Ethical basis of Law and

Business Management
Contemporary Business Ethics

• Business ethics is a form of applied ethics that

examines ethical principles and moral or ethical
problems that arise in a business environment.

• The field is vast, often encompassing such concerns as

corporate governance, reputation management,
accurate accounting and audits, fair labor practices
and environmental stewardship

• Business ethics continues a rich tradition of leading

the way with new ideas about business and the
intersection of business and society.
Nature of Ethics

The word “ethics” is derived from the Greek word

ethos means “character”.

Ethics is a major branch of philosophy, encompassing right

conduct and good life. It is significantly broader than the
common conception of analyzing right and wrong. A central
aspect of ethics is "the good life."

Every profession has its own unique set of standards called

“Code of Ethics” like legal ethics, medical ethics, and business
ethics.
 Two Systems of Ethics

• There are two systems of Ethics

Formalism and Consequentalism.
Both systems are not mutually
exclusive in the outcomes of their
moral analysis. They begin from
different assumptions.
 Formalism
• Formalism is also called Deontology which is
an approach to Ethics that affirms absolute
morality. A particular act is in itself right or
wrong. For example lying is wrong so there
is no justification for end, because
wrongness does not depend on the situation
in which the lie is told.
 Consequentalism
• Consequentalism is also called Teleology, it
concerns moral consequences of actions
rather than with the morality or the actions
themselves. For consequentalist lying itself
is not unethical. It is the consequences,
things in result of lying, that must be
evaluated for their ethical implications.
• The dominant form of consequentalism is
utilitarianism judges actions by usefulness,
by whether they served to increase the
common good.
 Sources of Values for
Business Ethics
• There are four sources of values for business
ethics.

– Legal Regulation
– Professional Codes of Ethics
– Organizational Code of Ethics
– Individual Values
 Legal Regulation

• Ethical Legal Relationship is to realize that

in our society Ethical Values frequently
become law and that legal regulation can
reflect society’s ethical values.
• For example insider trading fraudulent
practices and conflict of interest are often
cited as examples of Ethical failures. These
practices are illegal.
Professional Codes of Ethics
• Professional Codes of Ethics has historical
background of Professional Codes like
medicine and law. Other professions
recently developed their own code of ethics
to regulating the profession in accordance
with the Regulatory Framework of the State.
• Professional Codes of Ethics also regulate
the conduct of professionals for example
Pakistan Bar Council and Pakistan Medical
Dental Council.
 Organizational Codes of
Ethics
• All the organizations operating in any State
are subject to enforcement of legal system,
so all business organizations now have
developed their own code of business ethics
which is also called “CODE OF CONDUCT”
• The Code of Conduct is dealing with honesty,
compliance with laws safety and security of
employees customer relationship and
protection of the company business.
 Individual Values
• The sources of Ethical values for business
decision making comes from the individuals
• Ethics are used by Managers as guidelines in
decision making that affect employees,
organization, consumers and stakeholders.
• Managers should look at existing ethical
norms and trends in the industries in order
to determine what decision and actions are
right or wrong.
 Achieving an Ethical Business
Corporation

• The primary object of Modern Business

Organization is to earn profits because
profits motivates the entire organization,
corporate culture and it promotes the
common good by providing incentives for
job creation and results organization,
growth and success.
 The Control of Resources by
Non-owners
• In the corporate world the owners of business
organizations are not in position and control of
their business resources.
• This produce the problems of corporate
governance.
• Managers who are the agent of the owners
have ethical and legal duties to manage the
organization for the benefit of their owners.
• As managers are controlling the organization
resources so it is easy to misuse their authority
or to infringe of the property of the
organization. It includes fraud embezzlement
and misrepresentation of financial data.
 Consideration of All Stakeholders
• The Investors, owners, shareholders,
employees and consumers having interest
with business organization have their
interest at stake because the company may
take any action which is against its
stakeholders.
• So ethical corporate behaviour of
organization is based on managers who
recognized and tact into account the
interest of various stakeholders.
 Property as a system of Personal
Ethics
• Property provides an ordering relationship between
people. Legally and morally owners of the property
must respect the equal right of others to what is
proper to them.
• It is unethical for an employee to fill to warm
employees of safety risk in the work place for the
employees to embezzle money from the employee.
• The property system does not explain which
resources belong in the first instance within the
exclusive right of property protection.
• The rule of law and property are fundamental not
only to structure but also to the values of the
private market and of ethical behaviour is in
corporate sector
 Key ingredients of Business Ethics
1. Corporate Compliance
Particularly related to government contracts - gave rise to
corporate compliance, which is most often narrowly
focused on complying with national and local laws and
regulations.
2. Corporate Responsibility
Corporate responsibility refers to fulfilling the
responsibilities or obligations that a company has
towards its stakeholders.
3. Corporate and Social Responsibility
Corporate and social responsibility can be understood in
terms of corporate responsibility, but with greater stress
laid upon the obligations a company has to the
community, particularly with respect to charitable
activities and environmental stewardship.
4. Corporate Governance
Corporate governance refers to the oversight of company
operations by bodies (e.g., board of directors) that bear
the responsibility to oversee, direct, and evaluate
company operations on behalf of the company’s investors.
 Business Ethics as Discipline
Business ethics can be both a normative and a
descriptive discipline. As a corporate practice and a
career specialization, the field is primarily
normative. In academia descriptive approaches are
also taken. The range and quantity of business
ethical issues reflects the degree to which business
is perceived to be at odds with non-economic social
values. Historically, interest in business ethics
accelerated dramatically during the 1980s and
1990s, both within major corporations and within
academia. For example, today most major corporate
websites lay emphasis on commitment to promoting
non-economic social values under a variety of
headings (e.g. ethics codes, social responsibility
charters). In some cases, corporations have
redefined their core values in the light of business
ethical considerations.
 Issues in Business Ethics

