Ethics are broader than what is stated by law, customs and public opinion. The ethical behaviour may determine the path of humanity. Consequential Ethics. Ethical behaviour not only improves profitability but also fosters business relations and employees productivity. Some of these ethical values are as follows: i. (c) Products those are innately deleterious like alcohol, tobacco, fast motor vehicles, warfare, chemical manufacturing etc. The communication should be in cleared, open and justified manners. People also frequently seem to believe that a profitable company must necessarily be unethical. This paper examines the importance of Aristotle’s theory of virtue ethics in business and organization management, in doing so, the paper summarizes the basic tenets of the virtue theory and presents some case studies. Playing the business game by the market rules will ensure that the ‘individual hand of the market’ would generate social welfare to community. Business owners and managers often implement these principles to ensure their company’s overall mission is in sync with society as a whole. Similarly, you may ask, what are five theories of ethics? If you follow this approach, you should choose a course of action that you believe can apply to all people under all situations and that you would want applied to yourself. Ethical business practices strengthen customer relationship that is of prime importance for long-term organizational success. Characteristics 6. Determinant # 9. For example, bribery by its very nature is wrong irrespective of its consequences. Among the business ethics theories, this is typically seen as the oldest theory, as it was propagated by many philosophers, such as Jeremy Bentham, James Mill, and Mill's son John Stuart Mill. The utilitarian approach, thus, puts focus on behaviours and their results, not on the motives for such actions. Deontological theories suffer from the following weaknesses: (i) Deontological theories fail to provide a precise criteria to understand our moral obligations and to resolve moral conflict. For the long run existence and sustained profitability of the firm, business is required to conduct itself ethically and to run its activities on ethical lines. The Institute of Management Accountants (IMA) established four ethical standards that accountants should live by. Fore mostly, in business as per their products and services, the customers should be satisfied at every stage. 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. Ethical behaviour of people doing business is very important in our society. Is it fair to all concerned? This was mainly because of the distorted view of business that society had during that time. Nature, 8. A sick and bankrupt organisation is a social liability and can hardly contribute in the area of social responsibility. Managers should indulge in soul-searching questions such as: “would I be comfortable explaining to a national TV audience why I preferred this action?”. Today, more and more interest is being given to the application of ethical practices in business dealings and the ethical implications of business. These theories propose a set of ethical principles that can be easily assessed and expressed by the typical business person--not only by ethical philosophers. They evaluate the compliances of the organisation with these ethical standards. Books of accounts are prepared by recording focus expenses in order to show less profit to elude tax liability. a. The observation of business ethics is only in the hands of businessmen. The antennae of these managers are tuned to public opinion and they react to it. Thus, businesses also have choices-a choice to maximise their profits and a choice to do good for the society in which they live and operate. Understanding the importance of ethics in human resources is crucial for any business owner, whether in a local startup or a multinational powerhouse. Business Jargons Business Ethical Theories Ethical Theories Definition: The Ethics is the branch of philosophy that deals with the principles of morality and the well-defined standards of right and wrong that prescribe the human character and conduct in terms of obligations, rights, rules, benefit to society, fairness, … This varies from place to place, based on countries' specific cultural or societal beliefs. Social forces and pres­sures have considerable influence on ethics in business. Determinant # 8. Defensive Factors refers to the attempts of an individual to find easy ways to escape from an act of violation of a law or a duty. This view sought to integrate the two previous views presenting a more realistic picture. Generally, individual companies try to formulate their own ethical standards for their behaviour. Also known as … Nevertheless, they find it difficult to translate business ethics into practice. Bok, S. (1983). – This principle is based on inner-feeling of persons to analyse the sense of right and wrong. They must follow the rational attitudes and behaviour. Society, in the recent past, has demonstrated how a special status can be conferred on backward castes; boycotted products, and severe action to prevent the construction of nuclear power plants. At the same time, the mental peace and purity also becomes the ways for politeness and tolerances etc. The behaviour of a businessman has more impact within the business organisation