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BUSINESS ETHICS

BY – Zara Syed Naveed

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• Ethics involves a discipline that examines good or bad practices within the context of a moral duty

• Moral conduct is behavior that is right or wrong

• Business ethics include practices and behaviors that are good or bad .

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Business ethics are moral principles that guide the way a business behaves. The same principles that determine an individual’s actions also apply to business.

Acting in an ethical way involves distinguishing between “right” and “wrong” and then making the “right” choice. It is relatively easy to identify unethical business practices.

For example, companies should not use child labour. They should not unlawfully use copyrighted materials and processes. They should not engage in bribery.

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If you want to run a sustainable business having a high set of ethics is critical, and there can be serious consequences if poor ethical decisions are made. Regardless of whether you believe good business ethics contribute to profits or not, poor ethics will have a major impact on your bottom line.

Without standards you have misinformed, misguided and bad decisions being made, which can cause financial loss or injury to other people, or the business. Many legal cases are raised because of people seeking compensation for their losses as a result of business people making unethical decisions.

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FEATURES / CHARACTERISTICS OF BUSINESS ETHICS

Code of conduct : Business ethics is a code of conduct. It tells what to do and what not to do for the welfare of the society. All businessmen must follow this code of conduct.

Based on moral and social values : Business ethics is based on moral and social values. It contains moral and social principles (rules) for doing business. This includes self-control, consumer protection and welfare, service to society, fair treatment to social groups, not to exploit others, etc.

Gives protection to social groups : Business ethics give protection to different social groups such as consumers, employees, small businessmen, government, shareholders, creditors, etc.

New concept : Business ethics is a newer concept. It is strictly followed only in developed countries. It is not followed properly in poor and developing countries.

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Provides basic framework : Business ethics provide a basic framework for doing business. It gives the social cultural, economic, legal and other limits of business. Business must be conducted within these limits.

Voluntary : Business ethics must be voluntary. The businessmen must accept business ethics on their own. Business ethics must be like self-discipline. It must not be enforced by law.

Requires education and guidance : Businessmen must be given proper education and guidance before introducing business ethics. The businessmen must be motivated to use business ethics. They must be informed about the advantages of using business ethics. Trade Associations and Chambers of Commerce must also play an active role in this matter.

Relative Term : Business ethics is a relative term. That is, it changes from one business to another. It also changes from one country to another. What is considered as good in one country may be taboo in another country.

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2 BRANCHES OF ETHICS

Descriptive ethics, also known as comparative ethics, is the study of people's beliefs about morality. Descriptive ethics is a form of empirical research into the attitudes of individuals or groups of people. Those working on descriptive ethics aim to uncover people's beliefs about such things as values, which actions are right and wrong, and which characteristics of moral agents are virtuous.

Research into descriptive ethics may also investigate people'sethical ideals or what actions societies reward or punish in law or politics. What ought to be noted is that culture is generational and not static. Therefore a new generation will come with its own set of morals and that qualifies to be their ethics. Descriptive ethics will hence try to oversee whether ethics still holds its place.

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Normative ethics

 Is the study of ethical action. It is the branch of philosophical ethics that investigates the set of questions that arise when considering how one ought to act, morally speaking. Normative ethics is also distinct from descriptive ethics, as the latter is an empirical investigation of people’s moral beliefs.

To put it another way, descriptive ethics would be concerned with determining what proportion of people believe that killing is always wrong, while normative ethics is concerned with whether it is correct to hold such a belief. Hence, normative ethics is sometimes called prescriptive, rather than descriptive.

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The Relation Between Law and Ethics

A relationship exists between law and ethics. In some instances, law and ethics overlap and what is perceived as unethical is also illegal. In other situations, they do not overlap. In some cases, what is perceived as unethical is still legal, and in others, what is illegal is perceived as ethical.

Though law often embodies ethical principles, law and ethics are far from co-extensive. The law does not prohibit many acts that would be widely condemned as unethical. And the contrary is true as well. The law also prohibits acts that some groups would perceive as ethical.

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For example lying or betraying the confidence of a friend is not illegal, but most people would consider it unethical. Yet, speeding is illegal, but many people do not have an ethical conflict with exceeding the speed limit. Law is more than simply codifying ethical norms.

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3 Models of Management Ethics

Immoral ManagementA style devoid of ethical principles and active opposition to what is ethical.

Moral ManagementConforms to high standards of ethical behavior.

Amoral Management : Intentional - does not consider ethical factorUnintentional - casual or careless about ethical considerations in business

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WHO IS RESPONSIBLE FOR CREATING ETHICS IN AN ORGANIZATION?

