UNIT: BUSINESSS EHICS AND CSR

Ethics is a branch of social science. It deals with moral principles and social
values. It helps us to classifying, what is good and what is bad? It tells us to do
good things and avoid doing bad things.

So, ethics separate, good and bad, right and wrong, fair and unfair, moral and
immoral and proper and improper human action. In short, ethics means a code
of conduct. It is like the 10 commandments of holy Bible. It tells a person how
to behave with another person.

In short, business ethics means to conduct business with a human touch in order
to give welfare to the society.

So, the businessmen must give a regular supply of good quality goods and
services at reasonable prices to their consumers. They must avoid indulging in
unfair trade practices like adulteration, promoting misleading advertisements,
cheating in weights and measures, black marketing, etc. They must give fair
wages and provide good working conditions to their workers. They must not
exploit the workers. They must encourage competition in the market. They must
protect the interest of small businessmen. They must avoid unfair competition.
They must avoid monopolies. They must pay all their taxes regularly to the
government.

Definition of Business Ethics

According to Andrew Crane,

“Business ethics is the study of business situations, activities, and decisions

where issues of right and wrong are addressed.”

According to Raymond C. Baum hart,

“The ethics of business is the ethics of responsibility. The business man must
promise that he will not harm knowingly.”

According to Wikipedia,

“Business ethics (also corporate ethics) is a form of applied ethics or

professional ethics that examines ethical principles and moral or ethical
problems that arise in a business environment. It applies to all aspects of
business conduct and is relevant to the conduct of individuals and entire
organizations.”

Nature of Business Ethics

The characteristics or features of business ethics are:

 Code of conduct: Business ethics is a code of conduct. It tells what to do

and what not to do for the welfare of the society. All businessmen must
follow this code of conduct.
 Based on moral and social values: Business ethics is based on moral
and social values. It contains moral and social principles (rules) for doing
business. This includes self-control, consumer protection and welfare,
service to society, fair treatment to social groups, not to exploit others,
etc.
 Gives protection to social groups: Business ethics give protection to
different social groups such as consumers, employees, small
businessmen, government, shareholders, creditors, etc.
 Provides basic framework: Business ethics provide a basic framework
for doing business. It gives the social cultural, economic, legal and other
limits of business. Business must be conducted within these limits.
 Voluntary: Business ethics must be voluntary. The businessmen must
accept business ethics on their own. Business ethics must be like self-
discipline. It must not be enforced by law.
 Requires education and guidance: Businessmen must be given proper
education and guidance before introducing business ethics. The
businessmen must be motivated to use business ethics. They must be
informed about the advantages of using business ethics. Trade
Associations and Chambers of Commerce must also play an active role in
this matter.
 Relative Term: Business ethics is a relative term. That is, it changes
from one business to another. It also changes from one country to
another. What is considered as good in one country may be taboo in
another country.
 New concept: Business ethics is a newer concept. It is strictly followed
only in developed countries. It is not followed properly in poor and
developing countries.

Advantages of Business Ethics

More and more companies recognize the link between business ethics and
financial performance. Companies displaying a “clear commitment to ethical
conduct” consistently outperform companies that do not display ethical conduct.

1. Attracting and retaining talent

People aspire to join organizations that have high ethical values. Companies are
able to attract the best talent and an ethical company that is dedicated to taking
care of its employees will be rewarded with employees being equally dedicated
in taking care of the organization. The ethical climate matter to the employees.

Organizations create an environment that is trustworthy, making employees

willing to rely, take decisions and act on the decisions and actions of the co-
employees. In such a work environment, employees can expect to be treated
with respect and consideration for their colleagues and superiors. It cultivates
strong teamwork and Productivity and support employee growth.

2. Investor Loyalty

Investors are concerned about ethics, social responsibility and reputation of the
company in which they invest. Investors are becoming more and more aware
that an ethical climate provides a foundation for efficiency, productivity and
profits. Relationship with any stakeholder, including investors, based on
dependability, trust and commitment results in sustained loyalty.

