BUSINESS ETHICS AND PROFESSIONALISM
DR. V BALACHANDRAN* & DR. V CHANDRASEKARAN**
INTRODUCTION
Change is the only constant factor in everyday life. It is witnessed from the Stone
Age to civilized age. When change affects life it also affects the environment and
business. The business environment becomes extremely complex as change inflicts
variety and diversity leading to deep and fundamental ways. Change in the values,
environments of business based on the expectation of society has alerted business
houses to realign its priorities. The changing economic, political, legal and social
environment has also made the business and businessmen to consider the ethical
approach to business. Therefore, there is paradigm shift from the goal of maximization
of profit or wealth to ethical means to achieve them. The last 150 years have been
marked the world over for rapidity of change ushered in by the advent of technology
and industrial revolution. This period
has
also
been
marked
for
its attempt to
generate unquestioning faith in human reason and intellect. The last century has
witnessed that the intellect are becoming the cornerstones of the society. The rapid
changes have improved the standard of living, also establishing a lot of sensible
relationships in and around the society.
There is a growing realization all over the world that ethics is virtually important for
any business and for the progress of any society. Ethics makes for an efficient economy.
Ethics is good in itself, ethics and profit go together in the long run and ethics alone can
protect the society. An ethically responsible organization is one, which has developed a
culture for caring for the people and for the betterment of society as a whole. Ethics has
a considerable influence on the economy for efficient and smooth functioning. The
government, the laws cannot always resolve certain key problems of the society and
business. Ethical behavior enhances the quality of life. An ethically based economy can
do wonders in the way of creating wealth or society.
The task of business is to optimize the outcome of economic activity. It is the
economic environment of business, which is the primary consideration in evaluating the
business tactics. The present day economic environment of business is a complex
phenomenon. The economic relations with the government, public, society and
community influence the trend and structure of economy. People and society are part
and parcel of an organization. People want and need to be ethical not only in their
private life but also in public. The people are the ultimate sufferers if the affairs of the
organization were conducted unethically which are detrimental to the society. Therefore,
they have a concern over this. Over the last two decades, there has been a shift in the attitudes of
corporate and their executives towards ethics. A silent revolution is in under way in business ethics
today. The ideas, beliefs and attitudes associated with the profit ethic are being challenged as never
before. The historical idea of the divine right of capital no longer applies. The changes in the values,
cultures and customs lead to change, which in turn lead to re-engineering of ethics.
The world of business ethics is quite broad and its tentacles spread into a number of
areas in the larger sphere of business society relationship. The social responsibilities of
businessmen, for instance, clearly involve ethics and morality. There is always a doubt in
the mind of the businessmen about what is and what is not ethical. It is difficult to
understand business or business society relationships, without knowledge of the ethics.
Business ethics is what society expects from business. Mark Twain once said: “ To be
good is noble. To tell people how to be good is even nobler”.
*
FCS, Senior Reader in Corporate Secretaryship, Alagappa University, Kraikudi.
**
Ph.D.
WHAT IS BUSINESS ETHICS?
Ethics is defined as the study of standards of conduct and moral judgment. Ethics is
the study of what ought to be, what is the ultimate good and how to achieve it. People
have always thought that the primary purpose of business is to serve society. Business
must have a social commitment otherwise business cannot enjoy social sanction. It is a
study of human actions in respect of being right and wrong. Ethics is an attempt to
discover that ought to be. Ethics forms critique of both ultimate values and goals and
the means used in trying to achieve them. The history of business ethics displays a
growing recognition of the need to examine the social transformations that have
impacted organization, management and society. Ethics is a mass of moral principles or
sets of values about what conduct ought to be. Ethics is a written or unwritten set of
codes or principles governing business or profession. Ethics is a study that constitutes
good and bad conduct, including related values. It has to do with fulfilling the
relationship with people and society at large. When this applied in a business context, it
becomes business ethics. Ethics in business has become one of the most challenging
issues confronting the whole business community. Establishing ethical climate is like
starting an endless marathon. The first step should be to change unethical behavior. It is
an “on going process”. It never stops. Ethics is a contract between the business and the
community based upon certain values of principles.
An effective program of ethics
requires involvement and commitment from all. The constituents should ensure
commitment towards ethical behavior at all levels. Ethical consideration and ethical
behavior should run thro’ the marrow of the bones and should be carried by the
capillaries to all parts. Maximizing return has made a paradigm shift towards to the
concept that it should be ethically achieved. Mr.J.R.D. Tata in his own words, ethical
values have too often been ignored in recent years in the belief that quicker profits
would be result.
MAJOR ATTRIBUTES OF ETHICS
Concept : The field of ethics may be conceived as a discipline, science, study or
evaluation.