than outside. Principle of ‘sacrifice’ – A person, who is able to sacrifice a part of his asset or effort, commands a superior place in the organisation. Duty or obligation is the fundamental concept in deontological theories. How is ethical theory used in contemporary teaching in business ethics? Principle of non-Cooperation in Evils – It is needful that businessmen should try to make non-cooperation or discourage the evils, misconduct and unethical behaviour not only with different customers but with society also. Principle of ‘integrity’ – Integrity emphasis unity which helps to reap the benefits of division of labour. is a platform for academics to share research papers. To ensure ethical behaviour, a corporate training programme is established which deals in assisting employees to understand the ethical issues that are likely to arise in their workplace. The history of Ethics goes back to 1970’s when the term Business Ethics was commonly used. Hence, the first and foremost ethical obligation of every business is to make profits for its shareholders, for its employees, for its creditors and most importantly, for itself, so that it can discharge its social responsibilities and welfare commitments. Business ethics theories often use this approach by not imposing their missions, products, or systems on consumers. Business ethics means the behaviour of a businessman while conducting a business, by observing morality in his business activities. Having realised this, more and more business organisations are today accepting business ethics as part and parcel of their daily business conduct. A sick and loss making company is a liability and a burden to society-it cannot discharge its responsibilities to the society, it cannot meet its welfare commitment to its employees, indeed it cannot even compensate its workforce for their efforts, it cannot generate revenue for its shareholders, it cannot meet consumer demands adequately and cannot do all those things that a healthy responsible organisation is required and expected to do. Any written ethical code will not work unless supported and followed by a proper training programme. human decorum and human aspects within their policies, programmes and different working areas. Thus, the motive with which actions are done determine their Tightness. It is based on the social customs, traditions, standards, and attributes. Ethics help us to understand why this is happening, what will be its implications and how we will address this situation. Businesses can implement this approach, although it may run against the grain of society until the values take hold among the general public. What may be ethical behaviour to ‘X’ may be unethical to ‘Y’. Science and technology should, by all means, be used to uplift and make better the lives of human beings all over the world, and specially in such backward regions as this boatman lived. Different sources (psychology, theology) offer solutions, 7. Top management can communicate the ethical standards to the lower management which can be further transferred to the operational level. Tolerance – It helps to maintain cordial relationships among the employees of an enterprise. Such a loss-making company becomes a nuisance and a burden to the economy and has no right to exists in the marketplace. Business Ethics Practiced by Indian Companies are: 1. Training will help them to familiarize with company’s ethical code of behaviour. If these characteristics of an individual are negative then they are reflected in his/her behavior. (i) Teleological theories are consistent with the ordinary moral reasoning. Some of the elements of Business Ethics are: Code of conduct is statements of organizational values. In fact, business itself is considered to constitute of ethics, as it does so much good to so many people and specially to the society it serves. Personality factors refer to the prominent characteristics of an individual. Determinant # 2. d. Maintain confidential service to answer employee’s questions about ethical issues. Categorical Imperative of Immanuel Kant Kantianism is an ethic of duty . Perseverance – Perseverance refers to the quality of an individual to not to give up soon and keep on trying for achieving goals. And to their astonishment and delight, they have found that being ethical and moral have given them an unique edge and advantage in the marketplace. Each theory includes specific traits or characteristics that focus on specific ethical principles that can help companies correct business issues. The code should reflect the managements desire to incorporate the values and policies of the organization. Friedman feared that if business ethics formed a part of corporate culture, ultimately the customer would be called upon to bear the cost of the ethical practices of the organisation, as Friedman erroneously assumed that such ethical practices would increase the prices of the organisation’s products. Moral standards depend upon our value system; c. The value system of people depend upon their background and childhood experience; and. Accordingly, we should perform all the role and behaviour to another person’s for their esteemed interest. Many executives suggested that the company should sell the car at $2,011 but include the safety feature. Bentham’s theory is criticised for two reasons. They also dispute on how we should value humans in our actions. 