3. Customer satisfaction

Customer satisfaction is a vital factor in successful business strategy. Repeat

purchases/orders and enduring relationship of mutual respect is essential for the
success of the company. The name of a company should evoke trust and respect
among customers for enduring success. This is achieved by a company that
adopts ethical practices. When a company because of its belief in high ethics is
perceived as such, any crisis or mishaps along the way is tolerated by the
customers as a minor aberration. Such companies are also guided by their ethics
to survive a critical situation. Preferred values are identified ensuring that
organizational behaviours are aligned with those values. An organization with a
strong ethical environment places its customers’ interests as foremost. Ethical
conduct towards customers builds a strong competitive position. It promotes a
strong public image.

4. Regulators
Regulators eye companies functioning ethically as responsible citizens. The
regulator need not always monitor the functioning of the ethically sound
company. The company earns profits and reputational gains if it acts within the
confines of business ethics. To summaries, companies that are responsive to
employees’ needs have lower turnover in staff.

 Shareholders invest their money into a company and expect a certain

level of return from that money in the form of dividends and/or capital
growth.
 Customers pay for goods, give their loyalty and enhance a company’s
reputation in return for goods or services that meet their needs.
 Employees provide their time, skills and energy in return for salary,
bonus, career progression, and learning.

Scope of Business Ethics

Ethical problems and phenomena arise across all the functional areas of
companies and at all levels within the company.

1. Ethics in Compliance

Compliance is about obeying and adhering to rules and authority. The

motivation for being compliant could be to do the right thing out of the fear of
being caught rather than a desire to be abiding by the law. An ethical climate in
an organization ensures that compliance with law is fuelled by a desire to abide
by the laws. Organizations that value high ethics comply with the laws not only
in letter but go beyond what is stipulated or expected of them.

2. Ethics in Finance

The ethical issues in finance that companies and employees are confronted with
include:

 In accounting – window dressing, misleading financial analysis.

 Related party transactions not at arm’s length
 Insider trading, securities fraud leading to manipulation of the financial
markets.
 Executive compensation.
 Bribery, kickbacks, over billing of expenses, facilitation payments.
 Fake reimbursements

3. Ethics in Human Resources

Human resource management (HRM) plays a decisive role in introducing and
implementing ethics. Ethics should be a pivotal issue for HR specialists. The
ethics of human resource management (HRM) covers those ethical issues
arising around the employer-employee relationship, such as the rights and duties
owed between employer and employee.

The issues of ethics faced by HRM include:

 Discrimination issues i.e. discrimination on the bases of age, gender, race,

religion, disabilities, weight etc.
 Sexual harassment.
 Affirmative Action.
 Issues surrounding the representation of employees and the
democratization of the workplace, trade.
 Issues affecting the privacy of the employee: workplace surveillance,
drug testing.
 Issues affecting the privacy of the employer: whistle-blowing.
 Issues relating to the fairness of the employment contract and the balance
of power between employer and employee.
 Occupational safety and health.

Companies tend to shift economic risks onto the shoulders of their employees.
The boom of performance-related pay systems and flexible employment
contracts are indicators of these newly established forms of shifting risk.

4. Ethics in Marketing

Marketing ethics is the area of applied ethics which deals with the moral
principles behind the operation and regulation of marketing. The ethical issues
confronted in this area include:

 Pricing: price fixing, price discrimination, price skimming.

 Anti-competitive practices like manipulation of supply, exclusive dealing
arrangements, tying arrangements etc.
 Misleading advertisements
 Content of advertisements.
 Children and marketing.
 Black markets, grey markets.

5. Ethics of Production

This area of business ethics deals with the duties of a company to ensure that
products and production processes do not cause harm. Some of the more acute
dilemmas in this area arise out of the fact that there is usually a degree of danger
in any product or production process and it is difficult to define a degree of
permissibility, or the degree of permissibility may depend on the changing state
of preventative technologies or changing social perceptions of acceptable risk.

