Lesson 1:Business Ethics

Business Ethics

1
Define Ethics and Business Ethics
 Ethics refers to a system of moral principles, a sense of right
and wrong, goodness and badness of actions.
 Business ethics refers to the applications of ethics to business.
To be more specific, business ethics is the study of good and
evil, right and wrong, and just unjust actions of businesses.

2
Objectives of ethics
The objectives of ethics are:
 Study of the human behavior and making evaluative
assessment about that as moral or immoral.
 Establishing moral standards/norms of behavior.
 Making judgment upon human behavior based on these
standards and norms.
 Prescribing moral behavior i.e. making recommendations
about how to or how not to behave.
 Expressing an opinion about human conduct in general. 3
Needs and importance of ethic to the business
The following points explain the need for business ethics:
1. Globalization: Globalization leads to business involvement
with different cultures and socio-economic systems. With this
development, ethical considerations- such as the different
assumptions about the responsibilities of business, acceptable
business practices, and value needed to build a successful
organization- become more important.

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2. Technology: The added capabilities of technology have
created a new level transparency and urgency to business
communication. Now the conduct of businesses around the
globe is more exposed than it was ever before.

3. Competition: Rising competition added pressure.

Simultaneously, leaders are looking for new ways to
differentiate their companies and move them to a new level of
excellence. Some believe that a proactive ethical states can have
a positive impact to the businesses.
5
4. Public perception and the law: Managers are no longer
comfortable assuming that employees joining their companies
will act as managers’ desire. And public expectations have
changed too. That which was acceptable before, now may not.
New laws enforcement, have increased the personal and
organizational responsibilities.

6
History of Business Ethics
 Business ethics has only existed as an academic field since the
1970s.
 During the 1960s, corporations found themselves increasingly
under attack over unethical conduct.
 As a response to this, corporations developed social responsibility
programs involved charitable donations and funding local
community projects. .

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 Business schools in large universities began to add “social
responsibility” courses into their syllabus.
 Social responsibility has been described as being a main pillar
with four types of responsibility involved; Economics, Legal,
Ethics and philanthropy

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 When philosophers became involved, they brought ethical
theory related to the ethical issues, and business ethics
became a more institutionalized, organized and integral part
of education in business.
 This new aspect to business ethics differentiated, it from
social issues activities in three ways:

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1. Business ethics provided an ethical framework for
evaluating business and the corporate world.
2. It allowed critical analysis of business and development of
new and different methods.
3. Business ethics are mixed of personal and social
responsibilities to gather and give it a theoretical foundation.

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Argument for and against of business ethics

Argument against:
 businesses are economic entities and should concentrate on
producing goods and services efficiently and maximizing profits
for the shareholders.
 Some economists like, Friedman believed that if business ethics
is a part of a corporate culture, the customer would have to bear
the cost of ethical practices of the organization as some ethical
practices increases the price of products.
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 Earlier, people considered that ethical code of conduct would
mean a sacrifice of efficiency and productivity and the
competitiveness of the marketplace would decrease.

Argument for:
 Business organizations today have accepted ethics as a part of
their business conduct.
 They have realized that business exists and operates within the
society and is a part of a subsystem society, so its activities
should contribute to the welfare of the society. 12
 As a company grows, the public takes more interest on it, and
it has a great impact on the community.
 There is a greater social responsibility on the mangers to
maintain a proper image of their company in the public mind.
 The company cannot practice unethical behavior or
disregarding social welfare.
 Ethical practices sometimes reduce the cost of production in
the long run. Ethical and moral behavior gives a unique
advantage in the market place. 13
The Nature of Business Ethics

 Ethics refers to a system of moral principles, a sense of right

and wrong and goodness and badness of actions.
 Business ethics refers to the applications of ethics to business.
 Since business exists and operate within the society and is a
part of a subsystems of society, its functioning must contribute
to the welfare of the society.

14
 To survive, develop and excel, business must respect social
sanctions of the society wherein it exists and operates.
 Without social sanctions, a business cannot earn loyal
customers, cannot operate in a market place and will soon
will die.
 Businesses which are operating unethically or disregard to
its social concerns, no longer will exist.

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 Business needs to remain ethical for its own good. For the
long run existence and sustained profitability of the firms,
 Business needs to function as responsible corporate citizens of
the country.

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Nature of Values:
 Values are beliefs that guide actions and judgments across a
variety of situations.
 Values represent basic belief of what is good and what is bad
or what is desirable or undesirable in one’s conduct.
 Value are at the core of personality and are a powerful source
affecting behavior. They have an important influences on the
attitudes, perceptions, needs and motives of people at work.
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 Values form the structure of culture. They provide the context
within which a society’s norms are established and justified.
 They may include a society’s attitudes towards such concepts
as individual freedom, democracy, truth, justice, honesty,
loyalty, social obligations, collective responsibility and so on.

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The Relationship Between Ethics and Businesses

The relationships between ethics and business can be viewed from

two angles:
1. Ethics conflict with profits, and
2. Business always choose profits over ethics
 Everyone in business are interested in one thing: money, and

they will do anything that has to be done to make money.

