(ii) Ross gave no order of priority among his rules and when these rules are in conflict there is no guide. Currently, the stockholder theory is somewhat out of favor with many members of the business ethics community. Businessmen get acknowledgement from the employees for a higher amount than the amount actually paid. Thus, instead of profits being contradictory to ethics, business ethics dictates that the first responsibility of business is to remain profitable and generate revenue for the shareholders and the society. – According to this principle, every businessmen should be able to fulfill their commitments and assurances as given to other persons. The three leading normative theories of business ethics are the stockholder theory, the stakeholder theory, and the social contract theory. These opposing theories are presented and briefly discussed before the theories are applied to practical business ethics and classified with the concept of Creating Shared Value. 8. Business ethics are based on the concepts, thoughts and standards as contributed as well as generated by Indian ethos. Human feelings are properly c… The purpose of this article is to define ethics, then critically examine its importance in business. This view is of the opinion that business is only a subset or sub-structure of the moral structure of the society. Business ethics and corporate social responsibility are both related to the ethical behavior a business prides itself in. Technological advancements have to come, have to be used; however, what to do with the people whose life and earnings are affected by the utilisation of advanced technology, is a question which is difficult to answer. Nothing could be more far from the truth. Moreover, he says that the business manager does not know, and does not need to know, where public interest lies. It is a person’s own attitude and beliefs concerning good behaviour. The term ‘deontological’ is derived from the Greek word ‘deon’ which means duty. Though it is done very, very infrequently now-a-days, some authors and philosophers, nonetheless, do tend to put forward the argument that businesses being economic entitles, should have nothing to do with morals (i.e., with what people do) or ethics (what people ought to do). Doing so would lay a strong foundation for the business for continued and sustained existence. Top management can communicate the ethical standards to the lower management which can be further transferred to the operational level. “Business ethics study the special obligations that a man and a citizen accept when he becomes a part of the world of commerce”. He can distinguish between good and evil, right and wrong, just and proper. Principle of Wishless Work – This principle emphasise that there is no need to perform all the task to be self-centered or self-interest. (iii) Economists assume that people seek to maximise their utility or welfare. The Company’s Act, Consumer Protection Act, M.R.T.P. Mrs. Priyanka A. Bansode Assistant Professor Electronics and Telecommunication, Engineering Walchand Institute of Technology, Solapur This is obvious when you read the news and see stories about investors being misled by executi… Parents, teachers, relatives, friends and others influence an individual’s values. iii. Thus, business needs, in its own interest, to remain ethical and socially responsible. A businessman should observe morality not only in business activities but also in non-business activities. Our mission is to provide an online platform to help students to discuss anything and everything about Economics. Corporate goals are paramount and exert considerable pressure on executives to change their ethical views. Friedman feared that if business ethics formed a part of corporate culture, ultimately the customer would be called upon to bear the cost of the ethical practices of the organisation, as Friedman erroneously assumed that such ethical practices would increase the prices of the organisation’s products. 2. Bok, S. (1983). Importance of Ethics in Finance, Human Resource Development, Marketing and Production, Business Ethics – 10 Major Determinants of Business Ethics, Advantages of Managing Ethics in Workplaces, Values and their Impact on Human Behavior, Rationale of Business Ethics: Survival of Business, Need of a Stable Society, Growing Clout of Business, Effective Decision-Making and a Few Others, Dimensions: Systematic Issue, Business Issues and Individual Issues. The history of Ethics goes back to 1970’s when the term Business Ethics was commonly used. For example, if a person has a prominent characteristic of being late to the office regularly then indiscipline is he/she personality factor. Ethical implications of the relationship of purpose to role and function in public relations, Journal of Business Ethics 8, 65-73. Principles 9. 9. They must give and perform some excellence examples as per the expectations of others. Need 10. Stability of any society requires that its members adhere to some minimal standards of ethics. (4) Universalism – Everyone’s consequences are alike. Bentham and Mill explained the doctrine of utilitarianism: Jeremy Bentham (1748-1832) explains this principle as follows: “By the principle of utility is meant that principle which approves or disapproves of every action whatsoever, according to the tendency which it appear to have to augment or diminish the happiness of the party whose interest is in question – or, what is the same thing in other words, to promote or to oppose that happiness.”