MODULE 5

Ethics

The word ethics has originated from the greek word ‘ethos’ meaning character
or manners.

Meaning

Ethics is a branch of social science .It deals with moral principles and social
values .It helps us to classify what is good and what is bad .So, ethics separates
good and bad, right and wrong, fair and unfair, moral and immoral and proper
and improper human actions. In short ethics means a code of conduct .

Importance of Ethics:

(i) Satisfying basic human needs .

Being fair, honest, and ethical is one of the basic human needs .Every
individual desires to be as such as for himself and to work in an environment
that is fair and ethical in its practices.

(ii) Creating Credibility.

An organization that is believed to be driven by moral values is respected in the

society. The perception is held far and wide even by those who do not even
know what business the organization is into.

E.g Infosys is perceived as an organization for good corporate governance and

social responsibilities initiatives.

(iii) Uniting people and leadership.

An organization driven by values is respected by its employees also. This goes a

long way in aligning behaviors within the organization towards achievement of
one common goal or mission.

(iv) Improving decision making.

A man’s destiny is the sum total of all the decisions that he/she takes in course
of his life. The same holds true for organizations. Decisions are driven by
values.

(v) Long term gains.

Organizations guided by ethics and values are profitable in the long run, though
in the short run they may seem to be a loss.

(vi) Securing the society.

Often, ethics succeeds law in safeguarding the society, the law machinery is
often found acting as a mute spectator. Lawyers and public interest litigations
may not help a great deal but ethics can.

Ethical Principles

1.Honesty

All personnel must be committed to telling the truth in all forms of

communication and in all actions. This includes never purposely telling partial
truths, selectively omitting information, making misrepresentations or
overstatements.

2.Fairness

Fairness requires treating all individuals equally and courteously, never

exercising power arbitrarily and never exploiting weaknesses or mistakes for
personal or corporate benefit.

3.Leadership.

Ethical leadership is when leaders demonstrate appropriate conduct in

accordance with recognized principles and values, both inside and outside the
outside.

4.Integrity

Integrity is the practice of being honest and showing a consistent and

uncompromising adherence to strong moral and ethical principles and values.

5.compassion.

Compassion inspires and sustains our work. Fostering a business environment

with empathy and compassion requires a commitment of being kind and caring
towards all personnel.
6.Respect.

Respect is demonstrated by a full commitment to the human rights, autonomy,

interests and privacy of all personnel. It means recognizing that everyone
deserves equal respect and support .

7.Responsibility.

The ability to recognize, interpret and act upon multiple principles and values
according to the standards within a given field or context.

8.Loyalty.

Loyalty means consistent in your treatment, behavior and regard for another.

9.Transparency.

The implications of transparency is that all of an organization’s actions should

be scrupulous enough to bear public scrutiny

10.Accountability.

Accountability means the state of being responsible or answerable for a system,

its behavior and its potential impact.

ETHICAL CONCEPTS AND THEORIES

Ethical Concepts.

Ethics examines the rational justification for our moral judgment, it studies what
is morally right or wrong, just or unjust. Honesty, integrity ,justice ,equality and
respect are some of the basic ethical concepts.

Business ethics are meant to ensure a certain level of trust between consumers
and corporations, guaranteeing the public fair and equal treatment.

Ethical Theories

Ethical theory is the systematic effort to understand moral concepts and justify
moral principles and theories. Ethical theories are thus formal statements about
what we ought to do when faced with an ethical dilemma.
Ethical theories are attempts to provide a clear, unified accounts of whatever
ethical obligations are.

There are 7 major ethical theories, each of these are as follows:

(i) Deontology.

The theory of deontology states that when we have to make ethical decisions
our first thought are on our duties and obligations. According to this theory,
what we believe our duties are, will drive how we act in different situations.

The biggest hole in the theory of deontology is that there is no standard for what
a person’s duties and obligations are.

Example: If you have made a promise, you must keep it. i.e., for example, you
might borrow money on the promise to pay it back, but you don’t intent to pay
it back. So making false promises is considered wrong.

(ii) Utilitarianism

Utilitarianism is an ethical theory that determines right from wrong by focusing

on outcomes.

According to the theory of utilitarianism, people choose their actions based on

how the decisions will benefit the most people. You make a decision that will
be best and everyone is involved.

There are two sides to this theory- Act utilitarianism and Rule utilitarianism.

