Business Ethics
Ethics
Ethics refers to
• Doing the right thing
• In the right way
• For the right reason
What is right may differ from country to country
and from company to company or even from
person to person.
Business Ethics
• Companies are the members of a society
• Draw revenue from the society
• Get capital and human resources from the
society
• Planning, organizing leading and controlling
Evolution of corporate ethics
• Business had negative image
• Ruthless pursuit of profits
How to enforce what is right?
• Law
• Industrial and professional codes
• Internal codes
Need and importance
A company that follows ethics
• Earns reputation
• Able to infuse honesty in its employees
• Attract and retain better employees
• Able to attract capital more easily
• Play a role in the betterment of the society
• Keep all the stakeholders happy
Characteristics of an ethical Organization
• Formal code of ethics or integrity policy
• Regular interaction with all its stakeholders
• Obsessively fair in dealing with everyone
• Managers take responsibility individually-they
do not hide behind the collective responsibility
• Whatever they do they do it for the right reason
• High degree of efficiency but not at the expense
of ethics
Roots of Unethical Behavior
• Pressure to balance work and family life
• Poor communication between the company and its
employees
• Poor leadership that fails to motivate
• Heavy workload
• Long working hours
• Undue pressure to meet sales or profit targets
• Lack of recognition of effort or honesty
• Politics at workplace, favoritism
• Personal circumstances, home worries, sickness in
family etc.
Aspects of unethical behavior
• Bribery
• Coercion
• Conflict of interest
• Tax Evasion
• Insider trading
• Lack of regard for the society
How to enforce ethical conduct in a
society?
The first step towards building an ethical
environment in a company is for the board to
promulgate a formal code of ethical conduct
which clearly and categorically lays down the
company’s policy on ethics and declares its total
commitment to adherence to ethical principles
in all spheres of its activities. In particular the
following should be included in the code:-
How to enforce ethical conduct in a
society?
Ethical decision making
Avoidance of conflict of interest
Honesty and integrity
Fairness in dealing with everyone
Transparency
Acting in good faith
Compliance with law
Confidentiality and respect for confidential data
Proper use of position, power or property
Whistleblowing
The Pakistani context
Businessmen complain that conditions prevailing
in the country are simply not conducive to being
completely ethical.
Business executives consider the following three
factors to be prime obstacles to ethical behavior
• Company policies
• Unethical industrial climate
• Extensive corruption in the govt.
Corporate Social Responsibility
Concept of CSR
• Integral part of business ethics
• Company owes its existence to the society
from which it draws its revenue, its capital and
its human resources.
• Company must behave responsible member of
the society
• Company must perform its social duties as an
individual is expected to serve his family.
Definition of CSR
Corporate social responsibility is the continuing
commitment by business to behave ethically and
contribute to economic development while
improving the quality of life of the workforce as
well as of the local community and society at
large.
CSR
• In USA Model, it is considered more like
philanthropy, i.e., using a part of the
company’s profits for charitable purposes,
without expecting any direct advantage from
such payments.
• In European Model, CSR is more focused on
operating the core business in a socially
responsible way, i.e. in a way that it helps the
society and does not harm its environment.
Social and management scientists
• They suggest that companies do not really
have any owners, they simply belong to the
society. Shareholders are providers of funds,
but do not own the specific assets of the
company. The directors hold the assets of the
company as trustees and their trusteeship
responsibility is to the entire society, not just
the shareholders.
Scope of CSR
It is difficult to draw boundaries for CSR,
generally its scope can be divided into three
broad segments, namely
• Philanthropy
• Doing business responsibly
• Being a good citizen
Scope of CSR
Philanthropy Doing Business Being a good citizen
responsibly
Financial donations to Integrity in conduct Compliance with law and
worthy causes codes
Setting up, running socially Fair treatment Investment in communities
desirable bodies
Supplementing Protection of stakeholders Concerns for environment
governmental efforts rights
