BUSINESS ETHICS • Confidentiality

Difference between ethics and business

Chapter 1:The Role of Business in Social and
ethics
Economic Development.
• An important difference between
ethics and business ethics is that
Lesson1: What is Business Ethics?
business ethics can be quantified
• A form of applied ethics or
more easily. Many companies
professional ethics, that examines
routinely evaluate their ethical codes
ethical principles and moral or
and run diagnostics to determine
ethical problems that can arise in a
how they can make more ethical
business environment
choices.
• It applies to all aspects of business
Why is it important to study Business
conduct and is relevant to the
Ethics?
conduct of individuals and entire
• Business ethics are a reflection of the
organizations.
standard of business that either an
• Business Ethics refers to
individual or business uses when
contemporary organizational
conducting transactions. Business
standards, principles, sets of values
ethics are important because they
and norms that govern the actions
add a line of defence to protect the
and behaviour of an individual in the
company, enable company growth,
business organization.
save money and allow people to
• Business Ethics is the study of
avoid certain legal implications.
appropriate business policies and
practices regarding potentially
Lesson 2: The Role of Business in Social and
controversial subjects including
Economic Development
corporate governance, insider
I.FORMS OF ORGANIZATION
trading, bribery, discrimination,
• A. Sole Proprietorship
corporate social responsibility and
- The vast majority of small businesses start
fiduciary responsibilities.
out on sole proprietorships. These
• The law often guides business ethics,
businesses usually are owned by one person,
but at other times business ethics
aka the individual who has day-to day
provide a basic guideline that
responsibility for running the business. Sole
businesses can chose to follow to
proprietors can be independent contractors,
gain public approval.
freelancers or home-based businesses.
What is Ethics?
Sole proprietorship advantages
• Moral principles that govern a
• The owner receives all profits.
person’s behaviour or the
• Profits are taxed only once.
conducting of an activity.
• The owner makes all decisions and is
• Ethics is the process of questioning,
in complete control of the company
discovering and defending our values,
(but this could also be a
principles and purpose. Its about
disadvantage.)
finding out who we are and staying
• It is the easiest and least expensive
true to that in the face of
form of ownership to organize.
temptations, challenges and
Sole Proprietorship disadvantages
uncertainty.
• There is unlimited liability if anything
Examples of Ethics:
happens in the business. Your
• Honesty
personal assets are at risk.
• Integrity
• It is limited in raising funds and the
• Loyalty
owner might have to acquire
• Fairness
consumer loans.
• Concern for others
• There is no separate legal status.
• Respect for others
B. Partnerships
Examples of Business Ethics:
• In a partnership, two or more people
• Punctuality
share ownership of a single business.
• Abiding by the law
Like proprietorships, the law does
• Non-discrimination
not distinguish between the business
• Abiding by industry standards
and its owners. The partners should
• Commitment to ethical sourcing
have a legal agreement that
• Commitment to fair trade and fair
establishes how decisions will be
worker treatment
made
• Commitment to worker safety
 • how profits will be shared, how
disputes will be resolved, how future
partners will be admitted to the
partnership, how partners can be
bought out or what steps will be
taken to dissolve the partnership
when needed.
Partnership Advantages
• It is easy to establish ( with the
exception of developing a
partnership agreement).
• Separate legal status gives liability
protection.
• Profits are taxed only once.
• Partners may have complementary
skills.
Partnership Disadvantages
• Partners are jointly and individually
liable for other partners actions
• Profit must be shared with the
partners.
• Decision making is divided.
• Business can suffer if the detailed
partnership agreement is not in
place.
C. Corporations
• A corporation is considered by law to
be unique entity, separate from
those who own it. A corporation can
be taxed, sued and enter into
contractual agreements. The
corporation has a life of its own and
does not dissolve when ownership
changes.
Corporation Advantages
• Limited Liability- the shareholders of
a corporation are only liable up to
the amount of their investments.
The corporate entity shields them
from any further liability, so their
personal assets are protected.
• Source of capital- A publicly- held
corporation in particular can raise
substantial amounts by selling shares
or issuing bonds.
• Ownership transfers-It is not
especially difficult for a shareholder
to sell shares in a corporation,
though this is more difficult when
the entity is privately- held.
