Chapter 4: Human Behavior- Indian Thoughts: Business ethics-Its meaning and definition,

Types, Objectives, Sources, Relevance in Business Organizations, Theories of Ethics, Codes

of Ethics

Many companies have a code of conduct that governs their public relations and
operational policies. Enterprises refer to these codes as business ethics, and they're
an important part of several current corporate environments. If you work in a
business setting, it might be helpful to learn more about what business ethics are
and why they matter.

“Business Ethics is generally coming to know what is right or wrong in the work place

and doing what is right. This is in regard to effects of products/services and in

relationship with the stake holders.” —Cater Mcnamara

“Business ethics in short can be defined as the systematic study of ethical matters

pertaining to the business, industry or related activities, institutions and beliefs.

Business ethics is the systematic handling of values in business and industry.” —

John Donaldson

Business Ethics – Ethics and the Indian Corporate Culture

Ethics in India is based on a number of scriptures, thoughts, ideas, and Vedas. In

India, the organizational culture is divided into two broad divisions, namely
professional culture and community culture. The professional culture helps the,
employees to maintain a certain acceptable level of discipline in the enterprise.

The community culture of an enterprise emerges from the varied cultural

backgrounds to which its employees belong. One important aspect of
organizational community culture is that the beliefs and views of any particular
culture or religion should not alienate any individual belonging to another culture.
The Indian corporate culture has borrowed many ethical values that have been
taught by Indian scriptures.

Some of these ethical values are as follows:

i. Respect – Respect means that every individual should have respect for the
beliefs and values of other individuals. In a multi-ethnic country as India, the
people should respect each other’s views, beliefs, and ideas to maintain good
mutual relationships.

ii. Trust – Trust means that the employees of an enterprise should cultivate
mutual trust and faith in each other. Doubts may create misunderstandings,
problems, and chaos among individuals, and thus need to be avoided. Such
doubts can be solved by placing trust in each other to facilitate a better working
of an enterprise.

iii. Spirituality – It emphasizes the positive inner transformation of an

individual’s life. An individual performs efficiently and feels satisfied at workplace
when he/she is in peaceful and contented frame of mind. Now-a-days, the
enterprises are realizing the importance of spirituality, contemplation, meditation,
and yoga practices, which are the essence of the Indian culture. Such practices
help people to lead a more sensible life, increase work efficiency, and decrease
stress levels.

iv. Tolerance – It helps to maintain cordial relationships among the employees

of an enterprise. Tolerance refers to increase in the level of adaptability of an
employee to various organizational changes. The individuals need to be
permissible and receptive to the challenges of their work. They should accept
people as they are without judging them.

v. Flexibility – Flexibility refers to the degree at which an individual can adapt

with the surroundings in the organizational environment. It takes into account the
receptive and adaptive nature of an individual towards fellow employees and
assigned tasks.

vi. Sincerity – Sincerity refers to truthfulness and transparency in the nature and
behavior of employees in an enterprise. It also necessitates an honest code of
conduct in an enterprise.

vii. Patience – Patience refers to the degree at which the individuals can tolerate
any delays in the fulfilment of their wishes or goals. Individuals with high degree
of patience are not affected by delays in getting rewards for their accomplished
tasks.

viii. Perseverance – Perseverance refers to the quality of an individual to not to

give up soon and keep o

n trying for achieving goals. Individuals with perseverance can keep their spirits
high to achieve the desired goals.

Business Ethics – Causes and Issues of Unethical Behavior

Unethical behavior refers to the behavior of people that do not confirm with the
acceptable standards of social and professional behavior. Such behavior may
include making long-distance calls from the office, duplicating the enterprise’s
system software to use at home, projecting a false report on the number of
worked hours, or falsifying business records.

There can be numerous factors that cause unethical behavior in the employees
of an enterprise.
Such factors are as follows:

i. Primary Factors:

Primary factors refer to the factors that comprise external stimuli and compel
people to move in a particular direction without thinking about ethical
parameters. For example, obedience to authority is a primary concept that
affects the ethical mindset of an individual.

Children tend -to obey their parents right from the time when they do not know
anything about ethics. This makes their every act conditioned to their parents’
teachings and orders. This mindset of children continues right from their school
time. As a result, when an authoritative person orders the individual to do an
unethical act, he/she tends to obey him/her as well. This happens due to the
conditioning of their mind to obey orders right from their childhood.

ii. Personality Factors:

Personality factors refer to the prominent characteristics of an individual. If these

characteristics of an individual are negative then they are reflected in his/her
behavior. For example, if a person has a prominent characteristic of being late to
the office regularly then indiscipline is he/she personality factor.

iii. Defensive Factors:

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. Generally, the defensive
factors are the activities caused by two basic internal stimuli, which are guilt and
shame. These two stimuli force individuals to lie, or draw a false consensus of
others to cover their mistakes.

