered from the incident, largely because of Johnson & Johnson’s leadership team’s swift action and transparent
care for customers.
 KEY TAKEAWAYS
Ethical Decision-Making
• Johnson & Johnson’s leadership adhered to their credo(Latin term meaning I believe), which
emphasized responsibility to consumers first. By recalling all Tylenol products—despite the financial
loss—they demonstrated a commitment to public safety and ethical responsibility.
Transparency and Communication
• The company worked closely with law enforcement and regulatory agencies, kept the public informed,
and maintained transparency throughout the crisis. This approach built trust and reassured customers
of their commitment to resolving the issue.
Proactive Innovation
• The development of tamper-resistant packaging not only addressed the immediate issue but also set a
new industry standard for consumer safety. This innovation reflected the company’s forward-thinking
approach and reinforced their dedication to protecting customers.
Restoration of Trust
• By acting decisively and ethically, Johnson & Johnson successfully rebuilt their brand's reputation.
Their actions during the crisis are now studied as a model for effective crisis management and ethical
leadership.
• This case underscores the importance of values-driven leadership in maintaining trust and integrity,
even in the face of unprecedented challenges.
 EXAMPLE OF VALUES IN BUSINESS
Salesforce
• Salesforce is a customer relationship management tool that combines data from multiple
departments to create a shared view of every single one of their clients’ customers.
Salesforce’s values are unique because they are heavily focused on the customer and
employee experience. They refer to their employee and customer base as their “Ohana,” or
family, and they are very passionate about delivering on their values, which include:
• Trust
• Customer Success
• Innovation
• Equality
• Salesforce walks the walk by instilling trust in their employees right off the bat.
They support the growth of their employees with things like ”Cultivating Your Career”
workbooks, and Salesforce also has a Chief Equality Officer and an Office of Equality to
foster equality internally and externally, with the chief purpose of driving innovation.
 Kohlberg's Theory of Moral Development
Level 1 Pre-conventional Morality
• Pre-conventional morality is the earliest period of moral development. It lasts
until around the age of 9. At this age, children's decisions are primarily shaped
by the expectations of adults and the consequences of breaking the rules. There
are two stages within this level:
• Stage 1 (Obedience and Punishment): The earliest stages of moral
development, obedience and punishment are especially common in young
children, but adults are also capable of expressing this type of reasoning.
According to Kohlberg, people at this stage see rules as fixed and
absolute. Obeying the rules is important because it is a way to avoid
punishment.
• Stage 2 (Individualism and Exchange): At the individualism and exchange stage
of moral development, children account for individual points of view and judge
actions based on how they serve individual needs. In the Heinz dilemma,
children argued that the best course of action was the choice that best served
Heinz’s needs. Reciprocity is possible at this point in moral development, but
only if it serves one's own interests.
Level 2 Conventional Morality
• The next period of moral development is marked by the acceptance of social rules
regarding what is good and moral. During this time, adolescents and adults
internalize the moral standards they have learned from their role models and
from society.
• This period also focuses on the acceptance of authority and conforming to the
norms of the group. There are two stages at this level of morality:
• Stage 3 (Developing Good Interpersonal Relationships): Often referred to as the
"good boy-good girl" orientation, this stage of the interpersonal relationship of
moral development is focused on living up to social expectations and roles. There
is an emphasis on conformity, being "nice," and consideration of how choices
influence relationships.
• Stage 4 (Maintaining Social Order): This stage is focused on ensuring that social
order is maintained. At this stage of moral development, people begin to consider
society as a whole when making judgments. The focus is on maintaining law and
order by following the rules, doing one’s duty, and respecting authority.
Level 3 Post-conventional Morality
• At this level of moral development, people develop an understanding of
abstract principles of morality. The two stages at this level are:
• Stage 5 (Social Contract and Individual Rights): The ideas of a social
contract and individual rights cause people in the next stage to begin to
account for the differing values, opinions, and beliefs of other people. Rules
of law are important for maintaining a society, but members of the society
should agree upon these standards.
• Stage 6 (Universal Principles): Kohlberg’s final level of moral reasoning is
based on universal ethical principles and abstract reasoning. At this stage,
people follow these internalized principles of justice, even if they conflict
with laws and rules.
ADDITIONAL READINGS
• https://online.hbs.edu/blog/post/examples-of-ethical-leadership

• https://ca.indeed.com/career-advice/career-development/personal-
ethics

• https://sproutsschools.com/kohlbergs-6-stages-of-moral-
development/

• https://www.appstate.edu/~steelekm/classes/psy2664/kohlberg.htm