 Defective, addictive and inherently dangerous products and

 Ethical relations between the company and the environment include
pollution, environmental ethics, and carbon emissions trading.
 Ethical problems arising out of new technologies for eg. Genetically
modified food
 Product testing ethics.

The most systematic approach to fostering ethical behaviour is to build

corporate cultures that link ethical standards and business practices.

A Framework for Ethical Decision Making

Recognize an Ethical Issue

1. Could this decision or situation be damaging to someone or to some

group? Does this decision involve a choice between a good and bad
alternative, or perhaps between two “goods” or between two “bads”?
2. Is this issue about more than what is legal or what is most efficient? If so,
how?

Get the Facts

1. What are the relevant facts of the case? What facts are not known? Can I
learn more about the situation? Do I know enough to make a decision?
2. What individuals and groups have an important stake in the outcome?
Are some concerns more important? Why?
3. What are the options for acting? Have all the relevant persons and groups
been consulted? Have I identified creative options?

Evaluate Alternative Actions

1. Evaluate the options by asking the following questions:

 Which option will produce the best and do the least harm? (The
Utilitarian Approach)
 Which option best respects the rights of all who have a stake? (The
Rights Approach)
  Which option treats people equally or proportionately? (The Justice
Approach)
 Which option best serves the community as a whole, not just some
members? (The Common Good Approach)

 Which option leads me to act as the sort of person I want to be? (The
Virtue Approach)

Make a Decision and Test It

1. Considering all these approaches, which option best addresses the

situation?
2. If I told someone I respect-or told a television audience-which option I
have chosen, what would they say?

Act and Reflect on the Outcome

1. How can my decision be implemented with the greatest care and attention
to the concerns of all stakeholders?
2. How did my decision turn out and what have I learned from this specific
situation?

Code of ethics, Guidelines for developing code

of ethics

Code of ethics

A code of ethics is a guide of principles designed to help professionals conduct

business honestly and with integrity. A code of ethics document may outline the
mission and values of the business or organization, how professionals are
supposed to approach problems, the ethical principles based on the
organization’s core values and the standards to which the professional is held. A
code of ethics, also referred to as an “ethical code,” may encompass areas such
as business ethics, a code of professional practice and an employee code of
conduct.
Both businesses and trade organizations typically have some sort of code of
ethics that their employees or members are supposed to follow. Breaking the
code of ethics can result in termination or dismissal from the organization. A
code of ethics is important because it clearly lays out the rules for behaviour and
provides the groundwork for a pre-emptive warning.

Regardless of size, businesses count on their management staff to set a standard

of ethical conduct for other employees to follow. When administrators adhere to
the code of ethics, it sends a message that universal compliance is expected of
every employee.

Compliance-Based Code of Ethics

For all businesses, laws regulate issues such as hiring and safety standards.
Compliance-based codes of ethics not only set guidelines for conduct, but also
determine penalties for violations.

In some industries, including banking, specific laws govern business conduct.

These industries formulate compliance-based codes of ethics to enforce laws
and regulations. Employees usually undergo formal training to learn the rules of
conduct. Because noncompliance can create legal issues for the company as a
whole, individual worker within a firm may face penalties for failing to follow
guidelines.

To ensure that the aims and principles of the code of ethics are followed, some
companies appoint a compliance officer. This individual is tasked with keeping
up to date on changes in regulation codes and monitoring employee conduct to
encourage conformity.

This type of code of ethics is based on clear-cut rules and well-defined

consequences rather than individual monitoring of personal behaviour.
Therefore, despite strict adherence to the law, some compliance-based codes of
conduct do not promote a climate of moral responsibility within the company.