Act utilitarianism says, you will make decisions based on helping others,
whereas Rule utilitarianism says, you will act out of fairness.

Example: When face with multiple simultaneous patience in the emergency

department it is important to have a way of reaching a decision quickly about
which patient to attend first.
. (iii) Virtue

The Virtue ethical Theory holds that ethical value of an individual is determined
by his character. In other words individuals are good if they have certain virtues
rather than following specific rules or laws.

Example: An employee should be dedicated in his work as well as

compassionate to his colleagues.

(iv) Relativism

Relativism is a the theory that deems your moral obligations and believes to be
based on the individual environment. It determines morals and ethics according
to the society that is being observed. Relativism argues that every society and
culture believes differently and thus each culture must be evaluated according to
its particular cultural patterns and influences.

Example: some people live a vegan lifestyle because they consider it wrong to
eat animals since animals are sentient creatures that are capable of experiencing
pleasure and pain

(v) Rights

In the rights ethical theory the rights set forth by a society are protected and
given the highest priority. Rights are considered to be ethically correct and valid
since a large or ruling population endorses them. A rights theory would provide
a moral framework for law.
Example; the right to marry, the right to own property

(vi) Consequentialism

Consequentialism is an ethical theory that judges whether or not something is

right by what its consequences are.

An action that brings about more benefit than harm is good ,while an action that
causes more harm than benefit is not.

Example: Most people would agree that lying is wrong. But if telling a lie
would help save a person’s life, consequentialism says it’s the right thing to do.

(vii) Non-Consequentialism

Non-Consequentialism is a type of ethical theory that denies, that the rightness

or wrongness of our conduct is determined solely by the goodness or badness of
the consequences of our acts or the rules to which those acts confirm.

Example: Smokers who have bad lungs because they smoke, receive the same
care as non-smokers with bad lungs.

Business ethics

Business ethics refers to the principles, values, and standards that guide the
behaviour of individuals and organizations in the business world. These
principles, values, and standards are often related to issues such as honesty,
fairness, responsibility, and respect for others. It Is otherwise known as
corporate ethics. It is a form of applied ethics or professional ethics that
examines ethical principles and moral or ethical problems that arises in a
business environment. It applies to all aspects of business conduct and is
relevant to the conduct of the individuals and entire organizations .Business
morals give a basic rule that organizations can decided to keep to acquire public
endorsement. Business ethics apply not only to how the business connect with
the large but also there one to one dealing with a single customer.

Definitions

1. By Andrew Crane

Business ethics is the study of business situations, activities and decisions where
issues of right and wrong are addressed.

2. By Raymond C Baumhart.

The ethics of business is the ethics of responsibility. The businessman promise

that he will not harm knowingly.

3. By Thomas J Adam

Business ethics deals with the values of what is right and wrong, good and bad
and moral and immoral in business environment.

Business ethics as a discipline.

As commerce become more complicated and dynamic, organizations realised

they need more guidance to ensure that their dealings supported the common
good and did not harm others, Business ethics was born.

Need or importance of business ethics.

1. Survival of the business unity

Unethical practices of the businessmen will lead to the Closure of business

unit. Not only create problems to the business, but also to the employees and the
society in general. Businessmen do not maximise his profit at the cost of
existence of a business unit. The behaviour of a businessman is affected by
some of the factors, such as leadership quality, integrity, knowledge skills
influence and exercising power. A businessman should protect his unit in all
respects. For example, Unethical practices of CEO of Satyam Computers
Ramalinga Raju lead to the closure of the firm.
2. Growth of the business unit

When a business observes ethics strictly, definitely the particular business will
get developed. If a business is determined detrimental to the society, the
business will shutdown.

3. Earning good will.

Automatically that particular business unit earns a good name among the public.

4. Improving the confidence

Increases confidence of the Customers, employees, and the like .If the
confidence is infused, customers and employees will popularise the name of the
particular distance unit.

5. Maintaining inter relationships.

No business functions independently. Each business has close relationship with

another. Business even though the nature and size of the business defers. It is
expected that each business unit should have a smooth relationship with others.
The Inter relationship of business is maintained by adopting business ethics.

6. Solving social problems

If a business man observes ethics in business, the public will not have any
difficulty in getting there once fulfilled. There is no bargaining between
businessman and public. There is a fair treatment of an employee by him. This
will avoid social problems like strike, lockout etc.