The above-mentioned factors can be dealt with the help of following

techniques:

a. Appointing a psychologist or consultant to help the employees deal with the

strong emotions that force them to indulge in an unethical behavior

b. Ensuring that the employees know about common psychological factors of

unethical behavior and the ways to deal with them

c. Recognizing the factors that cause unethical behavior; thus, finding the ways
to tackle the same.

What is business ethics?

The term business ethics refers to the set of moral principles that guides a
company's conduct. These principles govern every aspect of the company's
operations, including its interaction with the government and other businesses, its
treatment of its employees and its relationship with its customers. Whenever any
ethical dilemmas or controversies arise, a business references these foundational
principles to help resolve those situations.

Why is business ethics important?

Business ethics ensure that companies operate according to all applicable laws. This
maintains the company's respect among its peers and customers and protects it from
legal liability. A company's ethics also help it attract quality team members.
Businesses that care for their teams according to the highest ethical standards are
often attractive to job seekers. Ethical treatment can also increase employee
retention and reduce hiring and training costs.

A business that treats its customers or clients ethically can build trust and create
longstanding relationships. These customers are likely to return and may
recommend the business to people within their sphere of influence. Also, a business
known for its effective ethical principles can gain respect and elevate the quality of its
brand.

7 types of business ethics

There are various types of business ethics. Both the nature of the company's
business and its location can affect its code of ethics. The following are some
common business ethics:

1.Personal responsibility
Personal responsibility is a vital attribute for employees in both entry-level and senior
positions. This could entail completing tasks your manager has assigned or simply
fulfilling the duties of your job description. If you make a mistake, you acknowledge
your fault and do whatever you need to do to fix it.
2.Corporate responsibility
Businesses have responsibilities to their employees, their clients or customers and
their board of directors. Some of these may be contractual or legal obligations,
others may be promises. For example, a commitment to conduct business fairly and
to treat people with dignity and respect. Whatever those obligations are, the
business has a responsibility to keep them.
3. Loyalty
Loyalty is a valuable quality for both corporate leaders and team members. It's
important for team members to be loyal to their co-workers, managers and the
company. This might involve speaking positively about the business in public and
only addressing personnel or corporate issues in private. Customer or client loyalty is
important to a company not only to maintain good business relations but also to
attract business by cultivating a positive reputation.

4. Respect
Respect is an important business ethic, both in the way the business treats its
clients, customers and employees and in the way its team members treat one
another. When you show respect to someone, that person feels like a valued
member of the team or an important customer. It indicates that you care about their
opinions, you keep your promises to them and you work quickly to resolve any
issues they may have.
5. Trustworthiness
A business cultivates trustworthiness with its clients, customers and employees
through honesty, transparency and reliability. Team members should feel they can
trust their companies to keep to the terms of their employment. Clients and
customers should be able to trust the business with their money, data, contractual
obligations and confidential information. Being trustworthy encourages people to
conduct business with you and helps you maintain a positive reputation.

6. Fairness
When a business exercises fairness, it applies the same standards for all team members,
regardless of rank. The same expectations of honesty, integrity and responsibility placed
upon the entry-level employee also apply to the chief executive officer (CEO). Fairness
means that a business strives to treat its customers with equal respect, offering the same
goods and services to all based on the same terms.

7. Social and environmental responsibility

Corporate social and environmental responsibility means that a company recognizes its
impact outside of the marketplace. Many companies look for ways to help their communities
through volunteer work or financial investments. They may also adopt measures to reduce
waste and promote a safe and healthy environment.

8 examples of business ethics

There are many ways businesses express their ethics. Companies often have a code of
conduct document that informs team members of their ethical responsibilities. Businesses
may also publish a values statement that advertises the ethical standards to which they hold
themselves. These are some examples of ways a business might practice its ethics:

1. Data protection
Businesses often collect information about their customers. This may only be an email
address, but it could also be their physical address or health or financial information,
depending on the nature of the business. Companies that collect customer data usually
promise to secure that information and not share it without the customer's permission. The
same applies to employee information. Business ethics protect employees' personnel
records and allow access only to those with a valid need to know.

