BUSINESS ETHICS

UNIT-1
What does Business Ethics mean?
In short, business ethics means to conduct business with a human touch in order to give
welfare to the society.

So, 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.

Definition of Business Ethics

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.”

According to Wikipedia,
“Business ethics (also corporate ethics) is a form of applied ethics or professional ethics
that examines ethical principles and moral or ethical problems that arise in a business
environment. It applies to all aspects of business conduct and is relevant to the conduct
of individuals and entire organizations.”

Nature of Business Ethics

The characteristics or features of business ethics are:-

 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.
 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.

SCOPE OF BUSINESS ETHICS

Ethical problems and phenomena arise across all the functional areas of companies
and at all levels within the company.

1.Ethics in Compliance
Compliance is about obeying and adhering to rules and authority. The motivation for
being compliant could be to do the right thing out of the fear of being caught rather than
a desire to be abiding by the law. An ethical climate in an organization ensures that
compliance with law is fuelled by a desire to abide by the laws. Organizations that value
high ethics comply with the laws not only in letter but go beyond what is stipulated or
expected of them.

2.Ethics in Finance
The ethical issues in finance that companies and employees are confronted with
include:

 In accounting – window dressing, misleading financial analysis.

 Related party transactions not at arm’s length
 Insider trading, securities fraud leading to manipulation of the financial
markets.
 Executive compensation.
 Bribery, kickbacks, over billing of expenses, facilitation payments.
 Fake reimbursements

3.Ethics in Human Resources

Human resource management (HRM) plays a decisive role in introducing and
implementing ethics. Ethics should be a pivotal issue for HR specialists. The ethics of
human resource management (HRM) covers those ethical issues arising around the
employer-employee relationship, such as the rights and duties owed between employer
and employee.

The issues of ethics faced by HRM include:

 Discrimination issues i.e. discrimination on the bases of age, gender, race,

religion, disabilities, weight etc.
 Sexual harassment.
 Affirmative Action.
 Issues surrounding the representation of employees and the democratization
of the workplace, trade ization.
 Issues affecting the privacy of the employee: workplace surveillance, drug
testing.
 Issues affecting the privacy of the employer: whistle-blowing.
 Issues relating to the fairness of the employment contract and the balance of
power between employer and employee.
 Occupational safety and health.
Companies tend to shift economic risks onto the shoulders of their employees. The
boom of performance-related pay systems and flexible employment contracts are
indicators of these newly established forms of shifting risk.

4.Ethics in Marketing
Marketing ethics is the area of applied ethics which deals with the moral principles
behind the operation and regulation of marketing. The ethical issues confronted in this
area include:

 Pricing: price fixing, price discrimination, price skimming.

 Anti-competitive practices like manipulation of supply, exclusive dealing
arrangements, tying arrangements etc.
 Misleading advertisements
 Content of advertisements.
 Children and marketing.
 Black markets, grey markets.
5.Ethics of Production
This area of business ethics deals with the duties of a company to ensure that products
and production processes do not cause harm. Some of the more acute dilemmas in this
area arise out of the fact that there is usually a degree of danger in any product or
production process and it is difficult to define a degree of permissibility, or the degree of
permissibility may depend on the changing state of preventative technologies or
changing social perceptions of acceptable risk.

 Defective, addictive and inherently dangerous products and

 Ethical relations between the company and the environment include
pollution, environmental ethics, and carbon emissions trading.
 Ethical problems arising out of new technologies for eg. Genetically modified
food
 Product testing ethics.
The most systematic approach to fostering ethical behaviour is to build corporate
cultures that link ethical standards and business practices.

Objectives of Business Ethics:

The objectives of business ethics are:

(i) Personal level:
At personal level the policy should be set that not to misuse the
properties of the others or of the organisation keeping the promises
and extending the mutual help, not to seek quick gains and not to
indulge in politics to gain power.

(ii) Internal policy level:

The business organisation should follow fair practices in dealing with
employees and other stakeholders. The organisation should have open
and better communication at all levels. The organisation leadership
should motivate employees for better productivity and for common
good.

(iii) Societal level:

The social concerns like no discrimination concerned for the down
trodden be the prime concerns of the business organisations. Optimal
 use of scarce resources, clean environment and ensuring better quality
of life to all the stakeholders should be stressed in the internal policies.