A company’s managers play an important role in establishing its ethical tone. If managers behave as if the only thing that matters is profit, employees are likely to act in a like manner.

A company’s leaders are responsible for setting standards for what is and is not acceptable employee behavior . It’s vital for managers to play an active role in creating a working environment where employees are encouraged and rewarded for acting in an ethical manner.

Ethical Leadership is leading by knowing and doing what is right. The problem with ethical leadership is that it is difficult to define “right”. Ethical leadership is divided into two parts. The leader must act and make decisions ethically, and second, the leader must also lead ethically in their attitudes and interactions

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Traditionally, the view of leadership has been that the main goal of leaders is to increase production and profits. The traditional view of leadership is slowly diminishing, as more theorists in the 21st century are asserting that leaders also have the responsibility for ensuring standards of moral and ethical conduct. Good leadership refers not only to competence, but to ethics and transforming people as well.

It is believed that the nurturing aspect of leaders can raise organizational cultures and employee values to high levels of ethical concern. Ethical leadership requires ethical leaders. If leaders are ethical, they can ensure that ethical practices are carried out throughout the organization.

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OTHER FACTORS IMPACTING

ORGANIZATIONAL ETHICS

Corporate culture

Existence and application of a written code of ethics

Formal and informal policies and rules

Norms for acceptable behaviour

Financial reward system

System for recognizing accomplishment

Company attitude toward employees

How employees are selected for promotions

Hiring practices

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7 Principles of Admirable Business Ethics

1. Be Trustful: Recognize customers want to do business with a company they can trust; when trust is at the core of a company, it's easy to recognize. Trust defined, is assured reliance on the character, ability, strength, and truth of a business.

2. Keep An Open Mind: For continuous improvement of a company, the leader of an organization must be open to new ideas. Ask for opinions and feedback from both customers and team members and your company will continue to grow.

3. Meet Obligations: Regardless of the circumstances, do everything in your power to gain the trust of past customer's and clients, particularly if something has gone awry. Reclaim any lost business by honoring all commitments and obligations.

4. Have Clear Documents: Re-evaluate all print materials including small business advertising, brochures, and other business documents making sure they are clear, precise and professional. Most important, make sure they do not misrepresent or misinterpret.

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5. Become Community Involved: Remain involved in community-related issues and activities, thereby demonstrating that your business is a responsible community contributor. In other words, stay involved.

6. Maintain Accounting Control: Take a hands-on approach to accounting and record keeping, not only as a means of gaining a better feel for the progress of your company, but as a resource for any "questionable " activities. Gaining control of accounting and record keeping allows you to end any dubious activities promptly.

7. Be Respectful: Treat others with the utmost of respect. Regardless of differences, positions, titles, ages, or other types of distinctions, always treat others with professional respect and courtesy.Recognizing the significance of business ethics as a tool for achieving your desired outcome is only the beginning. A small business that instills a deep-seated theme of business ethics within its strategies and policies will be evident among customers. It's overall influence will lead to a profitable, successful company. By recognizing the value of practicing admirable business ethics, and following each of the 7 principles, your success will not be far off.

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IMPORTANCE OF BUSINESS ETHICS

Public expects business to exhibit high levels of ethical performance and social responsibility

Encouraging business firms and their employees to behave ethically is to prevent harm to society.

Promoting ethical behaviour is to protect business from abuse by unethical employees or unethical competitors.

High ethical performance also protects individuals who work in business.

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Stop business malpractices : Some unscrupulous businessmen do business malpractices by indulging in unfair trade practices like black-marketing, artificial high pricing, adulteration, cheating in weights and measures, selling of duplicate and harmful products, hoarding, etc. These business malpractices are harmful to the consumers.

Improve customers' confidence : Business ethics are needed to improve the customers' confidence about the quality, quantity, price, etc. of the products. The customers have more trust and confidence in the businessmen who follow ethical rules.

Survival of business : Business ethics are mandatory for the survival of business. The businessmen who do not follow it will have short-term success, but they will fail in the long run. This is because they can cheat a consumer only once. Therefore, if the businessmen do not follow ethical rules, he will fail in the market.

Safeguarding consumers' rights : The consumer has many rights such as right to health and safety, right to be informed, right to choose, right to be heard, right to redress, etc. But many businessmen do not respect and protect these rights. Business ethics are must to safeguard these rights of the consumers.

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Develops good relations : Business ethics are important to develop good and friendly relations between business and society. This will result in a regular supply of good quality goods and services at low prices to the society. It will also result in profits for the businesses thereby resulting in growth of economy.

