Ethics can be said as the science of human conduct.

What should be the ideal human behaviour

DEFINITION OF ETHICS AND BUSINESS ETHICS

Ethics can be defined as the critical, structured examination
of how we should behave in particular, how we should
constrain the pursuit of self-interest when our actions affect
others.

Business Ethics can be defined as the critical, structured

examination of how people & institutions should behave in the
world of commerce. In particular, it involves examining
appropriate constraints on the pursuit of self-interest, or (for
firms) profits, when the actions of individuals or firms affects
others.

The critical and the structured parts of those definitions are

both important:
Ethics is critical in the sense of having to do with examining and
critiquing various moral beliefs and practices. (In other words, its
not just about describing peoples values or behaviour, though
that can be a useful starting point.) Ethics involves looking at
particular norms and values and behaviours and judging them,
asking whether various norms and values are mutually
contradictory, and asking which ones matter more in what sorts of
situations.
Ethics is structured in the sense that its not just about having
an opinion about how people should behave. Everyone has
opinions. Ethics involves attempting, at least, to find higher-order
principles and theories in an attempt to rationalize and unify our

diverse moral beliefs.

For practical purposes, ethics means providing reasoned
justification for our choices & behaviour when it affects others,
and reasoned justification for our praise or criticism of other
peoples behaviour.

Law vs Ethics
Ever since we were kids and became aware of our surroundings,
our parents and elders have instilled in us a fundamental
awareness of what is right and wrong. It is actually an inherent
trait of all humans and grows from our desire to get along well
with each other in order to live a harmonious life.
To achieve this goal we understand that we must do to other
people what we expect them to do to us in return. For this, we
try very hard to do what we feel and see as the right things to do
in certain situations. This is the foundation of ethics. They
are rules of conduct that shows how our society expects us to
behave and are the guiding principles behind the creation of laws.
Based on societys ethics, laws are created and enforced by
governments to mediate in our relationships with each other.
Laws are made by governments in order to protect its citizens.
The judiciary, legislature, and public officials are the three main
bodies in a government that are assigned to the task of the
creation of laws.
Laws have to be approved and written by these three branches of
government before they are implemented and enforced by the
police and the military, with the help of the legal system
consisting of lawyers and other government servants.
While laws carry with them a punishment for violations, ethics
does not. In ethics everything depends on the persons

conscience and self worth. Driving carefully and within the

speed limit because you dont want to hurt someone is ethical,
but if you drive slowly because you see a police car behind you,
this suggests your fear of breaking the law and being punished for
it.
Ethics comes from within a persons moral sense and desire to
preserve his self respect. It is not as strict as laws. Laws are
codifications of certain ethical values meant to help regulate
society, and punishments for breaking them can be harsh and
sometimes even break ethical standards.
Take the case of the death penalty. We all know that killing
someone is wrong, yet the law punishes people who break the law
with death. With this comes the argument about whether laws
are necessary at all. But it is important to note that without laws
people are aware of the chaos that might reign in society.
Ethics and laws are therefore necessary to provide guidance and
stability to people and society as a whole.

Summary:
1.
Ethics are rules of conduct. Laws are rules developed by
governments in order to provide balance in society and protection
to its citizens.
2.
Ethics comes from peoples awareness of what is right and
wrong. Laws are enforced by governments to its people.
3.
Ethics are moral codes which every person must conform to.
Laws are codifications of ethics meant to regulate society.
4.
Ethics does not carry any punishment to anyone who
violates it. The law will punish anyone who happens to violate it.
5.

Ethics comes from within a persons moral values. Laws

are made with ethics as a guiding principle.

ETHICAL PRINCIPLES IN BUSINESS

Ethical principles are standards of conduct defining the kind of
behavior an ethical person should and should not engage in. The
following list of principles incorporate the characteristics and
values that most people associate with good character and ethical
behavior.
These principles not only provide a guide to making decisions
they also establish the criteria by which your decisions will be
judged by others.
Abraham Lincoln described character as the tree and reputation
as the shadow. Your character is what you really are; your
reputation is what people think of you. Thus, your character is
determined and defined by your intentions and the extent to
which you guide all your actions by these ethical principles while
your reputation is purely a function of perceptions. In business,
both are important.
Trust, one of the most important assets a successful executive
needs, can be strengthened or destroyed by both your actions
and the way your actions are perceived in relation to these twelve
principles:

1. HONESTY. Ethical executives are, above all, worthy of trust.

They are honest in all their actions and communications. They are
not only truthful they are candid and forthright. Ethical executives
do not deliberately mislead or deceive others by
misrepresentations, overstatements, partial truths, selective
omissions, or any other means and when trust requires it they
supply relevant information and correct misapprehensions of fact .