Nature of business ethics

1 Ethical values

The business community must conduct its activities with self control, self check
and self Scarifies, ie, acting with less concern for you than for the success of the
join activity. The interest of the community at large signifies ethical values.

2. Relative Term:

Ethics is a term of relation with the concept of morality and immorality. It

differs from an individual to an individual, society to society, culture to culture,
country to country. It helps to define the moral and immoral term of business
ethics.
3. The interest of Society:

In this features of business ethics, Business ethics said that business should first
do excellent to society and community and then to itself because social welfare
is also the objective of a business.

Business is an important institution and they have various social responsibilities

to protect the category of all formal or informal groups which are directly or
indirectly related to the organization like employees, shareholders, consumers,
and their stakeholders also to contribute to the growth of the business.

4. Business Social Relationship:

Business ethics helps to set or formulate the terms and standards to understand
social affection or relationship of business. It describes what community or
society expects from business and what it presumes about the business.

5. Provides the framework:

Business is an institution which includes various social and economic rules and
regulations. Business is always trying to restrict its activities (formal or
informal) within the limits of the social, cultural, regional, religion, and
economic environment.

6 To build trust and credibility:

By conducting their operations in an ethical manner, organizations can earn the

trust and credibility of stakeholders, such as customers, employees, and
investors. This can help to improve relationships and build a positive reputation,
which can be beneficial for the organization.

7 . To protect the organization from legal and financial penalties:

 Unethical behavior can result in legal and financial penalties, such as fines,
lawsuits, and lost business. By adhering to ethical standards, organizations can
avoid these penalties and protect their financial and legal interests.

8 .To enhance organizational performance:

Ethical organizations are often more successful, as they are able to attract and
retain top talent, foster a positive work culture, and maintain good relationships
with stakeholders. This can help to improve performance and overall success.

9. To fulfill social responsibilities

Organizations have a responsibility to act ethically and to consider the impact

of their actions on society. By being ethical, organizations can help to create a
better world and support the well-being of individuals and communities.

Overall, the importance of business ethics lies in the positive impact they can
have on organizations, stakeholders, and society. By promoting ethics,
organizations can improve their performance, relationships, and reputation, and
they can also contribute to the greater good.

Features of business ethics

There are several key features of business ethics that help to distinguish them
from other types of ethics. Some of the key features of business ethics include:

They are concerned with the behavior of individuals and organizations in the
business world. Business ethics focus on the principles, values, and standards
that guide the behavior of individuals and organizations in the business context.

They are influenced by a variety of factors. Business ethics are influenced by a

variety of factors, including the organization's culture, values, policies, and legal
and regulatory requirements.
They are often codified and communicated to employees. Many organizations
have codes of ethics that outline the ethical standards and expectations for
employees. These codes are typically communicated to employees and are
expected to be followed in their daily work.

They may be subject to external review and evaluation. Business ethics may be
subject to review and evaluation by external stakeholders, such as regulators,
customers, and investors. This can help to ensure that organizations are
adhering to ethical standards and are meeting their obligations.

They can have a significant impact on an organization's success. Business ethics

can have a significant impact on an organization's performance, reputation, and
relationships with stakeholders. By promoting ethics, organizations can improve
their overall success and contribute to a better world.

Scope of business ethics

The scope of business ethics refers to the range of issues and topics that are
covered by business ethics. These issues and topics can be broad in nature,
covering a wide range of areas that are relevant to the business world. Some
examples of the scope of business ethics include:

Ethical leadership and decision making : Business ethics often focus on the
principles, values, and standards that should guide the behavior of leaders and
decision-makers in the business world. This can include issues such as honesty,
fairness, integrity, and accountability.

Social responsibility and sustainability : Business ethics often address the

obligations of organizations to consider the impact of their actions on society
and the environment. This can include issues such as environmental
sustainability, diversity and inclusion, and philanthropy.
Corporate governance and compliance : Business ethics can also address the
systems and processes that organizations use to ensure that they are operating in
a responsible and ethical manner. This can include issues such as corporate
governance, compliance with laws and regulations, and ethical risk
management.

Employee rights and well-being : Business ethics often focus on the rights and
well-being of employees within an organization. This can include issues such as
fair treatment, equal opportunities, and support for personal and professional
development.

Overall, the scope of business ethics is broad and covers a wide range of issues
and topics that are relevant to the business world.