Creates good image : Business ethics create a good image for the business and businessmen. If the businessmen follow all ethical rules, then they will be fully accepted and not criticised by the society.

Smooth functioning : If the business follows all the business ethics, then the employees, shareholders, consumers, dealers and suppliers will all be happy. So they will give full cooperation to the business. This will result in smooth functioning of the business.

Consumer movement : Business ethics are gaining importance because of the growth of the consumer movement. Today, the consumers are aware of their rights. Now they are more organised and hence cannot be cheated easily. They boycott poor quality, harmful, high-priced and counterfeit (duplicate) goods. Therefore, the only way to survive in business is to be honest and fair.

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Protecting employees and shareholders : Business ethics are required to protect the interest of employees, shareholders, competitors, dealers, suppliers, etc. It protects them from exploitation through unfair trade practices.

Consumer satisfaction : Today, the consumer is the king of the market. Any business simply cannot survive without the consumers. Therefore, the main aim or objective of business is consumer satisfaction. Consumer will be satisfied only if the business follows all the business ethics, and hence are highly needed.

Importance of labour : employees or workers play a very crucial role in the success of a business. The business must give them proper wages and salaries and provide them with better working conditions. There must be good relations between employer and employees.

Healthy competition : The business must use business ethics while dealing with the competitors. They must have healthy competition with the competitors. They must not do cut-throat competition. Similarly, they must give equal opportunities to small-scale business. They must avoidmonopoly. This is because a monopoly is harmful to the consumers.

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ELEMENTS OF MORAL JUDGMENT

Moral Imagination : This term refers to the ability of a person to recognize that business, moral or ethical relationships do not exist independent of one another but instead are intertwined. A person with moral imaginations is sensitive to ethical issues as he makes business decisions .Those with moral imagination see past the bottom-line mentality and recognize that everyday choices have moral and ethical implications.

Moral Identification and Ordering :Once a person recognizes moral issues exist, it is necessary to identify and rank, or prioritize, the issues. A person who can order and identify these ethical problems can distinguish the valid and important from the rhetorical. The person can recognize which moral questions are relevant and know that moral issues can be prioritized and addressed.

Moral Evaluation :Those competent in moral evaluation use consistency and coherence in their ethical decision making, develop systems for making moral decisions and understand and identify moral and economic results of decisions. These people have foresight and make decisions based on a concern for others as well as the goals of the organization.

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Tolerance of Moral Ambiguity : The fourth aspect of good moral judgment is the understanding that there is ambiguity and disagreement in ethical decision making. If a person accepts that disagreement in a discussion of ethics, the person is more likely to make morals a part of the decision-making process. This element says that despite lack of clear-cut answers, people can make decisions that represent the best ethical choice as they understand it, knowing that others may disagree.

Integration of Managerial and Moral Competence: Most ethical scandals that organizations have are created as the result of economic decisions. Leaders need to recognize that there are business and economic consequences of ethical decisions, and moral competence is an integral part of managerial or leadership competence. Leaders who understand this element can foresee ethical problems and lead ethical decision making.

Moral Obligation This element is foundational to all the other elements. The person with moral obligation feels a necessity or urgency to act with a concerns for justice, due process and fairness to all peoples, groups and communities. This sense of integrity or moral urgency is the motivating force to making moral judgments and implementing ethical decisions.

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LEADERSHIP

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Autocratic LeadershipIn autocratic leadership (also known as authoritarian leadership), the leaders make most or all of the decisions, without the involvement or input of the employees. Autocratic leaders inform their subordinates on what must be done, how it should be done and when it must be completed. This kind of leader is likely to ignore suggestions made by staff members.

Democratic LeadershipDemocratic leadership (also known as participative leadership) gives some decision-making powers to the group (i.e. the other members of the team), but in the end the final say still rests with the leaders - staff members just have an opportunity to provide their opinions and recommendations going forward.

Laissez-faire LeadershipLaissez-faire leadership (also known as delegative leadership) is a rather relaxed leadership style, giving complete decision-making control to the staff. It is up to them to manage their workload, while the leaders neither get in the way nor closely oversee what they are doing.

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ETHICAL DECISION MODELS

•Utilitarian Model•An ethical decision is one that produces the greatest good for the greatest number of people.

•Moral Rights Model•An ethical decision is one that best maintains and protects the fundamental rights and privileges of the people affected by it.

•Justice Model•An ethical decision is one that distributes benefits and harms among individuals in a fair, equitable, or impartial way.

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Thank You !

Presentation By : Zara Syed Naveed

(Mount Carmel College)