Content : The subject matter of ethics is concerned with what is good or bad, right or
wrong.
Judgment : Judgment is required to determine whether human action is ethical or
not. The judgment concerns the overt act, not the motivations behind it. Behavior and
its cause is that what which is judged.
Standards : Judgment is based upon standards, which are, of course, values.
Values : The final element of ethics therefore, is the set of values and criteria used
as standards for judging human conduct.
NEED FOR ETHICS
Business ethics are very much influenced by social movements, social system and
social preferences. No business can survive or grow without social harmony. Individual’s
values, however best they may be, are not sufficient to attain the maximum level of
ethical performance.
Ethics and social responsibility are necessary for the survival
because of the highly competitive climate that prevails today. The climate in which
business operates has become cold and unfriendly to day as a result of revelations of
unethical behavior that have rocked nations and the world. Ethics is crucial for an
efficient and smooth operating economy. An ethically based capitalism can do wonders
in the way of creating wealth for society. According to economic philosopher, Adam
Smith: that our system of capitalism does not work well unless it has the moral cooperation of its participants. Jewish theologian wrote: “ It’s what people do when they all
are alone, when one is looking that makes all the difference between civilization and the
jungle.” Ethics is important because either government or legislation cannot do
everything to protect society. Technology races ahead much faster than the government
can regulate. People in an industry often know the dangers in a particular technology
better than government regulators who sit at a distance. Ethics is good in itself. Ethics is
important to create a smoothly and efficiently running economy. The Bhagavad Gita asks
us not consider only the fruits of our actions. It invokes the notion of passionless action.
The concept of Gita of doing one’s duty without seeking for the fruits, Manu’s concept
of inheriting debts as well as property, the Mauriyan idea of accountability provide a
basis for Gandhiji’s belief that politics and business must work hand in hand for the
development.
FACTORS HAVING IMPACT ON ETHICS
Ethical
considerations
vary
by
class,
structure,
economic
group,
industry,
professional group and so on. Business ethics has to be on par with the ethical code of
the society in which it operates. It is essential that the business adheres to the
well-established ethics. The following are the factors that creates the basis to ethical
consideration (a) Value, (b) Culture,and (c) Transformation.
VALUE
Values are additions or accretions to the image. Values are not fixed. They change.
As they undergo change the society and its constituents also have to undergo the
process. When the values undergo a change it takes the culture along with it. Values are
crucially important factor in business relationships. Values create credibility with the
public. It will certainly add value to the concern and create more credibility by being
morally responsible and accountable. This creates a confidence in those who are directly
and indirectly involved. An organization perceived by the public to be ethically, socially
concerned will be honored and respected even those who have no knowledge of its
actual functioning. Not only this enhances the credibility within itself but also with its
employees. It creates a feeling of oneness among employees having a common goal. For
an individual business values derive from multitude of sources, such as mission of
business as a social institution, the nation in which business is located, the type of
industry in which it is active and the nature. Over a period of time value become
institutionalized with regard to business and society. These values perform two
important functions. First they form as a guide to business environment. Second, they
become strong motivators for people in business. They become the key factor in the
system relationship of business with society. Business has certain rights but it also has
certain responsibilities to society and in turn society has certain rights and
responsibilities in regard to business activity. Value-ethical attitude helps management
for better decision-making. The decisions are in the interest of public, society and
environment. Ethical decisions are in the interest of public, society and environment.
Value added rather based ethical decision-making will make an organization and its
decision-maker to look into all aspects of economic, social, politico-legal aspects.
CULTURE
Culture is described as human environment of humans. The system aspect of culture
is the set of relationship that makes it possible for human beings to create a society to
pass the accumulated learning of the species from generation to generation and
continue to make the accumulations of learning. Culture refers to activities, thoughts,
feelings and artifacts which man acquires as a member of the society. Cultural
differences separate the ethical attitude of different people. Much more emphasis is
given to building and developing relationship and much less emphasis is given to the
abstract concept issues.
TRANSFORMATION
Transformation is yet another reason for the change in culture and values.
Transformation with regard to communication, viewing, travelling, shopping, working
and playing envisage a change in the ethics and ethical practice. These phenomenal
growth and development in these areas brought about a social change amongst public,
society and business. These have improved the life style and quality of life, which in turn
has created a change in the cultural and cultural values bringing out a revolutionary
change in the ethical standards. Change is a permanent feature on man’s social life and
social system in the form of transformation. The economy as a whole has been through
five revolutions in the twentieth century, which have transformed its basic structure and
method of functioning.
IMPORTANCE OF ETHICS
Ethics corresponds to basic human needs. Most people want to be ethical not only in
their private lives but also in their business affairs. People want to be part of the
organization, because they perceive its purpose and activity to be beneficial to society.