Value-Based Code of Ethics

A value-based code of ethics addresses a company’s core value system. It may
outline standards of responsible conduct as they relate to the larger public good
and the environment. Value-based ethical codes may require a greater degree of
self-regulation than compliance-based codes.
Some codes of conduct contain language that addresses both compliance and
values. For example, a grocery store chain might create a code of conduct that
espouses the company’s commitment to health and safety regulations above
financial gain. That grocery chain might also include a statement about refusing
to contract with suppliers that feed hormones to livestock or raise animals in
inhumane living conditions.

Code of Ethics Among Professionals

Financial advisers registered with the Securities and Exchange Commission or a
state regulator are bound by a code of ethics known as fiduciary duty. This is a
legal requirement and also a code of loyalty that requires them to act in the best
interest of their clients.

Guidelines for developing code of ethics

Development Process

The first step in developing a code of conduct is to establish the purpose of the
codes and why they matter. In a KPMG survey of Fortune Global 200
companies, the three most common reasons for adopting business codes were to
comply with legal requirements, create a shared company culture, and protect
and improve the organization’s reputation. KPMG’s survey also found that the
most commonly cited core values of Fortune Global 200 companies are
integrity, teamwork, respect, innovation, and client focus. Schwartz also
recommended that code provisions should be consistent with “six universal
moral values” (trustworthiness, respect, responsibility, fairness, caring, and
citizenship), which should prevail over financial objectives.

Once the purpose is established, the framework for developing a code requires a
full understanding of the operational and reputational risks an organization
faces. These issues define the organization’s objectives when developing code
content, policies, communication, and training that address individual and
collective responsibilities regarding risk management.

To achieve the organization’s risk management standards it is important to draft

a code that clearly states expectations and guidelines for acceptable behavior,
and provides options for seeking advice and for reporting concerns or suspected
misconduct. In his research on the many dimensions of code development,
Schwartz found that employees, managers, and ethics officers consider codes
more effective when they are readable, relevant, and have a positive tone.
In addition, choosing your language carefully is important, as the authors of
an article analyzing Lehman Brothers’ Code of Ethics concluded: “finding the
right words to express ideas and behaviors is a key strategic action for an
organization.” The authors studied Lehman Brothers’ code using the Competing
Values Framework (CVF) to reveal the rhetorical elements of the message, and
the Erwin method to rate the code’s tone, readability, and style. They found that
Lehman Brothers’ code’s strengths were on the relational (trust) and
informational (facts) side, as opposed to the transformational (change) and
instructional (action) side, of the CVF. This led to their conclusion that:

The Lehman code of ethics and internal code of conduct do not offer much
vision or guidance to the reader. . . . While it lays out the basic rules expected of
all Lehman employees, executives missed the opportunity to create a unique
code expressing strong ethical principles. A more transformational code might
have identified their unique strengths and values, but this would have to be
coupled with transformational leadership and a culture of strong
communication. The Lehman code did a basic job of protecting the organization
against illegal actions by employees, but it did little to advance an ethical
culture that might have sustained them.

One of the things the authors found lacking was guidance for employees who
are faced with difficult decisions. The American Management Association
proposes using the code of conduct to guide employees who are conducting
business and making decisions in business dealings and relationships around the
globe, by simply recommending that employees ask themselves two questions:

1. Does this comply with the law, the Code of Conduct and the company’s
policies?
2. How would customers, shareholders, general public and co-workers view
it?

The best practices for drafting codes of conduct that emerge from these studies
include:

 Obtain buy-in across the organization with input from a multidisciplinary

team
 Include the organization’s mission statement, vision, and values that
reflect its commitment to ethics, integrity, and quality
 Clarify that the organization expects individuals to act with honesty and
integrity in addition to compliance with legal requirements
 Describe expected behaviours rather than stating prohibitions
 Cover relevant risks, employment practices, protecting corporate assets,
and managing third-party relationships
  Make it user-friendly and applicable to all individuals covered by the
code
 Use simple, concise, and easily understood language (and provide
translated versions as needed)
 Describe enforcement and disciplinary procedures
 Solicit feedback on the code from all levels of the organization
 Update to improve content and address new issues or risk areas

But the mere existence of a code of ethics, without more, will not create a sense
of shared values and commitment to ethical behaviour.