2. Customer prioritization
One way a business shows respect for its customers is by prioritizing their needs, even at
the expense of the company. For example, if a customer purchases goods or services that
turn out to be unsatisfactory, the business does whatever is necessary to provide
recompense. If it's a faulty product, the business may offer a replacement or a refund. If the
customer experienced poor service, the company usually apologizes and offers a discount or
some other form of compensation.

3. Workplace diversity
A business might express fairness by placing a high importance on having a diverse
workplace. Achieving a diverse workplace means using recruiting practices that give equal
opportunity to people from different ethnic, gender and social groups. This can add time and
effort to the hiring process, but it's often worthwhile. Employing a diverse range of people
gives the business the benefit of different perspectives. It also demonstrates that the
company is serious about equality and treating all people with respect.

4. Whistle-blower protection
As a business grows, it becomes harder to verify that employees are adhering to the ethical
standards set by the company. Sometimes, the business relies on whistle-blowers, or a
person who informs authority figures about illicit activity, to garner attention regarding
unethical practices within the company. To encourage employees to come forward to report
unethical practices, businesses often put in place protections against negative
consequences. With these protections, employees don't need to fear losing their jobs or
encountering disciplinary action for notifying the company about unethical behavior.

5. Corporate transparency: A business that practices transparency is clear in its

communication both with employees and customers. This means that communication is
unambiguous, so there's no confusion about the policies or priorities that guide business
decisions. Transparent corporate communications are also honest and truthful.

6. Community outreach
Companies often feel an ethical obligation to help the communities in which they conduct
business. This can take the form of volunteer programs for employees, sometimes at the
company's expense. Such programs might include serving in a soup kitchen, helping with
home repairs, cleaning up after a natural disaster, or teaching skills at the local community
center. These programs not only help those in need but also help develop respect and trust
within the community.

7. Environmental awareness
Many companies take environmental concerns seriously, whether that means reducing
waste or cleaning local land, water and air. There are various ways businesses act on this,
such as reducing air travel and using teleconferencing technology as much as possible.
Businesses might also promote recycling in their offices by providing receptacles to collect
recyclable waste.
8. Employee compensation
Companies adhering to principles of fairness and respect strive to pay their team members a
fair wage for the work they do based on their experience, education and job duties. They
also regularly review compensation and adjust it to make sure it continues to reflect the
positions and experiences of employees. Businesses often reward outstanding performance
with employee bonuses. These are good incentives for team members to work hard and
remain with the company. They're also a way for the business to express gratitude for their
efforts.

Sources of Business Ethic:

In every society there are three sources of business ethics-Religion, Culture and

Law. The HR manager in every organisation, thus, has to be well versed with the

unique system of values developed by these three sources.

These sources are discussed as follows:

1. Religion:

Religion is the oldest source of Religion is the oldest source of ethical inspiration.

There are more than ethical inspirations. 1, 00,000 religions which exist across the

whole world, but all of them are in agreement on the fundamental principles. Every

religion gives an expression of what is wrong and right in business and other walks

of life. The Principle of reciprocity towards one’s fellow beings is found in all the

religions. Great religions preach the necessity for an orderly social system and

emphasize upon social responsibility with an objective to contribute to the general

welfare. With these fundamentals, every religion creates its own code of conduct.

2. Culture:

Culture is the set of important understandings that members of a community share in

common. It consists of a basic set of values, ideas, perceptions, preferences,

concept of morality, code of conduct etc. which creates distinctiveness among

human groups. When we talk about culture we typically refer to the pattern of
development reflected in a society’s pattern of knowledge, ideology, values, laws,

social norms and day to day rituals. Depending upon the pattern and stage of

development, culture differs from society to society. Moreover culture is passed from

generation to generation. Culture facilitates the generation of commitment to

something larger than one’s individual self interest.

Culture encourages the members of the organisation to give priority to organizational

goals over and above their personal interests. Culture also serves as a sense

making and control mechanism that guides and shapes the attitudes and behaviour

of people. Managers have to run an industrial enterprise on the cutting edge of

cultural experience. The tension that their actions create makes the business

ethically more complex.

3. Law:

The legal system of any country, guide the human behaviour in the society.

Whatever, ethics the law defines are binding on the society. The society expects the

business to abide by the law. Although it is expected that every business should be

law abiding, seldom do the businesses adhere to the rules and regulations. Law

breaking in business is common eg. Tax evasion, hoarding, adulteration, poor quality

& high priced products, environment pollution etc.