The basic ethical needs are probably one of the most cogent reasons for ethical concern
on the part of organizations.
Ethics create credibility with the public. A company perceived by the public to be
ethically and socially concerned would be honoured and respected even by those who
have no intimate knowledge of its actual working. Gaining the confidence of the
community is vital to the business sector. Public opinion is the most powerful force in a
democratic society. It is a way of achieving higher standards ethical behavior.
Ethics give management credibility with employees. It provides a common language
for aligning a company’s leadership and its people. Ethics when perceived by employees
as genuine create common goals, values and language. The management has credibility
with its employees because it enjoys credibility with the public. It creates oneness
among the employees.
Ethics help in better decision-making. Ethical decision made by the company will
always be in the interest of the shareholders, stakeholders, public and their employees.
This is because respect for ethics will force the management to consider all aspects of a
question both economic, social and ethical aspects.
ETHICS IN MANGEMENT
Ethics are principles of conduct used to govern the decision-making and behavior of
an individual or group of individuals. Management is concerned with making decisions
within an organization. Ethics of the individual or group making decision have
significant implications for the organization’s stakeholders, employees, customers,
shareholders, suppliers, the government and the public at large. It is important to
develop code of ethics for decision-making. A code of ethics is a written document that
outlines the principles of conduct to be used in making decisions. Code of ethics is
based on philosophical approaches: justice, individual rights and utilitarianism. The
principle of justice involves making decisions based on truth, without bias and
consistency. The principle of individual rights concerns making decision based on
protecting human dignity. The principle of utilitarianism involves making decisions
directed towards promoting the greatest number of people. The Laws relating to ethics
in business speaks about consumer protection, product safety, shareholders and
stakeholders rights and environmental protection. Having a code of ethics with an
implementation
program
is
the
minimum
requirement
for
reputation
of
the
management. Ethics focus its attention on solving not only the internal problems of the
concern but also of the society at large. The economy as a whole has been thro’ five
revolutions in the twentieth century, which have transformed its basic structure and
method of functioning. First, the organizational revolution led to increase in number,
size and power of organizations of all types. Second, the corporate revolution expanded
the scale of business enterprise and led to dominate of modern big business
corporations. Third, the managerial revolution saw the emergence of a class of
professional mangers who took over the active control of large corporation. Fourth, the
property revolution separated ownership and management and diffused property rights
within the corporation. Finally, the capitalist revolution brought about a change in the
moral order of capitalism and greatly enlarged the public role of business and the
economic role of government. In this changed socio-economic environment the focus of
business ethics is on social responsibility. Social responsibility is a reaction to the goals
of the society and the economic, technological, social and political forces that mould the
society.
The ethics in the business community is not alienated or any different from the
ethics in the society at large. The codes of ethics, legislative changes and the standards
will not result in the desired holistic change. It is the mind set of the concerned people
which matter most and not the stick that forces compliance with reluctance. Hence,
there is an imperative need on the part of the corporate sector and profession to create
a higher standard of openness, truthfulness, honesty, clarity, transparency and accuracy
to ensure that all the stake holders have the best possible timely information. The
corporates in general and professionals in particular must adhere to the highest ethical
standards and assume a positive duty to unfold and update equivocally material
information.
Institutionalizing Ethics
A business that seriously desires to operate in an ethical environment has to
institutionalize ethics by drawing up a company policy and code of ethics, familiarizing
all concerned at all levels with the code of ethics and ensuring the implementation. Code
of ethics is nothing but a blue print of what is going to followed and adopted by the
company from then onwards. The company’s ethical code should be printed and
circulated to all those who deal with the company, by clearly bringing out what is
unethical conduct. The company may appoint ethics committee which offer training
within and outside. The duty of the committee is to report periodically to the Board and
offer suggestion for the betterment. The committee must also review the code of ethics
from time to time keeping pace with the changing environment. Business ethics has to
be practiced and preached. Before setting business standards, ethics and morality have
to be internalized so that they become a part of the blood stream. If the
corporate becomes committed to self-imposed standards of business morality the
whole country’s standards could be influenced.
Development of Program of Ethics
Merely endorsing a standard code or copying that of another will not suffice. It is
important to find out on what topics and areas require guidance.
Select a prominent personality to endorse the business ethics policy.
Choose a framework, which addresses issues as they affect different constituents or
shareholders of the company. The usual ones are: shareholders, employees, customers,
suppliers, and local/national community. Some might even include competitors.
The code needs piloting - perhaps with a sample drawn from all levels from different
locations.
The code of conduct framed should be distributed in booklet form.
Publish and send the code to all concerned.
