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8: Practice of Ethics in Business

Towards a better understanding of

business ethics

Factors Impacting Organizational Ethics

Understanding whether a company is

ethical in conducting business

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8.1.1 Towards a BetterUnderstanding of Business Ethics

In order to have a broader understanding of theconcept and its various aspects, one can lookfor answers to a number of the following type:

What Are Workplace Ethics?

What Is an Ethics Officer?

What does "You Reap What You Sow" Mean?

What is a Business Process?

What are Banking Ethics? What is Informed Consent?

What is Capitalism?

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8.1.2 Towards a Better Understanding ofBusiness Ethics: 10 Questions

Do you prefer socialisolation?

Why is it necessary to applybusiness ethics?

How can the public ensurethat a company adheres tocorrect business ethics?

Is business ethics a part ofcompany activities, or it is merelya response to societys call?

Can anyone do mybusiness ethics homework

for me? Rather than doingthe work myself andgaining an understanding ofethics that would help mebetter navigate thebusiness world?

Which one of (a) metaethics(analytical ethics, attempt to

understand metaphysical,epistemological, semantic,psychological presumptions andcommitment), (b) normative ethicsand (c) applied ethics is best formaking business decisions and why?

Can anyone examine criticallythe inevitability of ethics inbusiness activities?

What are consequences of greed interm of politics or economy of thecountry?

Which moral philosophy youfeel is best suited for making

business decisions and why?

How do businesses that you knowtreat their employees, or care for the

community and environment?

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8.2 Factors Impacting Organizational Ethics

Corporate culture Company attitude towardemployees

Existence and applicationof a written code of ethics

How employees areselected for promotions

Formal and informalpolicies and rules

Hiring practices

Norms for acceptablebehavior

Applications of legalbehavior

Financial reward system Degree to whichprofessionalism is

emphasizedSystem for recognizingaccomplishment

The companys decisionmaking processes

Behaviors and attitudes of

the organizations leaders

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8.3 Is a Company Ethical in

Conducting Business?

In order to find the answer look at the following:

Whether the company is responding to the

demand for ethicism What is the ethics coverage

What special factors the company is

considering, and How does the company handle ethical

dilemmas.

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8.3.1 Responding to the Demand forEthicism

Ethicism, the demand for more ethical businessprocesses and actions is increasing in the conscience-focused marketplaces of the 21st century. More

pressure is now applied on industry to improvebusiness ethics through new public initiatives and

laws. Businesses do continue to attain short-termgains by acting in an unethical fashion, but such

behaviors tend to undermine the economy over time.

In the end, it is up to the public to make sure that a

company adheres to correct business ethics. If thecompany is making large amounts of money, theymay not wish to pay too close attention to theirethical behavior. Alternatively, there are companies,although not many, that pride themselves in their

correct business ethics.

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8.3.2 The Ethics Coverage

A key to understand the status of a company is to recall

that Business ethics covers a lot of issues, fromwhether to hire a friend over a better qualifiedstranger, relationships within an organization, tobigger issues such as whether to be an

environmentally friendly organization but looseprofits, or take in large profits by not paying forenvironmental measures but get a bad reputation andin the long run cost tax payers more. It may also

cover whole industries, such as pharmaceuticalcompanies and whether it is ethical for them tocharge extreme amounts of money for a life savingdrug just because they own the rights, and therefore

are the only manufacturers of the drug.

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8.3.3 Considering the Special

Factors

Then consider some special factors. When a

company does business with another that is

considered unethical, does this make the

first company unethical by association?

Some people would say yes, the first

business has a responsibility and it is now a

link in the chain of unethical businesses.

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8.3.4 Handling Ethical Dilemmas

The law defines what is and is not legal, but the

distinctions between moral right and wrong are

not always so clear. But in many situations

lines between right and wrong are blurred.

Such situations can lead to ethical dilemmas,

when different people have different beliefs

about what constitutes ethical behavior. Whenfaced with ethical dilemmas, it is important to

consider outcomes of the decision-making

process.

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8.3.5.1 Testing Whether a Decision is anEthical One

One way of dealing ethical dilemmas is by using thefour way test to evaluate decisions. This test involvesasking four questions:

Is my decision a truthful one? Is my decision fair to everyone affected?

Will it build goodwill for the organization?

Is the decision beneficial to all parties who have a

vested interest in the outcome? When these four questions can truthfully be answered

with a yes, it is likely that the decision is an ethicalone.

