8: Practice of Ethics in Business

Towards a better understanding of

business ethics
Factors Impacting Organizational Ethics
Understanding whether a company is
ethical in conducting business

8.1.1 Towards a Better

Understanding of Business Ethics
In order to have a broader understanding of the
concept and its various aspects, one can look
for answers to a number of the following type:
What Are Workplace Ethics?
What Is an Ethics Officer?
What does "You Reap What You Sow" Mean?
What is a Business Process?
What are Banking Ethics?
What is Informed Consent?
What is Capitalism?

8.1.2 Towards a Better Understanding of

Business Ethics: 10 Questions
Do you prefer social
isolation?
How can the public ensure
that a company adheres to
correct business ethics?
Can anyone do my
business ethics homework
for me? Rather than doing
the work myself and
gaining an understanding of
ethics that would help me
better navigate the
business world?

Why is it necessary to apply

business ethics?
Is business ethics a part of
company activities, or it is merely
a response to societys call?

Which one of (a) metaethics

(analytical ethics, attempt to
understand metaphysical,
epistemological, semantic,
psychological presumptions and
commitment), (b) normative ethics
and (c) applied ethics is best for
making business decisions and why?
Can anyone examine critically What are consequences of greed in
term of politics or economy of the
the inevitability of ethics in
country?
business activities?
How do businesses that you know
Which moral philosophy you
treat their employees, or care for the
feel is best suited for making
business decisions and why? community and environment?

8.2 Factors Impacting Organizational Ethics

Corporate culture

Existence and application

of a written code of ethics
Formal and informal
policies and rules
Norms for acceptable
behavior
Financial reward system
System for recognizing
accomplishment

Company attitude toward

employees
How employees are
selected for promotions
Hiring practices
Applications of legal
behavior
Degree to which
professionalism is
emphasized
The companys decision
making processes
Behaviors and attitudes of
the organizations leaders

8.3 Is a Company Ethical in

Conducting Business?
In order to find the answer look at the following:
Whether the company is responding to the
demand for ethicism
What is the ethics coverage
What special factors the company is
considering, and
How does the company handle ethical
dilemmas.

8.3.1 Responding to the Demand for

Ethicism
Ethicism, the demand for more ethical business
processes and actions is increasing in the consciencefocused marketplaces of the 21st century. More
pressure is now applied on industry to improve
business ethics through new public initiatives and
laws. Businesses do continue to attain short-term
gains by acting in an unethical fashion, but such
behaviors tend to undermine the economy over time.
In the end, it is up to the public to make sure that a
company adheres to correct business ethics. If the
company is making large amounts of money, they
may not wish to pay too close attention to their
ethical behavior. Alternatively, there are companies,
although not many, that pride themselves in their
correct business ethics.

8.3.2 The Ethics Coverage

A key to understand the status of a company is to recall
that Business ethics covers a lot of issues, from
whether to hire a friend over a better qualified
stranger, relationships within an organization, to
bigger issues such as whether to be an
environmentally friendly organization but loose
profits, or take in large profits by not paying for
environmental measures but get a bad reputation and
in the long run cost tax payers more. It may also
cover whole industries, such as pharmaceutical
companies and whether it is ethical for them to
charge extreme amounts of money for a life saving
drug just because they own the rights, and therefore
are the only manufacturers of the drug.

8.3.3 Considering the Special

Factors
Then consider some special factors. When a
company does business with another that is
considered unethical, does this make the
first company unethical by association?
Some people would say yes, the first
business has a responsibility and it is now a
link in the chain of unethical businesses.

8.3.4 Handling Ethical Dilemmas

The law defines what is and is not legal, but the
distinctions between moral right and wrong are
not always so clear. But in many situations
lines between right and wrong are blurred.
Such situations can lead to ethical dilemmas,
when different people have different beliefs
about what constitutes ethical behavior. When
faced with ethical dilemmas, it is important to
consider outcomes of the decision-making
process.

8.3.5.1 Testing Whether a Decision is an

Ethical One
One way of dealing ethical dilemmas is by using the
four way test to evaluate decisions. This test involves
asking four questions:
Is my decision a truthful one?
Is my decision fair to everyone affected?
Will it build goodwill for the organization?
Is the decision beneficial to all parties who have a
vested interest in the outcome?
When these four questions can truthfully be answered
with a yes, it is likely that the decision is an ethical
one.

8.3.5.2 Testing Whether a

Decision is an Ethical One
Another way of making sure decisions are truly
ethical is by using the publicity test. Ask yourself
how you would feel if your actions were
published in your hometown newspaper. If you
would be comfortable having your parents, grade
school teachers, and other people find out what
you did, chances are that your decision is an
ethical one. However, if you would not want these
individuals to learn about your actions, you
probably need to rethink your decision.