Values and ethics are matters of governance. The board must be notified to involve
themselves for ethical policing.
Practical examples of the code in action should be introduced into all areas.
Training for all concerned.
Review mechanism should be established.
A code master needs to be appointed.
FACETS OF BUSINESS ETHICS
Stakeholder/Shareholders or other providers of money
Transparency and openness in all dealings. Providing adequate information to the
shareholders/stakeholders. The investment protection and ‘return’ on investment.
Employees
How the business values employees ? The company’s policies on: working
conditions, recruitment, development and training, rewards, health, safety & security,
equal opportunities, retirement, redundancy, discrimination and harassment.
Customer Relations
Customer satisfaction. Quality of product or service dealt. Fair pricing. After-sales
service.
Society/Community
The laws of the society and community are to be respected. Environmental
protection, Pollution abatement, Energy Conservation. In short improving the standard
and quality of life.
Government
Business ethics from the point of view of business and businessmen is to provide
information to
the government in all matters that is required to be. Following the
guidelines, policies and standard set up by the government. Paying the taxes that is
legitimately due to the government.
A growing global role
People around the globe are more connected to each other than ever before.
Information and money flow more quickly than ever. Goods and services produced in
one part of the world are increasingly available in all parts of the world. International
travel
is
more
frequent.
International
communication
is
commonplace.
This
phenomenon has been titled “globalization.” While some people think of globalization as
primarily a synonym for global business, it is much more than that. The same forces
that allow businesses to operate as if national borders did not exist also allow social
activists, labour organizers, journalists, academics, and many others to work on a global
stage.
— It means communication, interconnectedness.
— It means accomplishing things easier, cheaper, and quicker.
— Something on a bigger scope than local.
— It means opportunity, reducing trade barriers, growth.
— It means that there are many different ways to do things, all of which are valid in
their own right.
— It means a composite of things, an aggregate view.
— It means reallocating resources away from poorer nations to wealthier nations.
— Its meaning depends on your point of view.
Globalization is a medium which touches nearly every aspect of contemporary live in
the “civilized’ world. Globalization is the engine of trade and of explosive economic
prosperity. Globalization is a dynamic concept of universal proportions. The result is the
pressure on business to play a role in social issues will continue to grow. There is a
growing interest, therefore, in businesses taking a lead in addressing those issues in
which they have an interest where government has failed to come up with a solution. It
is the continuing commitment by business to behave fairly and responsibly and
contribute to economic development while improving the quality of life as well as of the
community and society at large.
Unless there is accountability and transparency in the dealings the business cannot
be socially responsible.
The values of accountability, social responsibility, long-term
vision, and ethical behavior have become more important. The wealth maximization or
profit maximization begins at the floor level leading to value addition. When once value
is added the concept of social responsibility would creep in. The present day scenario is
different and far from reality.
The world is entering a century with unprecedented changes for peace and progress.
Globalization is the buzzword in the context. Business is the silken thread that binds the
whole world. Therefore globalization of ethics is needed. The need is envisaged in the
following areas.
Global need for
— Stable and honest governments
— Transparency and openness to promote honesty in governments
— Commitment to internationally recognized human rights
— Developmental programs for environmental protection, pollution control, energy
conservation
— Evolution for world code of ethics for business
CONCLUSION
A society cannot function without a set of values.
Society is undergoing social
change. Business system is a product of customs and beliefs of the society in which it
exists. Ethics is a study of what is right and wrong.
Ethical considerations decide
whether the business enterprise is on par with the society’s needs.
Society is
undergoing social change due to ethical considerations. So long as the value systems
and philosophies of business go together, society will accept it. The resultant
contribution would be positive. Social and ethical challenges in business take several
forms and the impact is multidimensional and corporate governance is the key phrase.
The changes that are taking place in the internal and external environment in which the
business operates gave rise to a re-identification of their mission statement as “BE
INFORMED. BE INVOLVED. MAKE A DIFFERENCE.” This new ethical standard and social
attitude is blooming everywhere.
REFERENCES
1. Bowie, Norman E; Business Ethics; Prentice Hall Inc., New Jersy.
2. Davis Keith & Blomstrom.R.L.; Business & Society; McGraw Hill, New York.
3. Donaldson, John & Others; Business Ethics; Academic Press, London.
4. Dr. Robert F. Drainan; Globalizaion and Corporate Ethics; JRD TATA foundation
for ethics in Business, XLRI Jamshedpur.
5. Kumar.A, Joshi.K.M, & Jagni.B.J.; Ethical Issues in Management; Commonwealth
Publishers, New Delhi.
6. Mathias,T.A.Sj; Corporate Ethics; Allied Publishers, New Delhi.