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8.3.5.2 Testing Whether a

Decision is an Ethical One

Another way of making sure decisions are truly

ethical isby using the publicity test. Ask yourself

how you would feel if your actions were

published in your hometown newspaper. If you

would be comfortable having your parents, grade

school teachers, and other people find out what

you did, chances are that your decision is anethical one. However, if you would not want these

individuals to learn about your actions, you

probably need to rethink your decision.

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8.4 Which Businesses are Ethical inBehavior?

Businesses create value: investors earn profit; workers earnincomes; consumers get products and services. But ininstances businesses companies, firms behave in a waynot acceptable on different grounds. Businesses behaveethically means that they maintain ethical standardnorms, values, beliefs, and practices. However, theethical standards vary in different cultural environmentand need to be standardized in a cross cultural context.

While talking about ethics in business, we deal with the

behavior of Organization to its employees

The employees towards their organization and

The employees and organization towards other economicagents

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8.5 Some Examples of Unethical Companies

Minute Maid, Tropicana, Nestlebought fruitjuices from South America but these suppliersrely heavily on child labor (especially inharvesting fruit); parents may not oppose, but the

harm is already done; Child labor in sewing soccer balls in SanMiguello (Mexico); children are earning, butearning low and they are not going to school

Nikechild labor abuse, unsafe workingconditions, violations of local regulations inmanufacturing products in contracts withindependent operators in Asia.

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8.6.1 How Ethical Values Emerge

in Organizations?

Organizational ethics and responsibility areshaped by national culturemost businessesdevelop within nations by adopting dominant

national cultural values, beliefs, practices,behaviors (e.g., obeying national laws andregulations, conforming to national norms);both laws and norms reflect national cultural

values and together, they outline right andwrong business behavior; not everything iswritten, businesses do conform them in theiractions.

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8.6.2 How Ethical Values Emerge inOrganizations?

Every organization, especially its top management should knowthat unfair practices or corruption/bribery escalates cost, callsfor manipulation in management and the associated strains,invites petting the trade unions and so on. Also if they violate,they loose the moral right to insist ethical norms for others.

Top managers values are evident at an organizations foundingor with a new CEO. The top management Play role models in ethics; Influence organizational ethics Shape organizational culture, often with written statements

such as the organizations vision, purpose, mission or values Create ethics, positive cultures by articulating organizational

purpose in terms of a combination of social and businessgoals; and

Design a reward system that does not patronize unethicalbehavior.

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8.6.3 How Ethical Values Emerge inOrganizations?

Managers do more than sign off on an ethics planthey can not behave unethically to demoralizeemployees or even provoke them to leave their jobs;also, others follow the leader while managers are tocreate examples.

Managers mayDefine appropriate ethical standards,operate in a socially responsible way;address the issues of child labor or work safety;Compensate for the loss of job positions for

employees at home (because of shifting productionabroad)

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8.7.1: Three Faces of Ethics

Treatment of employees by their organization(how an organization treats its employees): Hire the best people to provide ample

opportunities for skills an career development

Provide appropriate compensation and benefits Respect personal rights and dignity of each

employee

However, there might be problems with wageranges and benefits, working conditions andthe environment, career prospects and child,women and labor rights.

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8.7.2: Three Faces of Ethics

Treatment of the organization by its employees

(how employees treat their organization): Conflicts of interest [suppliers offering gift to a

company employee influences purchases which maynot be the best; employee may accept the favor

because he has festivals, something to offer to thefamily or friends, needs like treatment, or recovery oflosses in gambling etc.; the employee will do badpurchases or divulge company information tocompetitors]

Secrecy and confidentiality Honesty and integrity [making long distance phone

calls by using the office line, stealing supplies,padding expense accounts etc]

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8.7.3: Three Faces of Ethics

How employees and organization treat other economic agents:customers, competitors, suppliers, labor unions and all other

stakeholders. Pricingescalating prices on every available grounds, a serious

issue in CSR Product qualityeffect of the product on health, environment,

psychology and social normsdiseases, change in mindset- drugs,violence, sex

Sensitive productsscarcity and pricepharmaceutical, fuel,kerosene, candles, salt

Company behavior with government and local people in starting andoperating business, sale of products and services;

Distribution of dividends against shares/stocks, manipulation ofshare prices;

Handling suppliers and dealers; Handling labor unionsa special issue in ethics; labor unions may

be (a) pro-self, (b) pro-industry, and (c) pro-labor

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8.8 Ethics Training

Multinational companies offer employees the

training on how to cope with ethical dilemmas(they are concerned about their interestsabroad)

Local business enterprises also need thetraining so that they are aware about what isethical and what is not

In western countries the priests have a greatrole in practice of ethics in business. Mollas inBangladesh are far, far behind. They hardlyhedayet the business people.