2. INTEGRITY. Ethical executives earn the trust of others through

personal integrity. They demonstrate moral courage, doing what

they think is right even when there is great pressure to do
otherwise. Ethical executives are principled, honorable, upright
and scrupulous. They fight for their beliefs and do not sacrifice
principle for expediency.

3. PROMISE-KEEPING. Ethical executives can be trusted

because they make every reasonable effort to fulfill the letter and
spirit of their promises and commitments. They do not interpret
agreements in an unreasonably technical or legalistic manner in
order to rationalize non-compliance or create justifications for
escaping their commitments.

4. LOYALTY. Ethical executives justify trust by being loyal to their

organization and the people they work with. They do not put their
loyalty above other ethical principles but they place a high value
on protecting and advancing the lawful and legitimate interests of
their companies and their colleagues. They faithfully safeguard
their ability to make independent professional judgments by
avoiding undue influences and conflicts of interest and they do
not use or disclose information learned in confidence for personal
advantage. If they decide to accept other employment, ethical
executives provide reasonable notice, respect the proprietary
information of their former employer, and refuse to engage in any
activities that take undue advantage of their previous positions.

5. FAIRNESS. Ethical executives strive to be fair and just in all

dealings. They do not exercise power arbitrarily nor do they use
overreaching or indecent means to gain or maintain any
advantage nor take undue advantage of anothers mistakes or
difficulties. Ethical executives manifest a commitment to justice,
the equal treatment of individuals, tolerance for and acceptance
of diversity. They are open-minded; willing to admit they are
wrong and, where appropriate, change their positions and beliefs .

6. CARING CONCERN FOR OTHERS. Ethical executives are

caring, compassionate, benevolent and kind. They always

consider the business, financial and emotional consequences of
their actions on others and seek to accomplish their business
objectives in a manner that causes the least harm and the
greatest positive good.

7. RESPECT FOR OTHERS. Ethical executives demonstrate

respect for the human dignity, autonomy, privacy, rights, and
interests of all those who have a stake in their decisions; they are
courteous and treat all people with equal respect and dignity
regardless of sex, race or national origin. Ethical executives
adhere to the Golden Rule, striving to treat others the way they
would like to be treated.

8. LAW ABIDING. Ethical executives abide by laws, rules and

regulations relating to their business activities.

9. COMMITMENT TO EXCELLENCE. Ethical executives pursue

excellence in performing their duties, are well-informed and
prepared, and constantly endeavor to increase their proficiency in
all areas of responsibility.

10. LEADERSHIP. Ethical executives are conscious of the

responsibilities and opportunities of their position of leadership
and seek to be positive ethical role models by their own conduct
and by helping to create an environment in which principled
reasoning and ethical decision making are highly prized.

11. REPUTATION AND MORALE. Ethical executives seek to

protect and build the companys good reputation and the morale
of its employees by engaging in no conduct that might
undermine respect and by taking whatever actions are necessary
to correct or prevent inappropriate conduct of others.

12. ACCOUNTABILITY. Ethical executives acknowledge and

accept personal accountability for the ethical quality of their

decisions and omissions to themselves, their colleagues, their

companies, and their communities.

OR

7 Principles of Admirable Business Ethics

1. Be Trustful: Recognize customers want to do business with a
company they can trust; when trust is at the core of a company,
it's easy to recognize. Trust defined, is assured reliance on the
character, ability, strength, and truth of a business .

2. Keep An Open Mind: For continuous improvement of a

company, the leader of an organization must be open to new
ideas. Ask for opinions and feedback from both customers and
team members and your company will continue to grow .

3. Meet Obligations: Regardless of the circumstances, do

everything in your power to gain the trust of past customer's and
clients, particularly if something has gone awry. Reclaim any lost
business by honoring all commitments and obligations.

4. Have Clear Documents: Re-evaluate all print materials

including small business advertising, brochures, and other
business documents making sure they are clear, precise and
professional. Most important, make sure they do not misrepresent
or misinterpret.

5. Become Community Involved: Remain involved in

community-related issues and activities, thereby demonstrating
that your business is a responsible community contributor. In
other words, stay involved.

6. Maintain Accounting Control: Take a hands-on approach to

accounting and record keeping, not only as a means of gaining a

better feel for the progress of your company, but as a resource for
any "questionable " activities. Gaining control of accounting and
record keeping allows you to end any dubious activities promptly.