Advantages of business ethics

 Attracting and retaining talent:Companies are able to attract the best

talent and an ethical company that is dedicated to taking care of its employees
will be rewarded with employees being equally dedicated in taking care of the
organization. The ethical climate matter to the employees

 Investor Loyalty:Investors are concerned about ethics, social

responsibility and reputation of the company in which they invest. Investors are
becoming more and more aware that an ethical climate provides a foundation
for efficiency, productivity and profits. Relationship with any stakeholder,
including investors, based on dependability, trust and commitment results in
sustained loyalty.

 Customer satisfaction: When a company because of its belief in high

ethics is perceived as such, any crisis along the way is tolerated by the
customers as a minor aberration. Such companies are also guided by their ethics
to survive a critical situation. Preferred values are identified ensuring that
organizational behaviors are aligned with those values. An organization with a
strong ethical environment places its customers’ interests as foremost. Ethical
conduct towards customers builds a strong competitive position. It promotes a
strong public image.
 Regulators : Regulators eye companies functioning ethically as
responsible citizens. The regulator need not always monitor the functioning of
the ethically sound company. The company earns profits and reputational gains
if it acts within the confines of business ethics. To summaries, companies that
are responsive to employees’ needs have lower turnover in staff.

 Egs:Google, Microsoft, Intel , atagonia , NuStar Energy, SAS Institute,

Ultimate Software, Goldman Sachs, Starbuck Salesforce.com ,tata,wipro etc.

Types of Business ethics

Corporate Social Responsibility

Corporate social responsibility (CSR) is the concept of meeting the needs of

stakeholders while accounting for the impact meeting those needs has on
employees, the environment, society, and the community in which the business
operates. Of course, finances and profits are important, but they should be
secondary to the welfare of society, customers, and employees—because studies
have concluded that corporate governance and ethical practices increase
financial performance.

Transparency and Trustworthiness

It’s essential for companies to ensure they are reporting their financial
performance in a way that is transparent. This not only applies to required
financial reports but all reports in general. For example, many corporations
publish annual reports to their shareholders.

Most of these reports outline not only the submitted reports to regulators, but
how and why decisions were made, if goals were met, and factors that
influenced performance. CEOs write summaries of the company’s annual
performance and give their outlooks.

Press releases are another way companies can be transparent. Events important
to investors and customers should be published, regardless of whether it is good
or bad news.

Technological Practices and Ethics

The growing use of technology of all forms in business operations inherently
comes with a need for a business to ensure the technology and information it
gathers is being used ethically. Additionally, it should ensure that the
technology is secured to the utmost of its ability, especially as many businesses
store customer information and collect data that those with nefarious intentions
can use.

Fairness

A workplace should be inclusive, diverse, and fair for all employees regardless
of race, religion, beliefs, age, or identity. A fair work environment is where
everyone can grow, be promoted, and become successful in their own way.

Factors affecting business ethics

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.

7. 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.

8. 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.
Challenges to business ethics.

Educating employees on their ethical code of conduct is a huge challenge.

Unlike personal ethics, corporate rules and regulations are complex. Non-
compliance may not affect an employee much, but the firm could suffer huge
losses. In large firms, it is a tedious task; there is less direct communication.
Emails do not succeed in conveying the intended message accurately. If the
corporate ideology is not well-communicated to the workers, there are chances
of non-compliance. One simple mistake by one employee could tarnish the
brand image of a huge entity.

Moral compliance, bribes, sexual harassment, and a toxic atmosphere are the
common challenges faced by firms. But, there is the other extreme too.
Stringent rules drafted in the name of ethics interfere with the growth and
profitability of businesses. On top of all the philanthropy and welfare, firms
need to turn a profit. Without profits, businesses can’t pay their employees.

Ethical Dilemma (Ethical Paradox or Moral Dilemma)

Ethical dilemma is a problem in decision making between two possible

options, It describes a conflict between two morally correct courses of action.
There is a conflict between values or principle. The dilemma is that you would
be doing something right and wrong at the same time, and by taking one right
course you will negative the other right course. Ethical Dilemmas are extremely
complicated challenges that can't be easily solved. An ethical dilemma is a
conflict between alternatives, where no matter what a person does some ethical
principle and it will be compromised. Analyzing the options and their
consequences provide the basic elements for decision making.