8.4 Which Businesses are Ethical in

Behavior?
Businesses create value: investors earn profit; workers earn
incomes; consumers get products and services. But in
instances businesses companies, firms behave in a way
not acceptable on different grounds. Businesses behave
ethically means that they maintain ethical standard
norms, values, beliefs, and practices. However, the
ethical standards vary in different cultural environment
and need to be standardized in a cross cultural context.
While talking about ethics in business, we deal with the
behavior of
Organization to its employees
The employees towards their organization and
The employees and organization towards other economic
agents

8.5 Some Examples of Unethical Companies

Minute Maid, Tropicana, Nestle bought fruit
juices from South America but these suppliers
rely heavily on child labor (especially in
harvesting fruit); parents may not oppose, but the
harm is already done;
Child labor in sewing soccer balls in San
Miguello (Mexico); children are earning, but
earning low and they are not going to school
Nike child labor abuse, unsafe working
conditions, violations of local regulations in
manufacturing products in contracts with
independent operators in Asia.

8.6.1 How Ethical Values Emerge

in Organizations?
Organizational ethics and responsibility are
shaped by national culture most businesses
develop within nations by adopting dominant
national cultural values, beliefs, practices,
behaviors (e.g., obeying national laws and
regulations, conforming to national norms);
both laws and norms reflect national cultural
values and together, they outline right and
wrong business behavior; not everything is
written, businesses do conform them in their
actions.

8.6.2 How Ethical Values Emerge in

Organizations?
Every organization, especially its top management should know
that unfair practices or corruption/bribery escalates cost, calls
for manipulation in management and the associated strains,
invites petting the trade unions and so on. Also if they violate,
they loose the moral right to insist ethical norms for others.
Top managers values are evident at an organizations founding
or with a new CEO. The top management
Play role models in ethics;
Influence organizational ethics
Shape organizational culture, often with written statements
such as the organizations vision, purpose, mission or values
Create ethics, positive cultures by articulating organizational
purpose in terms of a combination of social and business
goals; and
Design a reward system that does not patronize unethical
behavior.

8.6.3 How Ethical Values Emerge in

Organizations?
Managers do more than sign off on an ethics plan
they can not behave unethically to demoralize
employees or even provoke them to leave their jobs;
also, others follow the leader while managers are to
create examples.
Managers may
Define appropriate ethical standards,
operate in a socially responsible way;
address the issues of child labor or work safety;
Compensate for the loss of job positions for
employees at home (because of shifting production
abroad)

8.7.1: Three Faces of Ethics

Treatment of employees by their organization
(how an organization treats its employees):
Hire the best people to provide ample
opportunities for skills an career development
Provide appropriate compensation and benefits
Respect personal rights and dignity of each
employee
However, there might be problems with wage
ranges and benefits, working conditions and
the environment, career prospects and child,
women and labor rights.

8.7.2: Three Faces of Ethics

Treatment of the organization by its employees
(how employees treat their organization):
Conflicts of interest [suppliers offering gift to a
company employee influences purchases which may
not be the best; employee may accept the favor
because he has festivals, something to offer to the
family or friends, needs like treatment, or recovery of
losses in gambling etc.; the employee will do bad
purchases or divulge company information to
competitors]
Secrecy and confidentiality
Honesty and integrity [making long distance phone
calls by using the office line, stealing supplies,
padding expense accounts etc]

8.7.3: Three Faces of Ethics

How employees and organization treat other economic agents:
customers, competitors, suppliers, labor unions and all other
stakeholders.
Pricing escalating prices on every available grounds, a serious
issue in CSR
Product quality effect of the product on health, environment,
psychology and social norms diseases, change in mindset- drugs,
violence, sex
Sensitive products scarcity and price pharmaceutical, fuel,
kerosene, candles, salt
Company behavior with government and local people in starting and
operating business, sale of products and services;
Distribution of dividends against shares/stocks, manipulation of
share prices;
Handling suppliers and dealers;
Handling labor unions a special issue in ethics; labor unions may
be (a) pro-self, (b) pro-industry, and (c) pro-labor

8.8 Ethics Training

Multinational companies offer employees the
training on how to cope with ethical dilemmas
(they are concerned about their interests
abroad)
Local business enterprises also need the
training so that they are aware about what is
ethical and what is not
In western countries the priests have a great
role in practice of ethics in business. Mollas in
Bangladesh are far, far behind. They hardly
hedayet the business people.