• Ethical issues concerning relations between different

companies , like joint ventures, mergers, acquisitions,
take-over, etc.

• It also includes leadership issues, organizational

development issues, financial scandals, misuse of
corporate ethics policies as marketing tool etc.
 Professional Ethics

Professional ethics covers the myriad practical

ethical problems and phenomenon with arise
out of specific functional areas of companies or
in relation to organized business profession.
 Ethical issues in Accounting
Information
• Creating accounting reports with misleading facts and
figures.
• Insider trading, securities fraud, forex scams, and
manipulation of financial market.
• Kickbacks, bribery, facilitation payment.
• Corporate frauds and fake companies.
 Ethical issues in HRM

• The ethics of Human Resource Management (HRM)

covers those ethical issues arising around the
employer-employee relationship, such as the rights
and duties of employer and employee.
• Discrimination issues include discrimination on the
basis of age, gender, race, religion, disabilities, etc.
• Issues surrounding the representation of employees
and the democratization of the workplace: union
busting, and illegal strike.
• Issues affecting the privacy of the employee:
workplace surveillance and drug testing.
• Issues relating to the fairness of the employment
contract and the balance of power between employer
and employee.
• Occupational Health and Safety.
 Ethical issues in Sales and Marketing

• Marketing which goes beyond the mere provision

of information about (and access to) a product
may seek to manipulate our values and behavior.
To some extent society regards this as acceptable,
but where is the ethical line to be drawn?
Marketing ethics overlaps strongly with media
ethics, because marketing makes heavy use of
media. However, media ethics is a much larger
topic and extends outside business ethics.
• Pricing: price fixing, price discrimination, price
skimming.
• Anti-competitive practices: these include but go
beyond pricing tactics to cover issues such as
manipulation of loyalty and supply chains.
• Children and marketing: marketing in schools.
 Ethical issues in 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
services (e.g. tobacco, alcohol, weapons, motor vehicles,
chemical manufacturing).
• Ethical relations between the company and the environment:
pollution, environmental ethics, carbon emissions etc.
• Ethical problems arising out of new technologies:
genetically modified food, mobile phone radiation and
health.
• Product testing ethics: animal testing for experimental
purpose, use of economically disadvantaged groups (such
as students) as test objects.
 Ethical issues in Intellectual Property,
knowledge, and skills
• Knowledge and skills are valuable but not easily
"ownable" as objects. Nor is it obvious who has the
greater rights to an idea: the company who trained
the employee, or the employee themselves? The
country in which the plant grew, or the company
which discovered and developed the plant's
medicinal potential? As a result, attempts to assert
ownership and ethical disputes over ownership
arise.
• Patent infringement, copyright infringement, trade
mark infringement.
• Even the notion of intellectual property itself has
been criticised on ethical grounds.
• The practice of employing all the most talented
people in a specific field, regardless of need, in
order to prevent any competitors employing them.
• Bioprospecting (ethical) and biopiracy (unethical).
 Ethical issues in International Business
Systems
• While business ethics emerged as a field in the 1970s,
international business ethics did not emerge until the late
1990s, looking back on the international developments of
that decade. Many new practical issues arose out of the
international context of business. Theoretical issues such as
cultural relativity of ethical values receive more emphasis in
this field. Other, older issues can be grouped here as well.
Issues and subfields include:
• Comparison of business ethical traditions from various
religious perspectives.
• Ethical issues arising out of international business
transactions; e.g. bioprospecting and biopiracy in the
pharmaceutical industry; the fair trade movement and
transfer pricing.
• Issues such as globalization and cultural imperialism.
• Varying global standards - e.g. the use of child labour.
• The way in which multinationals take advantage of
international differences, such as outsourcing production
(e.g. clothes) and services (e.g. call centres) to low-wage
countries.
Question and Answer Session
Thank You