7. Be Respectful: Treat others with the utmost of respect.

Regardless of differences, positions, titles, ages, or other types of
distinctions, always treat others with professional respect and
courtesy.
Recognizing the significance of business ethics as a tool for
achieving your desired outcome is only the beginning. A small
business that instills a deep-seated theme of business ethics
within its strategies and policies will be evident among customers.
It's overall influence will lead to a profitable, successful company.
By recognizing the value of practicing admirable business ethics,
and following each of the 7 principles, your success will not be far
off.

Need or Importance of Business Ethics

These twelve points below discuss the need, importance of
business ethics.:

1.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
duplicate and harmful products, hoarding, etc. These business
malpractices are harmful to the consumers. Business ethics help
to stop these business malpractices.

2.Improve customers' confidence : Business ethics are

needed to improve the customers' confidence about the quality,

quantity, price, etc. of the products. The customers have more
trust and confidence in the businessmen who follow ethical rules.
They feel that such businessmen will not cheat them.

3.Survival of business : Business ethics are mandatory for the

survival of business. The businessmen who do not follow it will
have short-term success, but they will fail in the long run. This is
because they can cheat a consumer only once. After that, the
consumer will not buy goods from that businessman. He will also
tell others not to buy from that businessman. So this will defame
his image and provoke a negative publicity. This will result in
failure 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
market.

4.Safeguarding consumers' rights : The consumer has many

rights such as right to health and safety, right to be informed,
right to choose, right to be heard, right to redress, etc. But many
businessmen do not respect and protect these rights. Business
ethics are must to safeguard these rights of the consumers.

5.Protecting employees and shareholders : Business ethics

are required to protect the interest of employees, shareholders,
competitors, dealers, suppliers, etc. It protects them from
exploitation through unfair trade practices.

6.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 profits for
the businesses thereby resulting in growth of economy.

7.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 criticised by
the society. The society will always support those businessmen
who follow this necessary code of conduct.

8.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 smooth functioning of the business.
So, the business will grow, expand and diversify easily and
quickly. It will have more sales and more profits.

9.Consumer movement : Business ethics are gaining

importance because of the growth of the consumer movement.
Today, the consumers are aware of their rights. Now they are
more organised and hence cannot be cheated easily. They take
actions against those businessmen who indulge in bad business
practices. They boycott poor quality, harmful, high-priced and
counterfeit (duplicate) goods. Therefore, the only way to survive
in business is to be honest and fair.

10.Consumer satisfaction : Today, the consumer is the king of

the market. Any business simply cannot survive without the
consumers. Therefore, the main aim or objective of business is
consumer satisfaction. If the consumer is not satisfied, then there
will be no sales and thus no profits too. Consumer will be satisfied
only if the business follows all the business ethics, and hence are
highly needed.

11.Importance of labour : Labour, i.e. employees or workers

play a very crucial role in the success of a business. Therefore,
business must use business ethics while dealing with the
employees. The business must give them proper wages and
salaries and provide them with better working conditions. There
must be good relations between employer and employees. The
employees must also be given proper welfare facilities.

12.Healthy competition : The business must use business

ethics while dealing with the competitors. They must have healthy
competition with the competitors. They must not do cut-throat
competition. Similarly, they must give equal opportunities to
small-scale business. They must avoid monopoly. This is because
a monopoly is harmful to the consumers.

DEBATE FOR AND AGAINST BUSINESS ETHICS

The pursuit of profit will ensure maximum social benefit

members of society will benefit most if managers do not impose their
own values on a business
A managers most important obligation is to the company
This argument justify a managers unethical or illegal conduct
Business ethics is limited to obeying the law
Laws and morality do not always coincide
Laws do not involve serious matters
Nothing to do with morality
Ethics applies to all human activities
No reason to exempt business activity from ethical scrutiny
Business cannot survive without ethics
business activities cannot exist unless the people involved in the
business and its surrounding community adhere to some minimal
standards of ethics
Eg. Lying, theft, cheating, distrust, conflict of self-interest
Ethics is consistent with profit seeking
Companies where a history of good ethics has existed side by side :
Intel, Timberland, HP, Cisco System, Levi Straus, P&G, Starbucks
Coffee
Prisoners dilemma argument
a situation in which two parties are each faced with a choice between
two options : Either corporate with the other party or do not corporate
If everyone co-operates in following the rules of ethics - do not
steal, do not lie, do not injure, keep your promise, do not cheat - all

will be better off.