. Businesses can use this theory to ensure the outcome of various situations helps the maximum amount of stakeholders. Compliance means conforming to relevant laws, regulations, policies, standards, procedures, or contractual obligations. And if the fools, or the pig, are of a different opinion, it is because they know only their side of the question.”. d. To set up means of enquiries such as hotlines, suggestion boxes and e-mail facilities. 4. To answer this question, we undertook a survey of twenty-five of the leading business ethics texts. 2. Managers should indulge in soul-searching questions such as: “would I be comfortable explaining to a national TV audience why I preferred this action?”. A decision maker can choose the right course of action by calculating and comparing the consequences of different alternatives. Commonly, ethics is also referred to as “moral, good, right, just and honest. Moreover, their employees, executives and managers have felt proud to belong to such organisations. The committee members should be conscious about the corporate culture and ethical concise of the organisation. In fact, defining the term business ethics comprehensively is very difficult. The three main business ethics theories are deontological theory, utilitarianism, and norm theory. This View states that society consists of a number of subsystems, and business and morality are just two of these subsystems. If people are not treated fairly — such as one employee receiving higher compensation than another — a justifiable reason must exist, such as higher technical skills or the exclusiveness of a job position. Rather, it is unethical, not to make profits. Individuals with high degree of patience are not affected by delays in getting rewards for their accomplished tasks. The power and influence of business in society is greater than ever before. In an effort to establish some ethical guidelines for business, three normative ethical theories have evolved in Western capitalist societies. Business ethics implies general ethical ideas to business behaviour. The Institute of Management Accountants (IMA) established four ethical standards that accountants should live by. Here, the trade union has to suffer a break if business ethics is not properly followed. Business ethics is “concerned primarily with the relationship of business goals and techniques to specific human needs. ETHICAL THEORY 2013/2014 Ana Cláudia Campos 1º Semestre 2. Elements 7. Four universal duties are to help others who are in need; not to harm or injure another; not to cause unnecessary suffering; and to support and comply with just institutions. A business may be conducted according to certain self-recognised business ethics. There are examples galore, from the pages of history, where not only have ethical companies made profits, but more importantly, it is only ethical companies which discharged its social responsibilities, that have survived competition and turbulent changes through the years and have contributed to Social Welfare and have continued to flourished undiminished. Businesses must create an ethical business climate in order to develop an ethical organization. in what way does the theory of justice in business ethics guide the practice of corporate governance Answer Justice is defined as the act of ensuring fairness, by providing equal rights to all stakeholders in the process (Crane and Mattel, 2010). For example, telling the truth or keeping a promise may cause harm to someone. First, it is not always possible to measure in quantities the pleasure and pain caused by an action. People who value material possessions in life may not have strong ethical standards regarding behaviours that lead to accumulation of personal wealth. Safeguarding Public from Business Malpractices: Business malpractices have the potential to inflict enormous harm on individuals, communities, and the environment. A sick and bankrupt organisation is a social liability and can hardly contribute in the area of social responsibility. (i) Teleological theories are consistent with the ordinary moral reasoning. Determinants 14. They include the stockholder theory, the stakeholder theory and the social-contract theory. Can someone tell me if business ethics and corporate social responsibility are the same or are they two distinctly different concepts? Share Your PPT File. Ethics should be brought into business by showing that ethical considerations are consistent with business pursuits, in particular with the pursuit of profit. While discharging its obligations to the society, the company not only fulfils its own duties, but also paves the way for a stronger and more ethical foundation. Some executives thought that the company should sell the car at $2,000 as promised but exclude the safety feature. Appointing a psychologist or consultant to help the employees deal with the strong emotions that force them to indulge in an unethical behavior, b. Ethical theories depend on what is right and wrong and the