Importance of Business Ethics:

1. Corresponds to Basic Human Needs:

The basic need of every human being is that they want to be a part of the

organisation which they can respect and be proud of, because they perceive it to be

ethical. Everybody likes to be associated with an organisation which the society

respects as a honest and socially responsible organisation. The HR managers have

to fulfill this basic need of the employees as well as their own basic need that they

want to direct an ethical organisation. The basic needs of the employees as well as

the managers compel the organizations to be ethically oriented.

2. Credibility in the Public:

Ethical values of an organisation create credibility in the public eye. People will like

to buy the product of a company if they believe that the company is honest and is

offering value for money. The public issues of such companies are bound to be a

success. Because of this reason only the cola companies are spending huge sums

of money on the advertisements now-a-days to convince the public that their

products are safe and free from pesticides of any kind.

3. Credibility with the Employees:

When employees are convinced of the ethical values of the organisation they are

working for, they hold the organisation in high esteem. It creates common goals,

values and language. The HR manager will have credibility with the employees just

because the organisation has creditability in the eyes of the public. Perceived social

uprightness and moral values can win the employees more than any other incentive

plans.

4. Better Decision Making:

Respect for ethics will force a management to take various economic, social and

ethical aspects into consideration while taking the decisions. Decision making will be

better if the decisions are in the interest of the public, employees and company’s

own long term good.

5. Profitability:

Being ethical does not mean not making any profits. Every organisation has a

responsibility towards itself also i.e., to earn profits. Ethical companies are bound to

be successful and more profitable in the long run though in the short run they can

lose money.

6. Protection of Society:
Ethics can protect the society in a better way than even the legal system of the
country. Where law fails, ethics always succeed. The government cannot regulate all
the activities that are harmful to the society. A HR manager, who is ethically sound,
can reach out to agitated employees, more effectively than the police.
What Is a Code of Ethics in Business?

A business code of ethics, also known as an ethical code, is a set of principles

companies provide to employees so they can approach their job with integrity. A
code of ethics often includes a company’s core values, ways for employees to
resolve problems they encounter and the standards of performance they need to
meet.

A company could also list laws and regulations in its code of ethics depending on the
industry. For example, a banking organization might list government regulations that
employees must follow to perform effectively in their roles.

A code of ethics in business is a set of guiding principles intended to ensure a

business and its employees act with honesty and integrity in all facets of its day-to-
day operations and to only engage in acts that promote a benefit to society.

Why is a business code of ethics important for your company?

Creating a code of ethics for your business is important for the following reasons:

 Explains your expectations: Business codes of ethics outline how you

expect your employees to work in order to accomplish goals and live your
company’ values. It also provides a framework for how employees need to
interact with each other and clients in order to demonstrate a positive public
image.
 Showcases the drive for success: List your overall objectives and goals in
your code of ethics to give the public and your employees an idea of what you
want the future of your company to look like.
 Improves employee retention rates: A commitment to maintaining and
building on your company’s culture translates to higher retention rates for
current employees. In your code of ethics, discuss how you plan to take care
of your employees and explain the methods you’ll take to create stronger
bonds between team members.
  Builds trust with external stakeholders: A strong business code of ethics
builds trust with industry leaders and local communities. To make a code of
ethics generate interest among external stakeholders, create a list of
community leaders in your area and research their values.
 Attracts quality candidates who share similar values: An Indeed survey
found that 28% of job seekers would reconsider accepting an offer from a
company if the company’s mission/vision didn’t resonate with their
values — even if the job met all of their other personal requirements and they
had a positive interview experience. *

Common types of business codes of ethics

Codes of ethics can include many different policies. Here are some examples of
common types of codes of ethics in business:

1. Being inclusive
Businesses should welcome people from all backgrounds, and they should not
discriminate against anyone based on a variety of factors, including:

 Sex
 Race
 National origin
 Sexual orientation
 Gender
 Social or economic class
 Education
 Immigration status
 Age
 Political beliefs
 Religion
2. Being considerate and respectful
People depend on each other to do their best and make the business they work at
successful. When managers and employees make decisions, they should think
about how those decisions could impact clients and the team as a whole. When
people discuss actions and next steps, they need to focus on what’s best for the
company. They should speak calmly and rationally to make everyone as comfortable
and productive as possible.

3. Acting professionally
By acting professionally, you can increase your company’s reputation, reduce
turnover and make employees’ jobs less stressful. Make all of your interactions
positive and professional by focusing only on business-related topics. These rules
should apply to your emails and phone calls as well. When you set a professional
example, your employees will likely follow suit.

