NATURE AND SCOPE OF BUSINESS ETHICS

Ethics is that branch of philosophy which is concerned with the rightness

or wrongness, goodness, badness of human conduct ethics provides the

basis for deciding that a particular action is morally good and bad. In the

simplest terms, business ethics are moral principles that define right and

wrong behaviour in the world of business. The right and wrong behaviour

in business is determined by the public interest groups, and business

organisations as well as an individual’s personal morals and values. The

meaning of ‘ethics’ is that it is the science of moral which is concerned

with the human character and conduct. Ethics are the principle of

behaviors that distinguish between the rights from the wrong. Business

ethics is the evaluations of business activities and behaviors as right and

wrong. Ethical conduct conforms with what a group or society, as a whole

considers right behaviour.

Introduction to Business Ethic

There is a combinations of two familiar words, namely business and ethics

in business ethics. Business ethics concentrated on moral standards as his

apply to business policies institutions and behaviour. It is a specialized

study of moral right or wrong. It is a from of applied ethics. It includes not

only the analysis of moral norms and moral values but also attempts to

apply the conclusions of the analysis to that assortment of institution,

technologies, transactions, activities and pursuits that we call business.

Business ethics are nothing but the application of ethics in business. It

proves that business can be and have been ethical and still make profits

more and more interest is being given to the application of ethical practice

in business dealing and the ethics implications of business. Business ethics

are rules of business activities may be judge. It also relates to the

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behaviour of managers. Business ethics are concerned with moral issues

in business just as medical ethics are concerned with morality of medical

practices and policies or political ethics are concerned with the morality

of political affairs in business ethics.

Objectives of Business Ethics

Business ethics has a twofold objective.

Evaluates human practices by calling upon moral standards.

Gives prescriptive advice on how to act morally in a specific kind of

situation.

The first objective implies analysis and evaluation. It leads to an ethical

diagnosis of past actions and events.

Analysis consists of clarifying standards and lines of argument. Here,

ethics can be useful as one is often unaware about most moral values and

habits of thought. The basic assumptions behind our moral action and

judgements are mainly taken for granted. Ethics develops rational

methods for answering the present and future issues. In order to achieve

the second objective, one has to informed. Balanced judgements are

based on the careful assessment of the relevant information.

The second objective is to provide therapeutic advice. It suggests

solutions and policies when facing the present dilemmas and future

dangers, based on well-informed opinions. This especially requires an

identification of relevant stakeholder and a clear understanding of the

vital issues at stake.

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Ethics in Business

All over the words, there is a growing realizations that ethics is important

for any business and to achieve the progress of any society. Ethics give

rise to efficient economy. It is not the government or law which will

protect the society. But ethics alone can protect it. Ethics are good in itself.

Ethics and profits go together in the long run. An ethically responsible

company is one which has developed a culture of caring for people and

environment, a culture which flows down word from the top managers

and leaders. As a reflections, ethics are the methodical and systematic

elaboration of the norms and values we appeal to in our daily activities.

Where these activities are organized under business issues. We faces

ethics in the practical and reflective variety of business ethics.

Nature of Business Ethics

i. Most ethical questions could be of two types overt and convert

e.g. Bribery, theft, sabotage, collusion etc.

ii. Ethical issues commonly occur in management it goes many of

times for beyond the commonly discussed problems of bribery

collusion and theft reaching into areas of corporate acquisitions,

merge of firms, marketing policies of capital investments.

For example – if two firms are merged, ethical question arises

with regarded to demoting or firming the employees of those

who have been serving honestly of many years.

iii. Ethics want a manager to be honest within himself and also in

the society. The manager has to perform his jobs well and his

quality reflects in the success of a business ethical issues may be

sometimes occur as managerial dilemmas, measured by

revenues, cost and profits and the stated performance.

iv. Following characteristics for a decision to be ethical are needed.

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Scope of Business Ethics

Scope of business is very broad. It includes all those activities, which are

related to the production and distribution of goods and services with an

objective of earning profit.

Industry: Industry is a part of business. The purpose of industry is to

convert the basic raw materials into finished or semi-finished goods.

Industry be divided into two parts.

a. Primary Industry

b. Secondary Industry

a. Primary Industry

Primary industry is concerned with the production of raw materials.

i. Orientic Industry: The genetic industry is concerned with the

breeding of plants and animals, etc.

ii. Extractive Industry: In this industry hidden resources below the

surface of earth are extracted like extraction of oil, gas and coal,

etc.

b. Secondary Industry:

i. Secondary Industry: This industry is concerned with the

convention of basic raw materials into finished or semi-finished

goods. Basic raw materials is received from the primary industry.

This industry can also be divided into two types.

ii. Constructive Industry: All kinds of construction are included in

the type of industry like construction of roads, building bridges,

etc. In this industry raw material is converted into some finished

or semi-finished goods like textile mills, sugar mills, etc.

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What is the Nature and Scope of Business:

Business includes all those legal activities, which are undertaken for the

purpose of earning profit. It means the ultimate objective of business is to

earn profit. Hence, all illegal activities, social activities, self consumption

and gifts, etc. are excludes from the definition of business.