Prisoners dilemma analysis of ethics has significant implication for
ethics in business
Business interactions with employees, customers, suppliers and creditors
are repetitive and on ongoing

Customers and employees care about ethics

most people value ethical behaviour and will punish those who they
perceive to be behaving unethically and reward those who are perceived
to be ethical
customers will turn against a company if they perceive a gross injustice
in the way it conducts its business and will lower their willingness to
buy its products.
Employees who feel their companys decision making processes are
unjust will exhibit higher absenteeism, higher turnover, low productivity
and demand higher wages

APPROACHES TO BUSINESS ETHICS

TELEOLOGY
Teleological ethics, (teleological from Greek telos, end; logos,
science), theory of morality that derives duty or moral
obligation from what is good or desirable as an end to be
achieved. Also known as consequentialist ethics, it is opposed to
deontological ethics (from the Greek deon, duty), which holds
that the basic standards for an actions being morally right are
independent of the good or evil generated.
Modern ethics, especially since the 18th-century German
deontological philosophy of Immanuel Kant, has been deeply
divided between a form of teleological ethics (utilitarianism) and

deontological theories.
Teleological theories differ on the nature of the end that actions
ought to promote. Eudaemonist theories (Greek eudaimonia,
happiness), which hold that ethics consists in some function or
activity appropriate to man as a human being, tend to emphasize
the cultivation of virtue or excellence in the agent as the end of
all action. These could be the classical virtuescourage,
temperance, justice, and wisdomthat promoted the Greek ideal
of man as the rational animal; or the theological virtuesfaith,
hope, and lovethat distinguished the Christian ideal of man as a
being created in the image of God.

DEONTOLOGY
Deontological ethics or deontology (from Greek deon, "obligation,
duty"; and -logia) is the normative ethical position that judges the
morality of an action based on the action's adherence to a rule or
rules.
It is sometimes described as "duty" or "obligation" or "rule"
-based ethics, because rules "bind you to your duty".
Deontological ethics is commonly contrasted to consequentialism.
Deontological ethics is also contrasted to pragmatic ethics.
Immanuel kant's theory of ethics is considered deontological for
several different reasons. First, Kant argues that to act in the
morally right way, people must act from duty (deon). Second,
Kant argued that it was not the consequences of actions that
make them right or wrong but the motives of the person who
carries out the action.
Kant's argument that to act in the morally right way one must act
purely from duty begins with an argument that the highest good

must be both good in itself and good without qualification.

Something is "good in itself" when it is intrinsically good, and
"good without qualification", when the addition of that thing never
makes a situation ethically worse. Kant then argues that those
things that are usually thought to be good, such as intelligence,
perseverance and pleasure, fail to be either intrinsically good or
good without qualification. Pleasure, for example, appears to not
be good without qualification, because when people take pleasure
in watching someone suffering, this seems to make the situation
ethically worse. He concludes that there is only one thing that is
truly good:
Nothing in the worldindeed nothing even beyond the worldcan
possibly be conceived which could be called good without
qualification except a good wil.

UTILITARIANISM
Utilitarianism is a theory in normative ethics holding that the
proper course of action is the one that maximizes overall
happiness. It is now generally taken to be a form of
consequentialism, although when Anscombe first introduced that
term it was to distinguish between "old-fashioned Utilitarianism"
and consequentialism. According to utilitarianism the moral worth
of an action is determined only by its resulting outcome although
there is debate over how much consideration should be given to
actual consequences, foreseen consequences and intended
consequences. Two influential contributors to this theory are
Jeremy Bentham and John Stuart Mill.
Utilitarianism can be characterized as a quantitative and
reductionist approach to ethics. It is a type of naturalism. It can
be contrasted with deontological ethics, which does not regard
the consequences of an act as a determinant of its moral worth;

virtue ethics, which primarily focuses on acts and habits leading

to happiness; pragmatic ethics; as well as with ethical egoism and
other varieties of consequentialism.
Utilitarianism has often been considered the natural ethic of a
democracy operating by simple majority without protection of
individual rights.

Normative Theories of Business ethics

This theory is divided in two parts
1. Consequentialist Theories /Teleology and Utilitarianism.
2. Nonconsequentialist Theories/Deontology.
Consequentialist Theories:- Those theories that determine the
moral rightness or wrongness of an action based on the actions
consequences or results.
Nonconsequentialist Theories:-Those that determine the moral
rightness or wrongness of an action based on the actions intrinsic
features or character.Consequentiality Theories is also further
divided in to two types1. Egoism: The view that morality coincides with the self-interest
of an individual or an organization.
Egoists: Those who determine the moral value of an action based
on the principle of personal advantage. An action is morally right
if it promotes ones long-term interest. An action is morally wrong
if it undermines it.
Personal egoists: Pursue their own self-interest but do not make
the universal claim that all individuals should do the same.