(iv) Stakeholder’s level:

The organisation should take care of the maximum number of
stakeholders and follow ethical means with shareholders, customers,
suppliers, employees, banks and financial institutions, government
and all others that are connected with the organisation.

Importance of Business Ethics

 Long-term growth: sustainability comes from an ethical long-term
vision which takes into account all stakeholders. Smaller but sustainable
profits long-term must be better than higher but riskier short-lived profits.
 Cost and risk reduction: companies which recognise the importance
of business ethics will need to spend less protecting themselves from
internal and external behavioural risks, especially when supported by
sound governance systems and independent research
 Anti-capitalist sentiment: the financial crisis marked another blow
for the credibility of capitalism, with resentment towards bank bailouts at
the cost of fundamental rights such as education and healthcare.
 Limited resources: the planet has finite resources but a growing
population; without ethics, those resources are repleted for purely
individual gain at huge cost both to current and future generations.

OR
Need or 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 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.
2. 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.
3. 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.
4. 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.
5. 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.
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 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.

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 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.
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 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.
9. 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.
10. 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.

11. 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.
12. 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.

Characteristics of Business
Ethics:
(i) A Discipline:
Business ethics are the guiding principles of business function. It is the
knowledge through which human behaviour is learnt in a business
situation.

(ii) Ancient Concept:

Business ethics is an ancient concept. It has it origin with the
development of human civilization.
(iii) Personal Dignity:
The principles of ethics develop the personal dignity. Many of the
problems of ethics arise due to not giving dignity to individual. All the
business decisions should be aimed by giving dignity to the customers,
employees, distributors, shareholders and creditors, etc. otherwise
they develop in immorality in the business conducts.

(iv) Related to Human Aspect:

Business ethics studies those activities, decisions and behaviours
which are concerned with human aspect. It is the function of the
business ethics to notify those decisions to customers, owners of
business, government, society, competitors and others on good or bad,
proper or improper conduct of business.

(v) Study of Goals and Means:

Business ethics is the study of goals and means for the rational
selection of sacred objects and their fulfillment. It accepts the
principles of “Pure goals inspire for pure means” and “Means justifies
the end”. It is essential that goals and means should be based on
morals.

(vi) Different from Social Responsibility:

Social responsibility mainly relates to the policies and functions of an
enterprise, whereas business ethics to the conduct and behaviour of
businessmen. But it is a fact that social responsibility of business and
its policies is influenced by the business ethics.

(vii) Greater than Law:

Although the law approves various social decisions, but the law is not
greater than ethics. Law is usually related to the minimum control of
social customs whereas ethics gives importance to individual and
social welfare actions.

FACTORS INFLUENCING BUSINESS ETHICS

Business leaders today are well aware of the ethical issues and hence
they want to improve the ethical standards of the business. Self-
regulation is, of course, better and produce impressive results.
Besides, there are also a number of factors, which significantly
influence the managers to take ethical decisions.

FACTORS INFLUENCING BUSINESS ETHICS

Business leaders today are well aware of the ethical issues and hence
they want to improve the ethical standards of the business. Self-
regulation is, of course, better and produce impressive results.
Besides, there are also a number of factors, which significantly
influence the managers to take ethical decisions.
Some of them are

1. Personal Code of Ethics

A man’s personal code of ethics that is what one considers moral is the
foremost responsible factor influencing his behavior.

2. Legislation
It is already stated that the Government will intervene and enact laws
only when the businessmen become too unethical and selfish and
totally ignore their responsibility to the society. No society can tolerate
such misbehavior continuously. It will certainly exert pressure on the
Government and the Government consequently has no other
alternative to prohibit such unhealthy behavior of the businessmen.
3. Government Rules and Regulations
Laws support Government regulations regarding the working
conditions, product safety, statutory warning etc. These provide some
guidelines to the business managers in determining what are
acceptable or recognized standards and practices.

4. Ethical Code of the Company

When a company grows larger, its standard of ethical conduct tends to
rise. Any unethical behavior or conduct on the part of the company
shall endanger its established reputation, public image and goodwill.
Hence, most companies are very cautious in this respect. They issue
specific guidelines to their subordinates regarding the dealings of the
company.