Features of Ethical Dilemma

● Most ethical decisions have mixed outcome

● Uncertain consequences
● Have personal implivcation

● Most ethical decisions have extended consequences-The decisions of

managers have an impact upon other both within the society.

● Choice between equally undesirable alternatives

● Different courses of action possible

● Different sources(psychology, theology) offer solutions

● Unfavourable outcomes will result

● Data will not help resolve issue

● Choices have far-reaching effects on persons, relationship and society

● Resources which must be allocated are finite or limited

● Can be resolved, not solved

● There is no "right" or "wrong"

Ethical dilemma faced by managers (with example)

● Employment practices-The employment policies, practices, work

environment etc may become a source of ethical issues.

Eg:If the work conditions in subsidiary firm in a host country is inferior to the
work conditions in the home country, what standard should be followed?

Ethical issues like employing child labour, minimum wages etc also arises here)

● Human rights issues - Human rights, it's acceptance, practices etc may
vary widely between developing and developed nations. Ethical issues here is,
what should be the standard of MNC when basic human rights are violated ?
Should the firm honour such rights of it's employees in the host country, where
such rights are not considered as basic rights?
● Environment pollution - Ethical issues arise when environmental
regulations in host nations are inferior to those in the home nations. Should a
MNC s exploit such liberal environmental rules prevailing in host nations? It is
interesting to note that one of the major driving forces of many MNC s to move
to developing nations is the existence of liberal environmental laws in such
nations?

● Corruption- corrupting government officials or paying bribes in the forms

of gifts are widely employed by MNC s in host countries to remove investment
barriers and get clearances. In some countries, it is an accepted practice to give
gifts of high values as part of business negotiations. But in many countries,
corruption practices are prohibited and considered as criminal offences.

● Moral obligations- MNC s operating in host countries use the economic,

natural and social resources for it's business and growth. Naturally, it has a
moral obligation to contribute towards the growth of such country, which
enabled it to grow. This can be in the form of social responsibility activities or
investments. Some times MNCs may abuse their economic power in host
country for private gain.

Ethical gap

An ethical gap is an actual gap in a company where ethics are concerned.

They may say and act one way but ultimately they do another, thus causing a
gap of ethics to form.

Organization that are committed to maintaining ethics, need to consciously

avoid gap which risk which undermining their ethical status and eroding the
effectiveness of their ethical inactives.

1.For example ethical gap between what is said and done

● Respect is a value statement, but sometimes employees are demeaned in

front of colleagues or client.
● Recruitment policy is not applied when a family member of the boss
applies for a job.

These type of divides are harmful for the firm because, the ethical status of an
organization is judged based on demonstrable behaviour not on intentions.

2.Gap between senior management and employees.

● If organizations discriminate between senior management and employees

in how they handle incidents of misconduct, this too creates a problematic
divide

● Serious leadership, misconduct internally and kept in secret , there is a

chance to referring it to the appropriate authorities, the gap between ethical and
unethical behaviour is here, the unethical behaviour will adversely affect the
companies reputation.

3.Legal and unethical gap

The classical example in South Africa was the apartheid policy, many
actions under that banner may have been technically legal at the time, but they
certainly were not ethical.

4. Value gaps between company and employees

Misconduct of employees are punished, good behaviour is mostly takes

for granted.

5.Triple bottom line gap

Ethical gap can also occur between the 3 bottom lines, are social,
environment and economic.
● In a corporate governance guidelines, local communitie's interest is not
taken into account

● Environmental issues related to some industries is against the policies of

government.

● Economic barriers between people are there in society.

ETHICS IN FUNCTIONAL AREAS

1. HRM

Ethics in human resource management refers to the principles and standards

that guide the behaviour of HR professionals in their work. HR professionals
play a crucial role in ensuring that an organization is treating its employees
fairly and ethically, and are responsible for a range of activities that can impact
the ethical behaviour of the organization as a whole.

2. MARKETING

It is an area that deals with the moral principles behind marketing and applies to
different spheres such as in product, pricing, placing , promotion and
advertising etc. Following marketing, ethics has become crucial in today’s time
as they act as long-term branding, word-of-mouth, and trust-building
techniques. These techniques let them optimize a product or service’s presence,
leads, sales, and conversions. Marketing ethics revolves around ethical
marketing principles and standards that show acceptable marketing conduct.
Ethical marketing is a vital part of the marketing definition, thus making it
really crucial to understand.