That’s what business is really all about.

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 The problems for business and business ethics is the equation
of business with money, specifically profits, and the pressure
to increase those profits.
 The organization is structured, people are hired, jobs are
described, raw materials are acquired, and technology
engaged to increase the profit.

20
 What is needed, is a framework or blueprint for business and
for people in business to be able to appreciate the ethics of
business, and to regulate themselves rather than waiting for
political, legal, and religious demands to be imposed on them
from the outside.
 In other words, business ethics should be tied to profit
maximization, but to understand of profit maximization needs
to be done on ethical way.

21
 It is ethical for business to make profits. The first and the most
important ethical obligations is to make profits for the
company shareholders, for its employees, for creditors and for
the company to be able to perform its social responsibilities
and welfare commitments.
 A sick and loss making company is unwanted and fails to
perform its responsibilities towards its shareholders, creditors
and the society at large. Such businesses are highly unethical.

22
 Question and Answers
Define Ethics and Business Ethics?
 Ethics refers to a system of moral principles, a sense of right and
wrong, goodness and badness.
 Business ethics refers to the applications of ethics to business. To
be more specific, business ethics is the study of good and evil, right
and wrong, and just unjust actions of businesses.

23
What are the objectives of ethics?
The objectives of ethics are:
 Study of the human behavior and making evaluative assessment
 Establishing moral standards/norms of behavior.
 Making judgment upon human behavior based on these standards
and norms.
 Prescribing moral behavior i.e. making recommendations about
how to or how not to behave.
What's the needs and importance of ethic to the business ?

The following points explain the need for business ethics:

1. Globalization: Globalization leads business involvement
with different cultures and socio-economic systems. Ethical
considerations- such as the different assumptions about the
responsibilities of business, and acceptable business
practices required business ethics.
2. Technology: The capabilities of technology have created a new
level transparency and urgency to business communication. Now
the conduct of businesses around the globe is more exposed than
it was eve was before.
3. Competition: Rising competition brings pressure to managers
to look for new ways to differentiate their companies. Which a
proactive ethical states can have a positive impact on business.
3. Public perception and the law: Managers are no longer
comfortable assuming that employees joining their companies needs
to behave according to manager behavior. public expectations have
changed too. That which was acceptable before, now may not. New
laws enforced which increased the personal and organizational
responsibilities.

27
What are the argument for and against of business ethics?
Argument against:
 Businesses are economic entities and should concentrate on
producing goods and services efficiently and maximizing profits
for the shareholders.
 some ethical practices increases the price of products, customers
need bear that. Ethical practices decreases the business
productivities and competitiveness in the market.

28
Argument for:
 Business organizations today have accepted ethics as a part of
their business conduct. They have realized that business exists
and operates within the society and is a part of a subsystem
society, so its activities should contribute to the welfare of the
society.
 There is a greater social responsibility on the mangers to
maintain a proper image of their company in the public mind.

29
 Ethical practices sometimes reduce the cost of production in
the long run. Ethical and moral behavior gives a unique
advantage in the market place.

30
What is Nature of Business Ethics?

 Business ethics refers to the applications of ethics to

business.
 Business exists and operate within the society and is a part of
a subsystems of society, its activites must contribute to the
welfare of the society.

 To survive, develop and excel, business must earn social

sanctions of the society wherein it exists and operates.

31
 Without social sanctions, a business cannot find loyal
customers, cannot operate in a market place and soon will
die.
 Business needs to remain ethical for its own good. For the
long run existence and sustained profitability of the firm.

32
What is value?

 Values are beliefs that guide actions and judgments across a

variety of situations
 Value are at the core of personality and are a powerful source
affecting behavior. They have an important influences on the
attitudes, perceptions, needs and motives of people at work.

 Values form the structure of culture. They provide the context

within which a society’s norms are established and justified.

33
What Are The Relationship Between Ethics and Businesses?

The relationships between ethics and business can be viewed from

two angles:
1. Ethics conflict with profits, and
2. Business always choose profits over ethics

34
 The problems for business and business ethics is the equation
of business with money, specifically profits, and the pressure
to increase those profits.
 The organization is structured, people are hired, jobs are
described, raw materials are acquired, and technology
engaged to increase the profit.

35
 What is needed, is a framework or blueprint for business and
for people in business to be able to appreciate the ethics of
business, and to regulate themselves rather than waiting for
political, legal, and religious demands to be imposed on them
from the outside.
 In other words, business ethics should be tied to profit
maximization, but to understand of profit maximization needs
to be done on ethical way.

36
 It is ethical for business to make profits. The first and the most
important ethical obligations is to make profits for the
company shareholders, for tis employees, for creditors and for
the company to be able to perform its social responsibilities
and welfare commitments.
 A sick and loss making company is unwanted and fails to
perform its responsibilities towards its shareholders, creditors
and the society at large. Such businesses are highly unethical.

37