7. For example, telling a lie or breaking a promise is right if its consequences are better than those of any alternative course of action. When we grow up and enter organisations we continue to judge events, people and situations with preconceived notions of “what ought “and” what ought not” to be(Robbins) Values (such as freedom, honesty, self-respect, equality etc.) The utilitarian approach focuses on using ethical actions that will promote the most good or value among a society while limiting the amount of harm to as few people as possible. The purpose of enforcing the acts is to protect the public interests including the business and the businessmen. They believe that business being economic entities, only economic values should be their guiding principles and the sole determinant of their performances. For example, accepting gifts from father-in-law might be socially acceptable but not ethical; owners pocketing profits without sharing the gains with workers might be legally permissible but not ethical. d. The background and experience of people are vastly different. (v) Avoid penal action- Ethical problems if detected at earlier stage helps in avoiding penal action and lower fines for the organisation. Ethical standards are referred to as the principles or ideals of human conduct.” Thus, ethics implies good character and morality and refers to generally accepted human character and behaviour considered, Business Ethics – Concept and Definitions of Business Ethics. Individuals with perseverance can keep their spirits high to achieve the desired goals. One is bound to affect the other. If a custom is adopted and accepted by businessman and public, that custom will become an ethics. When new employees are to be recruited, the induction training should be arranged for them. Principle of Commitment – According to this principle, every businessmen should be able to fulfill their commitments and assurances as given to other persons. Concepts and Theories of Business Ethics INTRODUCTION. This website includes study notes, research papers, essays, articles and other allied information submitted by visitors like YOU. Ethical dilemma is also known as ethical paradox or moral dilemma. This View was proposed by Talcott Parsons, wherein he sought to integrate ethical behaviour and business in a new area called Business Ethics. “Business Ethics is an art and science for maintaining harmonious relationship with society, its various groups and institutions as well as recognizing the moral responsibility for the Tightness and wrongness of business conduct”, as said by Wheeler. This is obvious when you read the news and see stories about investors being misled by executi… truthfulness and tolerance for developing the feelings of mental peace. (3) Maximisation – A right action is one that creates greatest amount of net pleasure. (iv) Insurance policy – It ensures the employees that all the policies are legal and all the employees are treated equally in the organisation. The reason is that there is no distinction between a businessmen and his business. Day, in ‘The Social Relevance of Business’ had stated –, “As a statement of purpose, maximising of profit is not only unsatisfying, it is not even accurate. He further believed the social responsibility of business is contrary to basic business functions. Deontological theories have the following merits: (i) Deontological theories make sense in cases in which consequences are irrelevant. For, goodwill, loyalty genuine pride, and above all, mental peace, cannot be calculated accurately in terms of money. Involves value judgments about actions or consequences, 5. Compensation, recognition and status are common values in the workplace. Ethics should be brought into business by showing that ethical considerations are consistent with business pursuits, in particular with the pursuit of profit. To follow one action would result in transgressing another. 2. There are number of trade unions functioning in India. This type of practice cannot be controlled by anybody without the whole hearted co-operation of businessmen. Principle of Universal Values – It is required that every businessmen should conduct and perform the task and different business activities to be based on universal assumptions, customs and overall accepted norms and principles by society. Individual behaviour of the business set the agenda for other companies working in the industry concerned and managers and employees are expected to comply with these standards. Trade union acts as a watchdog to ensure observation of business ethics. These questions include about the morality of the activities, policies, practices, or organizational structure of an individual business taken as a whole. Importance 11. Business ethics comprises various traits, such as trustworthiness and transparency in customer services. Principle of ‘taxation’- The one who is taxed more is encouraged to stay fit for a longer period by proper appreciation. Safeguarding Public from Business Malpractices: Business malpractices have the potential to inflict enormous harm on individuals, communities, and the environment. Business ethics is concerned with the behaviour of businessman in doing a business. This view is of the opinion that business is only a subset or sub-structure of the moral structure of the society. The corporation is a creation of society whose purpose is the production and distribution of needed goods and services, to profit of society and itself. iii. These are ethical questions raised about a particular individual or particular issue within a business. For example, birth control is mandatory in Communist societies but not in Catholic Christian societies. Business activity raises a host ofinteresting philosophical issues: of agency, truth, manipulation,exploitation, justice, and more. As a specific theory of the way corporations interact with the surrounding community and larger world, corporate social responsibility (CSR) is composed of four obligations: The economic responsibility to make money. They are difficult to locate, to eliminate and are consequently much more dangerous and threatening to business. 