end result of the action. Business Ethics - and in particular Stakeholder Theory (Freeman et al., 2010) - offers a critical view on the purpose of business, traditionally seen as “to maximize shareholder value” (Friedman, 1970). According to Drucker, every individual and organisation in society should abide by certain moral codes and that there is no separate ethics of business. The code should reflect the managements desire to incorporate the values and policies of the organization. Principle of ‘reward’- The one who performs well is encouraged in form of rewards. Act in a way you would expect others to act toward you. A rights ethical approach is based on the belief that all individuals have rights in life and should be treated with respect and dignity. An individual performs efficiently and feels satisfied at workplace when he/she is in peaceful and contented frame of mind. Such practices help people to lead a more sensible life, increase work efficiency, and decrease stress levels. Business Ethics proves that businesses can be, and have been, ethical and still make profits. Act and the like are some of the legislative measures. BUSINESS ETHICS 2. It fused personal and social responsibility together and gave it a theoretical foundation. a. Choice between equally undesirable alternatives, 3. Increasing literacy, widespread use of information technology and declining sellers markets after globalisation reduce the scope for debating on the need for conducting business ethically. Ethical standards are ideals of human conduct. This does not mean that technology advancement must not be utilised or that modern methods should not be welcomed. As V.B. It should be –. the role and behaviour to another person’s for their esteemed interest. Once a particular value is internalized, it becomes a standard for guiding action. human decorum and human aspects within their policies, programmes and different working areas. Ross, the 20th century Britisher philosopher has given the following moral rules: (i) Duties of Fidelity — to keep promises, both explicit and implicit, and to tell the truth. Ethical communication system helps the employees in making enquiries, getting advice if needed and reporting all the wrong done in the organisation. I hope this makes sense. There are organizations that have created guidelines for certain fields of business based on the theories of business ethics. For example, tobacco and alcohol. These principles or virtues seek to replace the current values if they do not bring about the most good or best development of humanity. 3. Price discrimination is followed to different types of people, say, known and unknown, educated and uneducated, rich and poor, gents and ladies and the like. ii. Infact, peoples’ values develop as a product of the learning and experience they face in the cultural setting in which they live. The principle of utilitarianism consists of the following elements: (1) Consequentialism – The Tightness of any action depends solely on its consequences. Organizations that follow high Ethics comply with the law and ensure an ethical climate inside throughout the organization. Right from childhood, we are guided by our parents to be honest and true to ourselves and to be accountable for our actions. They are difficult to locate, to eliminate and are consequently much more dangerous and threatening to business. Sincerity – Sincerity refers to truthfulness and transparency in the nature and behavior of employees in an enterprise. All the business activities and transactions should be well informed with justified manners with their different stakeholders and society. Colleagues in an organisation, too, shape the value system of an individual. iv. Since business exists and operate within the society and is a part of a subsystem of society, its functioning must contribute to the welfare of the society. (ii) Another merit of deontological theories is that they consider the role of motives in evaluating actions. For, goodwill, loyalty genuine pride, and above all, mental peace, cannot be calculated accurately in terms of money. iii. But rule utilitarianism is morally more sound and does not require calculating the consequences of each action. Rationale of corporate ethics are as follows: Any individual business will collapse if all of its managers, employees, and customers come to think that it is morally permissible to steal from, lie to, or break their agreements with the business. Business ethics differ from industry to industry, and nation to nation. Such impressions help the enterprise to win the trust of customers and get more business. That is the concern of politicians, bureaucrats, concerned organisations and individuals and the state. In broader terms, goodness is human well-being. Ethical behaviour not only improves profitability but also fosters business relations and employees productivity. (vi) Duties of Self-improvement — to improve our own condition with respect to virtue and intelligence. Our moral belief about life changes over time. So, he should obey the laws even though he may personally believe them to be unjust or immoral. Business ethics means the behaviour of a businessman while conducting a business, by observing morality in his business activities. Day, in ‘The Social Relevance of Business’ had stated –, “As a statement of purpose, maximising of profit is not only unsatisfying, it is not even accurate. These two are extreme views, known as the Unitarian View and the Separatist View. Books of accounts are prepared by recording focus expenses in order to show less profit to elude tax liability. Principle of ‘sacrifice’ – A person, who is able to sacrifice a part of his asset or effort, commands a superior place in the organisation. There is no discrimination against any particular group of people, say the rich, the poor, the high, the low, the caste, the religion, etc. ii. It is that organ of the society that creates wealth for the country. The issue, now, is to treat ethics as part of human behaviour and part of making individual and collective business decisions. In classical utilitarianism, pleasure is regarded good, and pain is considered evil. Business ethics are most often related to the economic functions of a business whereas corporate social responsibilities are the environmental and social responsibilities a business imposes on itself. For example, the moral principles found in Japan will often be different than those in the United States. Tolerance refers to increase in the level of adaptability of an employee to various organizational changes. If a person is not given a ‘pat on the back’ for good behaviour while others earn rewards for bad behaviour, the person will probably alter both, ethical standards and behavioural responses, in future. Thereafter, the same practice is followed to maintain the earned goodwill. Now the question is which is good and what is evil. Any written ethical code will not work unless supported and followed by a proper training programme. Patience – Patience refers to the degree at which the individuals can tolerate any delays in the fulfillment of their wishes or goals. Government Rules and Regulations: Government regulation regarding product safety, working condition, statutory warnings (on cigarettes and other harmful products), etc., are all supported by laws. Take actions that might be viewed as proper by a disinterested group of professional colleagues. (i) Teleological theories do not consider the basic obligations. Peers, Colleagues and Superiors: In the company of good friends, the child realises the importance of high ethical standards in life. Different sources (psychology, theology) offer solutions, 7. Recently an award-winning regional language file of India, depicted the plight of an aged boatman whose occupation was to transport people and goods across the local river, as there was no bridge over the river. Business needs to function as responsible corporate citizens of the country. Service motive should be in the first place rather than profit motive, even though the very purpose of any business is to earn profits. Most people deplore it and most businesses take care not to be so openly unethical. Rationale of Business Ethics 20. A few different business ethics theories exist, such as the utilitarian, rights, justice, common good and virtue approach. factors can be dealt with the help of following techniques: Challenges in Compliance, Finance, Human Resource, Marketing and Production, o Customers, Employees, Industry, Business, Society and Government, Business Ethics: History, Meaning, Concept and Definitions, Characteristics, Elements, Nature, Principles and Other Details, Business Ethics – 13 Main Characteristics, Business Ethics – Elements: A Formal Code of Conduct, Ethics Committee, Ethical Communication System, A Disciplinary System, Monitoring and a Few Others, Business Ethics – Nature of Ethics in Business, Business Ethics – 17 Important Principles – Principle of Conscience, Wishless Work, Esprit, Publicity, Purity, Humanity, Universal Values, Commitment and a Few Others, Business Ethics – Importance of Ethics in Finance, Human Resource Development, Marketing and Production, Business Ethics – Theories of Business Ethics: Teleological and Deontological Theories, Business Ethics – Business Ethics and Profits, Business Ethics – Advantages of Managing Ethics in Workplaces, Business Ethics – Regulations: Legislative Measures, Goodwill of Business Unit, Social Status of Businessman, Trade Union, Business Association and Consumer Movement, Business Ethics – Guidelines to Determine Ethical Actions, Business Ethics – Relationship between Business & Ethics, Business Ethics – Rationale of Business Ethics: Survival of Business, Need of a Stable Society, Growing Clout of Business, Effective Decision-Making and a Few Others, Business Ethics – Three Dimensions: Systematic Issue, Business Issues and Individual Issues, Business Ethics – Ethics and the Indian Corporate Culture, Business Ethics – Causes and Issues of Unethical Behavior, Business Ethics – Challenges in Compliance, Finance, Human Resource, Marketing and Production, Business Ethics – Business Ethics in India, Business Ethics – Benefits to Customers, Employees, Industry, Business, Society and Government, Business Ethics – Arguments against Business Ethics, Concept and Definitions of Business Ethics, Business Ethics and Profits of Business Ethics, Advantages of Managing Ethics in Work Places. 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