Implementation
Based on their analysis of the effect that Lehman Brothers’ code of ethics had
on its corporate culture, the authors concluded that “silence can be deadly,”
“codes fail when poorly communicated,” and “codes themselves cannot create
ethical organizations.”

In fact, their research found that these two actions are key to code
implementation:

 Communicate codes through the right channels and explain why they’re
important
 Integrate codes into the organization’s practices and back it up with
enforcement

Once drafted, an organization needs to embed the code into its culture. The
KPMG report recommends that the code become a “living” document to guide
and create ethical behaviour throughout the organization through:

 Communication and training

 Personnel and other policy measures
 Monitoring, auditing, and reporting

At the companies KPMG surveyed, training courses were commonly used to:

 Explain the importance of the code

 Reinforce ethical behaviour
 Strengthen the moral compass
 Identify and deal with dilemmas
 Provide guidance on how to implement the code more effectivel
At Lehman Brothers, the ethical code contained the phrase “compete
aggressively in furthering the interests of the firm.” However, the authors raise
the question of whether explaining to employees the level of acceptable risk in
“competing aggressively” would have avoided leveraging the company “into a
lethal situation.”

Effective implementation requires ethical leadership and support, training, and

continuous reinforcement and updates to keep the code current. Ongoing
administration and reinforcement of code standards embeds an organization’s
values into its culture, which stimulates ethical reflection and action, and
encourages compliance so that employees speak up when they see others
engaging in unethical behavior. And for the skeptics who question whether an
effective code of ethics is worth all this effort, the bottom line is that good
ethics are good for business.

Ethos of Vedanta in Management

Vedanta is a principal school of Hindu philosophy derived from the ancient

sacred texts of India known as the Vedas, particularly the Upanishads. The term
“Vedanta” literally translates to “the end of the Vedas,” indicating both a
conclusion and an essence of the earlier teachings. It focuses on the concepts of
the ultimate reality (Brahman) and the nature of the individual soul (Atman),
positing that the true self is identical to the ultimate metaphysical reality.
Vedanta is not monolithic; it encompasses diverse sub-schools and
philosophical approaches, including Advaita (non-dualism), Dvaita (dualism),
and Vishishtadvaita (qualified non-dualism), each offering different
interpretations of the relationship between the soul, the universe, and the divine.
It is both a philosophical system and a practical guide to spiritual liberation.

 Holistic Vision:

Vedanta teaches a holistic approach to life and management. It suggests that all
aspects of the universe are interconnected and interdependent. In a management
context, this means recognizing the interconnections between different parts of
an organization and the broader business ecosystem. A Vedantic approach
encourages managers to consider the well-being of all stakeholders, including
employees, customers, shareholders, and the environment, advocating for a
balance between profit-making and social responsibility.

 The Concept of Dharma:

In Vedanta, ‘Dharma’ refers to righteousness or the right way of living. It is
closely tied to ethics and duty. For managers, this means adhering to ethical
practices in decision-making, ensuring fairness, and promoting a culture of
honesty and integrity. The concept of Dharma in management stresses the
importance of duties and responsibilities over personal gains, fostering trust and
long-term success.

 Atman and Brahman:

Vedanta teaches the concepts of Atman (the inner self) and Brahman (the
universal consciousness). The realization that the individual self (Atman) is part
of the universal self (Brahman) encourages managers to transcend personal
biases and egos, focusing instead on the larger goals of the organization and
community. This can enhance team dynamics and improve leadership
effectiveness by fostering a sense of unity and purpose.