5. 4. Without earning social sanction, no business can hope to survive, leave alone develop and flourish. (b) Issues surrounding the representation of employees and the democratization of the workplace. Better co-operation and co-ordination. Traditionally, ethics referred to the philosophical study of morality, the latter being a more or less systematic set of beliefs, usually held in common by a group, about how people should live.Ethics also referred to particular philosophical theories of morality. Ethical standards are ideals of human conduct. 4. Bentham and Mill explained the doctrine of utilitarianism: Jeremy Bentham (1748-1832) explains this principle as follows: “By the principle of utility is meant that principle which approves or disapproves of every action whatsoever, according to the tendency which it appear to have to augment or diminish the happiness of the party whose interest is in question – or, what is the same thing in other words, to promote or to oppose that happiness.”. The IMA states that an accountant should not violate any of these standards. Ethical theories depend on what is right and wrong and the end result of the action. Principle of Publicity – According to this principle, all the activities and performance as conducting in business houses, should be well informed to every person or organisation who are directly or indirectly attached with business. Ethics is the embodiment of moral values, which describes what, is ‘right’ and what is ‘wrong’ in human behaviour and what ‘ought to be’. Act and the like are some of the legislative measures. Eventually philosophers became involved and brought ethical theory to bear on the relevant ethical issues and hence business ethics became a more institutionalized part of business. Ethics committees can rise concerns of ethical nature; prepare or update code of conduct, and resolve ethical dilemma in organization. Deontological theories. Business ethics forms an important branch of applied ethics. 5. Business ethics is concerned basically the study of human behaviour and conducts. Choices have far-reaching effects on persons, relationships and society, 8. Kant’s Categorical Imperative (Universal Approach): Act in way that the action taken under the circumstances could be a universal law or rule of behaviour. These two are extreme views, known as the Unitarian View and the Separatist View. Certainly, they should. It was Friedman who forwarded the classical view that the only responsibility of business is to earn profits, arid he goes on to say, in his book, ‘Capitalism & Freedom’, thus-, “There is one and only one responsibility of business-to use its resources and engage in activities designed to increase its profit so long at it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud. Principle of ‘reward’- The one who performs well is encouraged in form of rewards. From a managerial standpoint, it is important to know that values are those concepts, principles, things, people or activities for which a person is prepared to work hard and even make sacrifices for. 4. Business ethics provide basic guidelines and parameters towards most appropriate perfections in business scenario. For example, if contributions to political parties by companies are being viewed as excessive and unethical, the practice can be banned. This happens due to the conditioning of their mind to obey orders right from their childhood. Recently an award-winning regional language file of India, depicted the plight of an aged boatman whose occupation was to transport people and goods across the local river, as there was no bridge over the river. a. Importance of Ethics in Finance, Human Resource Development, Marketing and Production, Business Ethics – 10 Major Determinants of Business Ethics, Advantages of Managing Ethics in Workplaces, Values and their Impact on Human Behavior, Rationale of Business Ethics: Survival of Business, Need of a Stable Society, Growing Clout of Business, Effective Decision-Making and a Few Others, Dimensions: Systematic Issue, Business Issues and Individual Issues. (a) Ethical problems arising out of use of new technologies that are deleterious to health, safety and environment, genetically modified food, radiations from mobile phones, medical equipment etc. Business ethics and corporate social responsibility are both related to the ethical behavior a business prides itself in. John Stuart Mill (1806-1873) modified the principle of utility by recognising that pleasures differ in their quality which is an important as the quantity of pleasure. A business or company is considered