3. OPERATIONS

Ethics in operations, generally defined in terms of social, communal and

environmental responsibilities. The role of ethics in operations management is
important especially in world-class operations and it should be considered in
corporate responsibility. This claim is based on the fact that most of the ethical
issues in businesses originate from the operations level. Another reason for
importance of ethics is the ethical consequences that arise from the strategy of
some companies to obtain cost advantage by outsourcing. Ethics in operations
management is concerned on the way how profit is obtained rather than on the
quantity of profit which is considered enough. The tension is between profits
and the responsibilities of the company.

4. FINANCE

Ethics in finance consists of the moral norms that apply to financial activity
broadly conceived. It demands adherence to the highest standards. The
consequences of unethical behavior are clear, from loss of reputation and trust
to monetary penalty and criminal prosecution. Effective leaders attend to an
inner moral compass which helps minimize the temptation toward unethical
behavior.

AREA OF HRM ETHICS

 Basic human rights, civil and employment fights

 Safety in the work place

 Privacy

 Justifiable treatment to employees (equal opportunity)

 Respect, fairness and honesty-based process in the workplace.

ETHICS IN HRM

Ethics in HRM indicates the treatment of employees with ordinary decency and
distributive justice. The ethical business contributes to the business goals as the
employees will feel motivated and they will work with effectiveness and
efficiency. Ethics in human resource management refers to the principles and
standards that guide the behaviour of HR professionals in their work.

ROLE OF HR IN PROMOTING ETHICS

1. Improve recruitment and selection

2. Conduct ethical training

3. Ensure that there are no pitfalls in performance appraisal

4. Rewards and disciplinary system

5. Improve and facilitate two-way communication

6. Avoid any kind of discrimination among the employees based on certain

factors like caste, religion, colour, culture, etc.

7. Equal opportunities must be given to every employee for his

advancement and development.

WHAT IS MARKETING

“Marketing is the science and art of exploring, creating, and delivering value to
satisfy the needs of a target market at a profit” ¬-PHILIP KOTLER

WHY WE NEED ETHICS IN MARKETING?

 Customers develop more positive attitudes

 To create values or trust

 To create good image about the organisation

ETHICS IN OPERATIONS MANAGEMENT

 Ethics in operations, generally defined in terms of social, communal and

environmental responsibilities.

 Ethics refers to a system of moral principles of an individual.

 Ethics refers to the rule of conduct.

 The customer is directly involved in the operations. Any mistake in the

service that are provided will result in a loss of trust and loyalty of the
customers.

 Ethics in production is a subset of business ethic

 Ethic Cost Efficiency is sometimes achieved at the cost of quality

 Poor processes and technology is used to keep the cost down, this is
especially true for small players who cannot afford economies of scale.

 Environmental concerns

 Safety and health of workers with proper care

 Disposing of waste products and recycling programs

 An ethical business has to be concerned with the behaviour of all

businesses that operate in the supply chain i.e.

a) Suppliers

b) Contractors

c) Distributors

d) Sales agents

FINANCE & ETHICS

 INSIDER TRADING

 Act of buying and selling a company’s stock on the basis of ‘inside’

information about the company.

 Insiders are directors, members of management, employees, internal

auditor, connected person.

 Insider trading is illegal.

 HOSTILE TRADING

 The acquisition of one company (called the target company) by another

(called the acquirer) that is accomplished by going directly to the company’s
shareholders or fighting to replace management to get the acquisition approved.

 DECEPTION

 Act of cheating/deceiving.

 Provide information truthfully, understandable, non misleading way.

 CHURNING

 Excessive or inappropriate trading for a client account by a broker who

has control over the account with the intent to generate commissions rather than
to benefit the client.

 SUITABILITY

 Recommend only suitable securities and financial products

 EQUITY AND EFFICIENCY

 Main aim is to ensure efficiency.

 Maximum output with minimum input.

 REMOVE UNFAIRNESS IN MARKETS

 Equal information

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ETHICS COMMITTEE
An ethics committee is a group of individuals who are responsible for
overseeing and enforcing ethical standards within an organization. This
committee is typically composed of members who have expertise in ethics and
are appointed by the organization’s leadership.

The main function of an ethics committee is to provide guidance and advice on

ethical issues that may arise in the organization. This may include developing
and implementing policies and procedures to ensure that employees and other
stakeholders are aware of the organization’s ethical standards and are acting in
accordance with them. The committee may also investigate and address any
ethical breaches or concerns that are brought to their attention.