• Perpetual life- there is no limit to the
life of a corporation, since ownership
of it can pass through many
generations of investors.
Disadvantages of Corporation
• Double Taxation- depending on the
type of corporation, it may pay taxes
on its income, after which
shareholders pay taxes on any
dividends received, so income can be
taxed twice.
• Excessive Tax Filings- depending on
the kind of corporation, the various
types of income and other taxes that
must be paid can require a
substantial amount of paperwork.
• Independent management- if there
are many investors having no clear
majority interest, the management
team of a corporation can operate
the business without any real
oversight from the owners.
Lesson 3: The purpose of establishing
Business Enterprise
The purpose of a business is to offer value
(through products and/or services) to
customers, who pay for the value with cash
equivalents. Minimally, the money received
should fund the cost of operating the
business as well as provide for the life needs
of the proprietor.
Typically, there are three reasons to start or
operate a business.
1. To make money
2. to gain satisfaction from working in the
field of interest
3. to benefit others
The order of the reasons depends on your
personal goals and whether the business is a
for-profit business or non-profit organization.
What is the role of Business in social and
economic development?
Business plays a vital role in the economic
development and wealth of the country.
Success in business translates to the
economic well-being of a company and its
residents through job creation and offering
improved quality of life for the country’s
citizens.
Economic Development and Business
Small and Large business drive economic
stability and growth by providing valuable
services, products and tax that directly
contribute to the health of the community.
They also provide jobs, strengthening the
economic health of each community where a
business is based. Even if a business is
headquartered elsewhere, employing people
at each local business contributes to the
success of that region, as with the wages
they earn, people buy property, work, shop
and otherwise invest in where they live.
Corporate Governance Ethics
- Corporate governance is a set of
rules that governs the administration
and management of companies
- Its goal post are transparency,
integrity, full disclosure of financial
and non-financial information and
protection of shareholders interest
Benefits from Managing Ethics in workplace
The many benefits that rise from managing
ethics in the workplace are:
- Attention to business ethics
improves society
- Ethical practice contributes towards
high productivity and strong team
work.
- Changing situations require ethical
education
- Ethical practices create strong public
image.
Characteristics of Ethical Organization
MARK PASTIN provides the following
characteristics of ethical organization
-Obsessed with Fairness
- At ease with while interacting with diverse
internal and external stakeholders group.
- Individual responsibility, with individuals
assuring personal responsibility for actions of
the organization
- see their activities in terms of purpose.
Lesson 4: The Core Principles of Good
Corporate Governance
The core principles of good corporate
governance are the ff;
Fairness
Accountability
Responsibility and Transparency
Fairness
Refers to equal treatment, for
example, all shareholders should receive
equal considerations for whatever
shareholdings they hold.
In addition to shareholders, there
should also be fairness in treatment of all the
stakeholders including employees,
communities and public officials. The fairer
the entity appears to stakeholders, the more
likely it is that it can survive the pressure of
interested parties.
Accountability
Corporate accountability refers to
the obligation and responsibility to give an
explanation or reason for the company’s
actions and conduct.
In brief:
-The board should present a balanced and
understandable assessment of the
company’s position and prospects ;
- The board is responsible for determining
the nature and extent of the significant risks
it is willing to take
- The board should maintain sound risks
management and internal control systems;
The board should establish formal and
transparent arrangements for corporate
reporting and risk management and for
maintaining an appropriate relationship with
the company’s auditor, and
-The board should communicate with
stakeholders at regular intervals, a fair
balanced and understandable assessment of
how the company is achieving its business
purpose
Responsibility
The Board of Directors are given
authority to act on behalf of the company.
They should therefore accept full
responsibility for the powers that is given
and the authority that it exercises.
Accountability goes hand in hand
with responsibility. The board of directors
should be accountable to the stakeholders
for the way in which the company has
carried out its responsibilities.
Transparency
A principle of good governance is
that stakeholders should be informed about
the company’s activities, what it plans to do
in the future and any risks involved in its
business strategies.
Transparency means openness, a
willingness by the company to provide clear
information to shareholders and other
stakeholder’s.
Transparency ensures that
stakeholders can have confidence in the
decision- making and management processes
of a company