Need for Business Ethics:

There are three points for the need of business ethics. They are as follows:

A. Business Operates within the Society

Business is a part of sub-system of the society. Business functioning

must attribute to the welfare of the society. In order to survive,

develop and excel, business must earn social sanction of the society

where it exists and functions. Without earning social sanctions,

business cannot get loyal customers, cannot operate in the market

place. It will soon collapse and die away.

If business grows larger, the public takes more interest in it, since

this will lead to a greater impact on the community. Managers are

turned to public opinion and react to it. they seek to maintain a

proper image of their company in the public mind. This leads to the

assumption of greater responsibilities.

B. Every business irrespective of size exists more on ethical

means or in total regard to its social concern to survive long:

If a business establishment resorting to unethical behaviour or not

concerning with social welfare, it will call for its own doom. Thus,

business should be ethical and socially responsible. As a statement

of purpose, maximising of profit is not only unsatisfying. It is not

even accurate. Business needs to remain ethical for its own good.

Unethical actions and taking decision will shorten the life of the

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business like a flash in the pan, quickly growing and even more

quickly dying and forgotten.

Business Needs To Function As Responsible Corporate Citizens in

the Country

Business is that organ of the society which creates wealth for the

country. Hence, narrow mentally and narrower goals and motives

are to be avoided.

C. Importance of Business Ethics:

It is the application of general ethical rules to business behaviour. It

is not a special set of ethical rules different from ethics in general

and applicable only to business. For Example: if a society’s ethical

rule says that dishonesty is unethical and immoral, then anyone in

business, who is dishonest with employees, customers, creditors,

stock holders or competitors is acting unethically and immorally.

Similarly, if protecting people from harm is considered ethical, then

business firm that recall a defective and dangerous product is acting

in an ethical way.

The general public expect business to exhibit high levels of ethical

performance and social responsibility. Business firms and their

employees are encouraged to act ethically is to prevent harm to

society. “Do no harm” is one of the stronger ethical principles. Next

is to protect business firms from abuse by unethical competitors.

Bribery and kickback schemes have become very common and

penalize honest business firms. High ethical performance protects

the individual who work in business.

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Inspite of the positive benefits of good ethical practices, ethical

problems occur for the following reason:

1. Personal gain

2. Individual values widely differ with organisatsional goals

3. Managers values and attitudes

4. Competitive pressures

5. Cross cultural contradictions

1. Personal Gain

Business that employs people sometimes wrongly whose personal values

are less than desirable. This will cause ethical problems. People will be

sometimes greedy and put down their own welfare ahead of all others, not

bothered about the welfare of the fellow employees. The company or

society, since ethical qualities are difficult to anticipate and measure at the

time of recruiting employees, many people of the above mentioned type

will creep in though an effort to without ethically undesirable applicants

are made. The embezzler the expense account paddler, the chronic sick

leaver and the bride taker slip in since the perfect screening system is

lacking, business is not likely to eliminate this kind of unethical behaviour

entirely. Business has to proceed carefully in screening applicants taking

care not to trample individual rights in the search for potentially

unethically employees.

2. Individual values vis-à-vis Organisational Goals:

The goal of a business organizational should be the collective welfare. If

the owner of that business organization resort to “Atma Sukha Talva”. If

the owner of the business sector gives only interests to the individual

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interest then at a point of time only he flourishes and on the other hand

the customer prish.

3. Managers Values and Attitudes:

As decision makers, managers have more-opportunities than others to set

an ethical tone for the company. They are the key people to act ethically or

unethically. Ethical guidance usually will be provided by the top levels to

the employees down below. The values held by the top managers are

important in promoting ethical activities.

Organizational effectiveness is their central goal while at work. If the

organisation is to be made effective good management is required.

4. Competitive Pressure:

Competitive pressures are more exhibited in case of private company in

order to wipe out the public sector. Private sectors always want to rise at

the cost of public sector to public sector cannot be as competitive as a

private sector. Due to this competitive attitude a private sector adopts to

unethical means.

5. Business Ethics is a Management Discipline:

The business ethics has grown in recent years into an interdisciplinary

area of study that has found a secure niche in the fields of liberal arts and

business education. On this credit goes to many individuals- both

philosophers and business scholars – who have succeeded in relating

ethical theory to the various problems of ethics that arise in business.

Business is a fruitful subject for philosophical exploration and practicing

managers in the World of business can benefit from the results.

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1. M. C. Namara says that, business ethics as came to be considered a

management discipline, especially since the birth of the social

responsibility of business. Business owned responsibility to work to

improve society. Environmental protection, equal right, public

health, educational improvement, etc. Business has replaced the

word ‘stock holder’ with ‘stakeholder’.

2. As per Rober Kreitner in his book “Management” says ‘Highly

published accounts of corporate misconduct in recent years have

led widespread cynicism about business ethics.’

3. Gallup Poll asked in 1992 Americans to rate the ethical standards of

various professions.

Characteristics of Business Ethics

Ethical decisions differ with the individual perspective of different

persons. Each person views the ethical question in terms of his own

frame of reference.

Ethical decisions are not limited to themselves, but effects a wide

range of other situations as well. Ethical decisions do not end in

themselves, but have widespread ramifications.

Ethical decisions are voluntary human actions. All human beings

have the freedom of choice and of free will.

Every person is individually responsible for the ethical or unethical

decision or action that he or she takes.

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