In addition to its advisory role, an ethics committee may also have the authority
to make decisions or take action on ethical issues. For example, the committee
may have the power to impose sanctions or penalties on individuals or groups
who violate the organization’s ethical standards.

Overall, an ethics committee plays a crucial role in promoting ethical behavior

and maintaining the integrity of an organization. By providing guidance and
oversight, the committee can help to ensure that the organization’s actions align
with its values and mission.

DUTIES OF ETHICS COMMITTEE

The duties of an ethics committee may vary depending on the specific

organization and its policies. In general, the main duties of an ethics committee
may include:

• Developing and implementing policies and procedures to promote ethical

behaviour within the organization.

• Providing guidance and advice to employees, managers, and other

stakeholders on ethical issues.

• Investigating and addressing any ethical concerns or breaches that are

brought to the attention of the committee.

• Monitoring compliance with the organization’s ethical standards and

taking appropriate action when necessary.
• Collaborating with other committees, departments, or external
organizations to ensure that ethical issues are addressed effectively.

• Providing regular reports and updates to the organization’s leadership on

the committee’s activities and recommendations.

• Participating in training and education programs to improve the

committee’s understanding of ethical issues and best practices.

ETHICAL AUDIT

An ethical audit is a systematic review of an organization’s policies, procedures,

and practices to assess their compliance with ethical standards. The purpose of
an ethical audit is to identify any gaps or deficiencies in the organization’s
ethical practices and make recommendations for improvement.

An ethical audit typically involves a thorough examination of the organization’s

policies and procedures, as well as its operations and practices. This may
include interviews with employees, managers, and other stakeholders, as well as
a review of relevant documents and records. The audit may also include a
comparison of the organization’s practices with relevant ethical codes or
standards.

Once the audit is complete, the auditors will prepare a report that summarizes
their findings and recommendations. This report may be shared with the
organization's leadership and other stakeholders, and can be used to identify
areas for improvement and develop a plan for addressing any ethical gaps or
concerns.

Overall, an ethical audit is an important tool for ensuring that an organization is

acting in a manner that is consistent with its ethical values and standards. By
conducting regular ethical audits, organizations can maintain their integrity and
reputation, and avoid potential legal and reputational risks.

BENEFITS OF ETHICAL AUDIT

1. It improves relationship with the stakeholder who demand transparency.

2. Improves overall performance of the organization.

3. Identify Potential ethical issues and improves legal compliance.

4. Set goals against which to measure actual Performance.

5. Detect misconduct before it becomes a major problem.

RISK OF ETHICAL AUDIT

An ethical audit may carry certain risks for an organization. Some of the
potential risks of an ethical audit include:

• Reputational damage: An ethical audit may uncover practices or

behaviours that are considered unethical by stakeholders or the public. This
could damage the organization’s reputation and credibility, and may lead to
negative consequences such as loss of customers, investors, or funding

• Legal liabilities: An ethical audit may identify practices or behaviours

that are illegal or violate regulations or laws. This could expose the organization
to legal liabilities, such as fines, penalties, or even criminal charges

• Conflict and disagreement: An ethical audit may uncover differing

opinions or perspectives on what constitutes ethical behaviour within the
organization. This could lead to conflict and disagreement among employees,
managers, and other stakeholders, which could affect the organization’s ability
to function effectively.

• Resource constraints: Conducting an ethical audit can be time-

consuming and costly, and may require the use of specialized expertise and
resources. This could put pressure on the organization’s budget and staff, and
may divert attention and resources away from other priorities.

Overall, while an ethical audit can provide valuable insights and benefits for an
organization, it is important for the organization to carefully consider the
potential risks and plan accordingly to mitigate them.

ETHICAL LEADERSHIP

What Is Leadership

Leadership is the process of inspiring, encouraging and helping others to work

enthusiastically towards objectives. It is the behaviour of an individual when
he/she is directing the activities of a group towards a shared goal. The
individual influences others to work together willingly to achieve a common
goal.

Ethical Leadership

• Ethical leadership is the practice of leading with integrity in a way that is

morally correct.

• It refers to the ability of the leader to make decisions and act in a manner
that is morally correct and socially responsible. This type of leadership is
characterized by honesty, fairness and commitment to the greater good of all
stakeholders, including employees and customers.