to be ethical only if it tries to reach a trade-off between perusing its economic objectives and its social obligations, i.e., between its obligations to the society where it exists and operates; its obligations to its people due to whom it can even think of pursuing economic goals; to its environment, from whom it takes so much without it demanding anything back in return; and the like. It also necessitates an honest code of conduct in an enterprise. Likewise, citizens have a moral right to control access to personal information about themselves and its use by public and private agencies. What Is the Relationship between Business Ethics and Values? So, he should obey the laws even though he may personally believe them to be unjust or immoral. The term ‘deontological’ is derived from the Greek word ‘deon’ which means duty. Principle of Satisfaction – Every businessmen are required to create and develop their role and behaviour to establish pleasure and happiness with other persons and the society at large. Theories of. Seeking the fulfillment of mutual interests. It challenges to bring in clarity, substance, and precision of argument into the area of morality. Content Guidelines 2. 16. Each element of that statement is needed if the whole is to be accurate; you cannot drop one element without doing violence to the facts.”. 2. In fact, Milton Friedman, the celebrated economists, who won the Noble Prize for Economics, in 1976, hold the view that business should go on with the business of producing goods and services efficiently, and leave the solution of social problems to government agencies and concerned individuals. This is fundamentally subversive doctrine.”. Bowen, S. A. With the wide spread interest in business activities since then, with the introduction of business and management education all over the world, and with the rapid widening of the market place and the astronomical growth of consumerism worldwide, the value of profit has been given its deserved place. Deals with a number of issues, which are as follows: a. Misinforming the customers about the products or services, b. According to critics, one absurd consequence of Bentham’s principle is that it would be better to live the life of a satisfied pig than that of a dissatisfied human being such as Socrates. Will it build goodwill and better friendships? Ethics committee at the board level- The committee would be charged to oversee development and operation of the ethics management programme. (ii) Ross gave no order of priority among his rules and when these rules are in conflict there is no guide. It deals with retaining and creating a long-lasting impression in the minds of customers. Four universal duties are to help others who are in need; not to harm or injure another; not to cause unnecessary suf­fering; and to support and comply with just institutions. The theories of business ethics can be divided into two categories: The term ‘teleological’ is derived from the Greek word ‘telos’ which means an end. Ethical theories in business include: Consequentialist normative theory: … Disclaimer Copyright, Share Your Knowledge Managers should manage only in the interests of the shareholders and shareholders should be put in the position where they decide how their wealth and resources will be used. Managerial ethics, thus, are those principles that guide the conduct and thinking of managers with respect to what is good or bad; right or wrong (Barry). They guide our behaviour wherever we go and are the primary sources of our actions. 11. These views were put forward in the 1950s and the 1960s. Ethics seeks, to improve the human condition by focusing on the causes and consequences of these malprac­tices being done by the business organisations. Ethics develop the ability to assess the benefits and problems associated with different ways of managing ethics in organizations. are clear for everyone to see and are generally considered reprehensible. But, how much profits to make, the means and methods of making it, and at what cost-that is the ethical question. Principle of Communicability – According to this principle, there is a need to make effective means of communication with the internal and external persons as engaged with business houses. Few trends could so thoroughly undermine the very traditions of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible. ii. (d) Issues affecting the privacy of the employer- whistle-blowing. Ethics management committee – It will be charged with implementing and administrating an ethics management programme, including administrating and training about policies and procedures, and resolving ethical dilemmas. Because, a company which cannot make profits and makes losses, misutilises scarce national resources cannot pay back creditors, does not make wealth for its shareholders, make huge liabilities, upsets the economy, promotes inefficiency and most importantly, cannot, at any cost discharge its social responsibility, meet its welfare commitments and jeopardises the future of its employees. Decorum and human aspects within their policies, programmes and different working areas by anybody without the safety.... With business pursuits, in fact, defining the term business ethics a. Helps in avoiding conflicts in the enterprise to win the trust of customers newspapers... 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