4. Considering your actions

It’s important to think about what you do in the workplace and how it affects others.
Certain actions, like taking personal calls near others, could distract employees and
make it difficult for them to focus. Think about any rules you may need to add to your
code of ethics to encourage a positive working atmosphere, such as keeping phones
on silent or having meetings in designated areas.

5. Admitting when you make a mistake

People need to take responsibility for their actions and learn from their mistakes.
They should also listen to the perspectives of others to implement the best idea.
Acknowledge your employees’ suggestions to show you value their opinions and
suggestions.

6. Avoiding conflicts of interest

Many companies have rules against managers dating employees, running for public
office or investing significant amounts of money in competitors or companies that
employees do business with. By asking employees to avoid conflicts of interest, you
can ensure that they remain productive and have a positive impact on the company.
7. Protecting company assets
Businesses need to protect their property, including records, computer systems,
equipment and intellectual property, such as patents. They should have the IT and
physical security they need to prevent hacking or thefts. Consider including a rule in
your code of ethics about how to treat company assets and data.

8. Being punctual and avoiding absences

Most companies have an attendance policy to encourage people to come to work on
time. For example, if someone is sick and they can’t make it to work, what steps
should the employee take? Many businesses require a doctor’s excuse for an
unscheduled absence, but you can come up with your own policies to suit your
business.

How to write a code of ethics for your business

Here is a framework to help you establish a code of ethics for your own business:

1. Define the company’s priorities

Meet with your key leaders to identify how they make important decisions. Use this
discussion to identify the customers you want to sign, the quality expected from
employees and the allocation of resources. Creating a code of ethics based on your
top priorities makes it more focused and clearer to your employees and the public.

Use your company’s core values to guide your code of ethics. For example, if you
created your business based on integrity and trust, incorporate these values into
your code by explaining how you and your employees will follow them. If one of your
company’s values is focused on sustainability, you could include information about
how the company is working to reduce its carbon footprint.

2. Speak with employees about content to include

Schedule a meeting with employees to talk about what they want to include within
your business’s code of ethics. Discuss the kind of culture they want to work in and if
the current environment meets their expectations. Use their suggestions to
determine what to include in your code to foster a positive workplace.
Ask employees for additional feedback on how to improve your company’s current
code of ethics if you already have one. Find out if employees are comfortable
collaborating, if they have a role model or mentor and if they believe they’re growing.
The responses help your organization live by your values and ensure consistency
when communicating this message to influential stakeholders.

3. Underline acceptable workplace behavior

Explain the type of behavior you expect your employees to have. Companies with a
zero-tolerance policy for misconduct show that they have high standards for conduct
in the workplace and commit themselves to doing the right thing at all times.

4. Note who is in charge of compliance

Consider designating a compliance manager to hold employees accountable. Search
for someone who has a track record in upholding ethical procedures. Either hire a
dedicated compliance officer to be a part of your human resources team or choose a
current employee. Your compliance officer needs to have a thorough understanding
of your company’s values, policies and procedures and feel comfortable serving as a
liaison between you and your employees.

5. Get approval from management

Ensure your managers approve of the code of ethics before implementing it.
Approval from leaders makes it more likely that employees will follow it.

6. Initiate a code program

A code program outlines the steps your employees need to take to implement your
new code of ethics. Training, reinforcement and metrics help employees understand
the purpose of the code program and how you plan to uphold it.

Things managers should remember about ethics in the workplace

To keep their employees happy and make their businesses successful, managers
should consider these tips:
Give people credit for their work
If you give employees credit for good performances or new ideas, they’ll be more
likely to do their best. Give praise and recognition when an employee excels.
Acknowledging an employee publicly will motivate their team to work harder as well.

Show all your employees that you appreciate them

Thanking someone for working overtime, asking how their weekend was or having
lunch with employees occasionally will show them that you value them. People want
to have a good relationship with their manager so they feel comfortable approaching
them with questions or ideas.

Let people make their own decisions

Employees often prefer when they have a certain amount of autonomy and freedom
to make their own decisions. Try giving your employees a general set of instructions
or even just a goal, then let them find the best way to do their work. Make yourself
available if they have any questions or need guidance, but allow them to work
independently if possible.

Treat all of your employees fairly

Managers may get along with some of their employees better than others, but this
shouldn’t impact their business decisions. They should reward everyone who works
hard, and consider ideas from all team members.

Lead by example
Managers should follow company policies and rules to encourage their employees to
do the same. For example, if there’s a company policy against using company
computers for personal reasons, make sure managers are leading by example.