• Ethical leaders strive to make decisions that are fair, just and consistent
with their values. They aim to create a work environment that is inclusive,
supportive and conductive for personal & professional growth.

PRINCIPLES OF AN ETHICAL LEADER

1. Respect Others - leader listens closely to followers, is empathic, and is

tolerant of opposing points of view.

2. Serve Others – The leaders altruism behaviour. Attending to the needs of

followers, and willingness to serve both the followers and the organization.

3. Just/Fair To Others – Ethical leaders make fairness and justice a top

priority to treat all of the team members in an equal manner.

4. Honest – Honesty is about telling the truth and being open

5. Build A Community – Leadership is a process whereby an individual

influences a group of people to achieve a common goal. A community is formed
is formed.

CHARACTERISTICS OF AN ETHICAL LEADER

1. Honesty – It means leaders commit to presenting facts as they are, and
communicate honestly with others. Making it easy to trust them.

2. Justice – It means to be fair and to treat everyone equally. Having no

favoritism and condemn improper behaviors and manipulations.

3. Respect – Ethical leaders respect others around them, regardless of their

position. They listen to each stakeholder and value diversity.

4. Integrity – Integrity is shown when words and actions are aligned. A

person lives in accordance to their deepest value and always keeps their word.
Individual behaves ethically and does the right thing, even behind closed doors.

5. Responsibility – Accepting to be in charge. Embracing power and duties

that come with it

6. Transparency- This is concerned with the communication with all

stakeholders. It means keeping an open dialogue, accepting feedback and
disclosing information that others need to execute their work

IMPORTANCE OF ETHICAL LEADERSHIP

reasons why ethical leadership is important for an organization are;

1. Leads to positive culture

Ethical leadership is considered quite important in improving the morale of the

employees in a manner that they won’t behave unethically to make profits. This
prevents behavioral and organizational corruption.

2. Prevents bad PR and Scandal

When the whole organization functions under ethical leadership, it comprises a

positive and ethical culture that naturally avoids bad PR and company scandals.

3. Ensures loyalty

A business or brand that is led by ethical leadership has employees as well as

customers who are loyal to that because of the ethical value system of that
brand.
• Ethical leadership can promote employee engagement, increase
productivity and enhance brand reputation. Organizations that engage in ethical
behaviour can attract customer loyalty by staying true to their mission
statements and organization values.

• Companies that practice ethical leadership can protect themselves from

lawsuits and ethical dilemmas in the long run.

ETHICS AND BUSINESS STRATEGY

WHAT IS A BUSINESS STRATEGY?

A business strategy refers to all decisions made and actions taken by a company
to achieve its goals. It outlines the plan of action to achieve the vision and set
objectives of an organization, and guides the decision making processes to
improve the company’s financial stability in a competing market.

It normally involve the following stages

• Stage 1 – Focuses on the Mission Statement and Values of the

organization. Reason for company being established, its purpose. “ Who are
we?”

• Stage 2 – Focuses on SWOT analysis and performance of organization.

“Where are we now?”

• Stage 3 – Focuses on company’s goals and objectives. What it strives to

achieve. “Where do we want to go?”

• Stage 4 – looks at the performance targets. “How will we know we have

arrived?”

• Stage 5 – Actionable steps. Steps necessary to be taken to achieve goal.

“How are we getting there?

HOW ETHICS AFFECTS BUSINESS STRATEGY

• Ethics and business strategy are closely related because an organizations

ethical values and practices can have an impact on it’s overall strategy and
success. A strong ethical foundation can help an organization to establish trust
and credibility with stakeholders, such as customers, employees and investors.
This can lead to better performance and improved financial results.

• A lack of ethical practices can have negative consequences for an

organization. E.g If an organization is known for unethical behaviour it may
face legal & financial penalties and experience damage to its reputation and
relationship with stakeholders. Which would make it more difficult for
organization to achieve it’s objectives.

• To integrate ethics into the business, organization must establish a code

of ethics and a set of ethical principles hat guide decision-making and behaviour
within an organization

Ethical Principles To Be Followed For A Successful Business:

1. Protect basic rights of the employees/ workers

2. Follow health, safety and environmental standards

3. Provide truthful and reliable advertising

4. Encourage feedback from both employees and customers

5. Present factual information. Maintain accurate and true business records.

6. Mission and vision of the company should be clear