5. Social Pressures
Social forces and pressures have considerable influence on ethics in
business. If a company supplies sub-standard products and get
involved in unethical conducts, the consumers will become indifferent
towards the company. Such refusals shall exert a pressure on the
company to act honestly and adhere strictly to the business ethics.
Sometimes, the society itself may turn against a company.

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Factors influencing Business Ethics | What affects Business Ethics?

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FACTORS INFLUENCING BUSINESS ETHICS
Business leaders today are well aware of the ethical issues and hence
they want to improve the ethical standards of the business. Self-
regulation is, of course, better and produce impressive results.
Besides, there are also a number of factors, which significantly
influence the managers to take ethical decisions.
 Image: Factors influencing business ethics
Some of them are

1. Personal Code of Ethics

A man’s personal code of ethics that is what one considers moral is the
foremost responsible factor influencing his behavior.

2. Legislation
It is already stated that the Government will intervene and enact laws
only when the businessmen become too unethical and selfish and
totally ignore their responsibility to the society. No society can tolerate
such misbehavior continuously. It will certainly exert pressure on the
Government and the Government consequently has no other
alternative to prohibit such unhealthy behavior of the businessmen.

3. Government Rules and Regulations

Laws support Government regulations regarding the working
conditions, product safety, statutory warning etc. These provide some
guidelines to the business managers in determining what are
acceptable or recognized standards and practices.

4. Ethical Code of the Company

When a company grows larger, its standard of ethical conduct tends to
rise. Any unethical behavior or conduct on the part of the company
shall endanger its established reputation, public image and goodwill.
Hence, most companies are very cautious in this respect. They issue
specific guidelines to their subordinates regarding the dealings of the
company.

5. Social Pressures
Social forces and pressures have considerable influence on ethics in
business. If a company supplies sub-standard products and get
involved in unethical conducts, the consumers will become indifferent
towards the company. Such refusals shall exert a pressure on the
company to act honestly and adhere strictly to the business ethics.
Sometimes, the society itself may turn against a company.
6. Ethical Climate of the Industry
Modern industry today is working in a more and more competitive
atmosphere. Hence only those firms, which strictly adhere to the
ethical code, can retain its position unaffected in its line of business.
When other firms, in the same industry are strictly adhering to the
ethical standards, the firm in question should also perform up to the
level of others. If the company’s performance is below than other
companies, in the same industry, it cannot survive in the field in the
long run.

FACTORS AFFECTING BUSINESS ETHICS

The business executive working as a professional manager has to

decide what is ethical or unethical. Many factors influence this
decision. In part, what is ethical is based on:

The individual’s personal code of behavior: The personal

Code of Behavior is the result of the complex environment that
influences one’s life.
2. The ethical standards imposed on a manager by his
superiors also influence him in his decisions as to the morality of
behavior. If the superior condones unethical activities such as padding
expenses accounts, the subordinate is encouraged to look upon this
activity as an acceptable practice.
3. The policies of the company also influence the determination
of ethical conduct. Standards of behavior in an industry are often
influenced greatly by the dominant firms in that industry. The authors
of the company policy obviously have an effect that is decisive.

FACTORS INFLUENCING BUSINESS ETHICS

Business leaders today are well aware of the ethical issues and hence
they want to improve the ethical standards of the business. Self-
regulation is, of course, better and produce impressive results.
Besides, there are also a number of factors, which significantly
influence the managers to take ethical decisions.

Some of them are

1. Personal Code of Ethics

A man’s personal code of ethics that is what one considers moral is the
foremost responsible factor influencing his behavior.

2. Legislation
It is already stated that the Government will intervene and enact laws
only when the businessmen become too unethical and selfish and
totally ignore their responsibility to the society. No society can tolerate
such misbehavior continuously. It will certainly exert pressure on the
Government and the Government consequently has no other
alternative to prohibit such unhealthy behavior of the businessmen.

3. Government Rules and Regulations

Laws support Government regulations regarding the working
conditions, product safety, statutory warning etc. These provide some
guidelines to the business managers in determining what are
acceptable or recognized standards and practices.

