Business ethics meaning is quite simple. A company should demonstrate ethical behaviour in all internal matters and dealings with the external environment. All stakeholders must ensure that ethical standards are adhered to while handling business transactions. The challenge for management is to ensure that all internal functions' standards are reasonably maintained in a controlled environment and are managed through policy and procedures.
DID YOU KNOW? Indian companies like Infosys, Wipro, and Tata Steel are among the most ethical companies in the world.
What is Business Ethics?
Business Ethics is a combination of two terms, ‘business’ and ‘ethics as presented in the diagram.
Business Ethics Definition
Business Ethics refers to “the organisational standards, principles, guidelines and set of values and norms that govern actions in the business organisation.” It is also known as Corporate Ethics, which ultimately helps corporate structures determine rightful acts and wrong or unethical acts in the business.
A company's behaviour is governed by a set of moral principles called business ethics. These values guide every firm’s decision, including how it interacts with the public and other businesses, treats its staff and deals with its clients. A firm will turn to these guiding principles to help it deal with any ethical issues or disputes as they emerge.
Feature of Business Ethics
To get a deeper understanding of business ethics, it’s necessary to know about the characteristics of business ethics. Following are the features of business ethics
- Business Ethics is not only a concept; it is a discipline. It is considered both science and art.
- Business ethics is not a modern business concept. It has its origin in the development of human civilization.
- Business ethics help in developing Personal Dignity by giving importance to stakeholders
- Business ethics is related to the human aspect
Need for Business Ethics
A business is said to be an ethical business only when the actions of the business are righteous and in favour of society. Ethical behaviours play a significant role in the development of society and help develop the business and generate goodwill for the business. Following are the major reasons that create the need to introduce business ethics.
- To stop businesses involving unfair trade practices like black-marketing, artificial high pricing, adulteration, cheating in weights, selling duplicate and harmful products, illegal hoarding, etc.
- To improve customers’ confidence and help in building trust about the product's quantity, utility, reliability, price, etc.
- The businesses opting for unethical practices can survive only in the short term and fail in the long run. For the survival of a business, ethical compliance is a mandatory requirement.
- Business ethics are required to safeguard consumers’ rights and protect the interests of the employees and stakeholders like government, lenders, shareholders, dealers etc.
- Business ethics helps generate cooperative work environments within the organisation that lead to the smooth flow of functional activities.
Objectives of Business Ethics
Business ethics helps to bring the following values and principles in day to day operation of businesses:-
Being honest will bridge the gap between the employer and employee. Ethics increases the truthfulness and devotion of employees towards the institution.
Customers rely more upon companies which do not compromise their qualities over quantities. Trust is not a one-time process; it takes years of ethics and code of conduct of a devoted organisation toward its goal.
Business Ethics make the company employees more responsible towards work with great value of devotion and discipline, which ultimately prepare them for the accountability towards their work. An increase in responsibility will undoubtedly help the customers with better service delivery.
This increases respect in employer-employee relations but also helps to create a better equation with the customers.
Elements of Business Ethics
To achieve ethical behaviour, it is necessary for a company or any other organisation to work upon the basic concepts of business ethics. It is important to identify the key pillars on which Business Ethics grow and develop. Here are five essentials of Business Ethics which are treated as ideal in the business market.
1. Top Management Engagement
The senior executives play a notable part in directing the organisation towards ethical behaviour. The Board of Directors, the CEO, the Chairman, and Departmental Heads must set an example by being committed to moral behaviour. They need to support the staff in embracing and upholding moral principles.
2. Precise Rules of Ethics
Having Precisely Written Rules of Conduct outlining acceptable standards is a good practice for an ethical corporation. Such rules of conduct cover topics like integrity, product safety, ethical marketing, ethical business practices, workplace health and safety etc.
3. Adherence to Mechanism
Once the Rule of Ethics has been formulated, the next step for an organisation is to ensure adherence to the mechanism built therein. It is essential because it helps to ensure whether the staff and employees have been working within the limit of the ethical code of the business organisation or not. It tracks all employees' actions like production, output towards work, recruitments, accounts, etc.