Impersonal egoists: Claim that the pursuit of ones self-interest

should motivate everyones behavior.Egoists do not necessarily
care only about pursuing pleasure (hedonism) or behave
dishonestly and maliciously toward others.Egoists can assist
others if doing so promotes their own advantage.
Psychological egoism: The theory of ethical egoism is often
justified on the ground that human beings are essentially
selfish.Even acts of self-sacrifice are inherently self-regarding
insofar as they are motivated by a conscious or unconscious
concern with ones own advantage.

Objections to egoism
The theory is not sound: The doctrine of psychological egoism is
false not all human acts are selfish by nature, and some are
truly altruistic.
Egoism is not a moral theory at all: Egoism misses the whole point
of morality, which is to restrain our selfish desires for the sake of
peaceful coexistence with others.
Egoism ignores blatant wrongs: All patently wrong actions are
morally neutral unless they conflict with ones advantage.
2. UtilitarianismDefinition:
The moral theory that we should act in in ways that produce the
most pleasure or happiness for the greatest number of people
affected by our actions.Main representatives: The British
philosophers Jeremy Bentham (17481832) and John Stuart Mill
(18061873).
The principle of utility: Actions are morally praiseworthy if they
promote the greatest human welfare, and blameworthy if they do
not.

Six points concerning utilitarianism:

(1)In choosing between alternative courses of action, we should

consider the net worth of happiness vs. unhappiness produced by
each course of action.
(2)We should give equal consideration to all individual
preferences, then calculate the net worth of the various kinds of
pleasures and pains.
(3) Anything can be morally praiseworthy in some circumstances
if it promotes the greatest balance of pleasure vs. pain for the
greatest number of people.
(4) We should seek to maximize happiness, not only immediately,
but in the long run.
(5) We should avoid choosing actions if their consequences are
uncertain.(6) We must guard against bias in our utilitarian
calculations when our own interests are at stake. So it is advisable
to rely on rules of thumb.

Utilitarianism in an organizational context:

Provides a clear and straightforward standard for formulating and
testing policies.
Offers an objective way for resolving conflicts of self-interest.
Suggests a flexible, result-oriented approach to moral decision
making.

Criticisms of utilitarianism:
The practical application of the principle of utility involves
considerable difficulties.
Some actions seem to be intrinsically immoral, though performing

them can maximize happiness.

Utilitarianism is concerned with the amount of happiness
produced, not how the amount is distributed, so the theory can
run counter to principles of justice.

Nonconsequentialist Theories:
Nonconsequentialist Theories it is also called Kantian
theory.Kants Ethics Immanuel Kant (17241804): A German
philosopher with a nonconsequentialist approach to ethics.Said
the moral worth of an action is determined on the basis of its
intrinsic features or character, not results or
consequences.Believed in good will, that good actions proceed
from right intentions, those inspired by a sense of duty.The
categorical imperative: Morality as a system of laws analogous to
the laws of physics in terms of their universal applicability.The
morality of an action depends on whether the maxim (or
subjective principle) behind it can be willed as a universal law
without committing a logical contradiction.
An example of the categorical imperative:
A building contractor promises to install a sprinkler system in a
project.But he is willing to break that promise to suit his
purposes.His maxim can be expressed as: Ill make promises that
Ill break whenever keeping them no longer suits my purposes.
By willing the maxim to become a universal law, the contractor
undermines promises in general.

Formulations of the categorical imperative:

Universal acceptability: To determine whether a principle is a
moral law, we need to ask whether the command expressed
through it is acceptable to all rational agents.
Humanity as an end, never as a means: We must always act in a
way that respects human rationality in others and in ourselves.

Kant in an organizational context:The categorical imperative

provides a solid standard for the formulation of rules applicable to
any business circumstances.Kant emphasizes the absolute value
and dignity of individuals.Kant stresses the importance of acting
on the basis of right intentions.

Criticisms of Kants ethics:

Kants ethics is too extreme insofar as it excludes emotion from
moral decision making and makes duty paramount.
Kant fails to distinguish between excepting oneself from a rule
and qualifying a rule on the basis of exceptions.
It is not always clear when people are treated as ends and merely
as means.