4. Ethical Code of the Company

When a company grows larger, its standard of ethical conduct tends to
rise. Any unethical behavior or conduct on the part of the company
shall endanger its established reputation, public image and goodwill.
Hence, most companies are very cautious in this respect. They issue
specific guidelines to their subordinates regarding the dealings of the
company.

5. Social Pressures
Social forces and pressures have considerable influence on ethics in
business. If a company supplies sub-standard products and get
involved in unethical conducts, the consumers will become indifferent
towards the company. Such refusals shall exert a pressure on the
company to act honestly and adhere strictly to the business ethics.
Sometimes, the society itself may turn against a company.
6. Ethical Climate of the Industry
Modern industry today is working in a more and more competitive
atmosphere. Hence only those firms, which strictly adhere to the
ethical code, can retain its position unaffected in its line of business.
When other firms, in the same industry are strictly adhering to the
ethical standards, the firm in question should also perform up to the
level of others. If the company’s performance is below than other
companies, in the same industry, it cannot survive in the field in the
long run.

FACTORS AFFECTING BUSINESS ETHICS

The business executive working as a professional manager has to

decide what is ethical or unethical. Many factors influence this
decision. In part, what is ethical is based on:

1. The individual’s personal code of behavior: The

personal Code of Behavior is the result of the complex environment
that influences one’s life.
2. The ethical standards imposed on a manager by his
superiors also influence him in his decisions as to the morality of
behavior. If the superior condones unethical activities such as padding
expenses accounts, the subordinate is encouraged to look upon this
activity as an acceptable practice.
3. The policies of the company also influence the determination
of ethical conduct. Standards of behavior in an industry are often
influenced greatly by the dominant firms in that industry. The authors
of the company policy obviously have an effect that is decisive.
4. The ethical climate of a country. If, it is poor, then only
giant corporations and large undertakings can stand competition and
be viable; a small concern is apt to go bankrupt, since business is
concerned with employment of a large number of persons, it has the
obligation to see that it adheres to an ethical atmosphere. However,
considerable differences occur among managers as to what is ethical
or unethical; and business truly lacks a Code of Ethics.

ARGUMENTS FOR AND AGAINST BUSINESS ETHICS

Introduction:
Throughout the world, changes are taking place at all levels. The new ways of living, working and
relating have been explored and developed. The growth of awareness, development of technology, growth
of new dimensions and changes in the attitude are the major reasons for the rapid growth of these
changes. This situation has also emerged as an opportunity for the growth of ethical principles and
practices.

Arguments for business ethics:

1) Holistic approach.

2) Leadership.

3) Employee commitment.

4) Investor loyalty.

5) Customer satisfaction.

6) Business is a co-operative effort.

7) Higher profits.

8) Changing mindset of shareholders.

1) Holistic approach:

In the last two centuries, importance was given to production of goods and services and the promotion of
more and more of knowledge. In the present modern century, a lot of significance is attached to the
growth of values and ethical ideas.

2) Leadership:

Business ethics in organizations requires value-based leadership from top management.

Openness and continuous effort to improve the organization’s ethical performance are to be directed from
the leadership of the organization. The ability of a firm to plan and implement ethical business standards
depends on the involvement of the leader in these programmees.

3) Employee commitment:

Ethics clearly contributes to the growth of employee commitment. Since the employees spend a
considerable amount of time at work, an ethical commitment to the organization improves the loyalty to
the organization.

The performance of the employees is bound to increase under ethical conditions because of the positive
environment. A trust worthy atmosphere increases efficiency and enterprise.

According to National Business Ethics Survey (USA), when employees see good values like honesty,
respect, and trust in work place, they do not feel like compromise in work and contribute more. The
ethical climate adds to the value of efficiency.

4) Investor loyalty:

Modern investors are concerned with ethical practices, social responsibility and reputation of companies.
An ethical climate provides a foundation for efficiency, productivity and profits. The negative factors like
law suites, fines and bad practices lower stock prices. When the value of the stock is declining, the
investors divest their stocks and bonds.

The relationship with investors should be based on dependability, trust and commitment.

Modern investors look at profit and also the performance standards of the company which include ethical
practices. The investors are communicated about company's performance and reputation.

5) Customer satisfaction:

Long-term good relationship is essential between business and customers. Consumers avoid the products
and services of companies where the employees are treated in an unfair way.