4. Employee Participation
Because they are one of the primary practitioners of ethical policies, management must involve employees at all levels in implementing ethical programmes and policies. Small groups of employees can also review the company’s ethical guidelines, enabling lawmakers to assess employees' thoughts about such ethical regulations and, if necessary, alter them.
5. Regular Monitoring
It is challenging to measure ethical program outcomes with extreme care. However, it is advisable for commercial organisations to periodically assess the extent to which the moral standards have been upheld. The top management and other staff members should determine the organisation’s ethical policies and efforts in light of the facts gathered.
Examples of Business Ethics
One classic example of business ethics can be seen during the Covid-19 era, where all the big giants throughout the globe have been cutting down the expenses and salaries of the employees and removing them from their jobs. Companies like TATA, Wipro, Infosys, and a few other businesses provided their employee's job guarantees and full salary payments with life insurance. Such initiatives are a classic example of business ethics.
Some of the other Business Ethics examples are mentioned below:
- Giving impartial and fair treatment to all employees
- Providing Quality Services to the customers with promising services
- Complying with the Taxation Laws of the land
- Balancing both profiteering as well as business trading interests
- Preparing and regulating the rules of conduct to regulate the behaviour of employees
Types of Business Ethics
Business Ethics has a broader scope and can be easily divided into different types. Many factors including the Nature of the business, are in which business has been indulged and to a greater extent, the place where the business has been located is responsible for the characterization of business ethics into different dimensions. It is important to divide it into fractions to learn the concept of business ethics in great detail.
Following are the types of business ethics:
1. Personal Responsibilities
Everyone who works for a company, whether at the senior or entry-level, is expected to take personal responsibility. This could include accomplishing activities allocated to you by your manager or just carrying out the duties outlined in your job description. If you make a mistake, you admit it and do whatever is necessary to correct it.
2. Corporate Responsibilities
Businesses have obligations to their staff, clients, or customers, and, in some situations, boards of directors. Some of these may be contractual or legal duties, while others may be commitments, such as fair business practices and treating people with dignity and respect. Whatever such commitments are, the company is responsible for meeting them.
Businesses and their employees are both expected to be loyal. Employees should be devoted to their coworkers, managers, and the organisation. This could imply speaking well about the company in public while dealing with personnel or corporate concerns in private. Customer or client loyalty is vital to a firm not just for maintaining strong business ties but also for attracting new business through a good reputation.
4. Trustworthiness and Seriousness towards Organisation
Through honesty, transparency, and dependability, a company builds trust with its customers, clients, and workers. Employees should have the confidence to uphold the terms of their employment. Consumers and clients should be able to put their money, data, contractual obligations, and personal information in the hands of the company. Being trustworthy encourages people to conduct business with you and aids in the maintenance of a good reputation.
5. Communal and Environmental Responsibility
Businesses will act ethically toward their clients, customers, and workers and also toward the environment and community. Many businesses seek ways to give back to their communities, whether through volunteer labour or financial investments. They will also implement waste-reduction measures and create a safe and healthy environment.
6. Technical Aspect of Morality
Professionals are expected to uphold particular ethical standards set by reputable organisations, individuals, or norms. Advocates, CAs, doctors, and other professionals are governed by the rule of Conduct that has been established for them by the relevant institutions.
7. Legal Responsibility
It refers to the responsibility imposed by law. Complying with all the procedures established by law and adhering to them is one of the types of Business Ethics.
Maintaining improved and friendly relationships with society, clients, staff, and the relevant industry sector is made possible by business ethics. Every employee of the company should adhere fully to the ethics defined by the company. Moreover, a reward-punishment system should be tied to those standards. Salary and promotion opportunities are the main factors that determine organisational rewards and punishments. As awards shape or consolidate employees' behaviours towards achieving organisational goals, penalties are designed to eliminate behaviour that hinders them.
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