According to a survey 60 percent of the people focus on social responsibility ahead of brand reputation.
After the Exxon Valdez oil spill, many customers boycotted the company. Nike, the world's largest maker
of athletic shoes suspended orders at June Textiles Company, for the use of child labor. Ethical conduct
towards customers builds a strong competitive position.

6) Business is a co-operative effort:

Since business is a co-operative activity, it requires ethics and good practices. In a cooperative process
there are many stakeholders like investors, suppliers, customers and government. Some ethical standards
are necessary for the solidarity of business and its operations. Lack of co-operation is often due to the fall
in ethical values and practices.

7) Higher profits:

Since all the stakeholders can get good benefit from the comprehensive ethical practices, there is a vast
scope for higher and consistent profits. In the long run, ethical practices increase the size of profit.
Johnson and Johnson, Xerox, MTR (Bangalore), and TVS (India) are examples.

Many studies have found a positive relationship between corporate social responsibility and growth of
business. A study of five hundred largest public corporations in the U.S.A. found that ethical behavior
resulted in the better financial performance.
8) Changing mindset of stakeholders:

Stakeholders apply their values and standards such as ideal working conditions, consumers' rights,
environmental issues and customer care. The stakeholders want the growth of business organization on set
patterns. The stakeholders provide resources for the success of the firm in the long-run. The stakeholders
supply some useful information and knowledge in their respective areas to the organization.

Arguments against business ethics:

1) No need for ethics separately.

2) Demand and supply forces only operate.

3) Compliance of law.

4) Conflicts of interest.

5) Profit is the object of business.

6) Poor moral standards of society.

1) No need for ethics separately:

If business firms are interested in doing their main job of business, there is no need for teaching ethics in
a separate way. A business has to prepare its business plan and execute it and satisfy all the needs of
stakeholders. Then ethics has no separate place. All good business activities themselves will cover ethical
issues.

2) Demand and supply forces:

Any market which is the heart of any business is governed by the two market forces, namely demand and
supply. The price, output and many other decisions are based on these two market forces. Hence the scope
for business ethics is very much restricted in business.

3) Compliance of law:

Any business has to be in compliance of the law of land. For example in India the
Competition Law encourages the growth of healthy competition. Apart from this, there are labour laws to
protect the working and service conditions of labour. Similarly there are legal provisions to take care of
the customers and customer welfare. In this context, the scope for business ethics is limited.

4) Conflicts of interest:

Business promotes conflicts of interest such as conflict between employers and employees, conflict
between sellers and buyers, conflict between owners and government as well as conflict between the
different competitors. In an atmosphere dominated by conflicts, the possibility of ethical operations is
limited.

5) Profit is the object of business:

The object of any business is to make profit and indicates its progress. While making profit through its
various operations, a business has to follow different techniques and tactics.

Most of these business techniques are based on exploitation. Hence there may not be a

good scope for business ethics in modern days.

6) Poor moral standards of society:

Even though high ethical values are spoken and written by a small section of society, the

moral standards of society have fallen down. Frauds are taking place in all areas of business operations
like accounting fraud, marketing fraud and consumer fraud.

Conclusion:
In spite of the arguments against business ethics, the emerging society is bound to be an ethical society
with all its responsibilities and values. Ethical considerations like finance, quality, logistics, marketing
and customer care are actively practiced. Efforts are made to incorporate values in all decision making
policies. The experiments with new approaches are increasingly introduced from the top. Many business
people build a value-driven organisation. People try to reinvent the organisations.

UNIT-2

What Is Corporate Culture?

Corporate culture refers to the beliefs and behaviors that determine how a
company's employees and management interact and handle outside business
transactions. Often, corporate culture is implied, not expressly defined, and
develops organically over time from the cumulative traits of the people the
company hires. A company's culture will be reflected in its dress code, business
hours, office setup, employee benefits, turnover, hiring decisions, treatment of
clients, client satisfaction, and every other aspect of operations.

 Corporate culture refers to the beliefs and behaviors that determine how a
company's employees and management interact.

 Corporate culture is also influenced by national cultures and traditions,

economic trends, international trade, company size, and products.

 Corporate cultures, whether shaped intentionally or grown organically,

reach to the core of a company’s ideology and practice, and affect every
aspect of a business.