 Karma Yoga:

Karma Yoga, a key aspect of Vedanta, involves performing one’s duty without
attachment to the results. In management, this translates to focusing on efforts
rather than outcomes. This perspective helps managers to stay motivated and
persistent, even when immediate results are not visible, and encourages them to
foster a similar attitude in their teams.

 Jnana Yoga:

Jnana Yoga, or the path of knowledge, is another aspect of Vedanta that

emphasizes the importance of wisdom and understanding. In a business setting,
this can be seen in the continual pursuit of knowledge – about the market, the
latest technological advancements, and about human behavior. Managers who
practice Jnana Yoga are likely to be more reflective and insightful, making
decisions that are informed and considerate of the bigger picture.

 Bhakti Yoga:

Bhakti Yoga involves devotion to a higher power. When applied to

management, it encourages leaders to cultivate loyalty and dedication towards
the organization’s mission and values. This can enhance organizational culture,
creating a work environment where employees are motivated by shared goals
and values.

 Detachment:
Vedanta advocates detachment from materialistic outcomes and superficial
measures of success. In management, this can help leaders avoid short-term
temptations and make decisions that align with long-term objectives and ethical
standards. Detachment aids in stress management and reduces the fear of
failure, which can inhibit innovation and risk-taking.

 Self-Realization and Personal Growth:

Vedanta holds self-realization as the ultimate goal of human life. In

management, this translates into personal development and helping others
achieve their full potential. Managers can use this principle to foster an
environment of learning and growth, encouraging employees to explore their
capabilities and align their personal growth with organizational goals.

 Sustainable Practices:

The respect for all living beings and the emphasis on minimal harm, principles
found in Vedanta, can lead to adopting sustainable business practices. Managers
can integrate these values into their business strategies by prioritizing
sustainability in resource usage, waste management, and overall business
operations.

 Ethical Leadership:

Vedantic philosophy promotes ethical leadership by advocating for selflessness

and service to others. Leaders who embrace these values can inspire trust and
loyalty, create more cohesive teams, and lead organizations that genuinely
contribute to societal well-being.

 Unity in Diversity:

Vedanta recognizes the underlying unity of all beings despite apparent

differences. This principle can help managers appreciate diversity in the
workplace, not just in terms of race, religion, or gender, but also in thoughts,
experiences, and perspectives. This can enhance creativity, innovation, and
problem-solving within teams.

 Mindfulness and Self-Control:

Practices such as meditation are recommended in Vedanta to develop

mindfulness and control over one’s mind. In management, these practices can
help in developing greater focus, reducing stress, and enhancing decision-
making capabilities.

Ethos of Vedanta in Management Challenges:

1.Cultural and Philosophical Differences:

Vedanta is rooted in Indian philosophy and may not be immediately resonant or

understandable to individuals from different cultural backgrounds. Its concepts
like Dharma, Karma, and Moksha are deeply philosophical and can be abstract,
making them difficult to translate effectively into practical, actionable strategies
in diverse, multicultural corporate environments.

2. Resistance to Non-Materialistic Approaches:

Vedantic philosophy often emphasizes non-attachment to material results and

advocates for focusing on duty and ethics over profit. This can be challenging to
implement in profit-driven business environments where success is
predominantly measured by financial outcomes and where stakeholders expect
tangible and quantifiable returns.

3. Balancing Detachment with Accountability:

Vedanta encourages detachment from the fruits of one’s actions, which can
conflict with modern business practices that stress accountability and results-
oriented performance. Managers may find it difficult to cultivate a sense of
detachment in themselves and their teams while also maintaining rigorous
standards of accountability and performance metrics.

4. Integrating Spiritual Practices:

Incorporating spiritual practices such as meditation and mindfulness (as

recommended by Vedanta for self-control and awareness) into the daily routine
of a corporate environment can be challenging. There might be skepticism or
reluctance among employees, and finding time during the workday for these
activities might not always be feasible.

5. Ethical Dilemmas and Profitability:

Applying the ethical and righteous path of Dharma in decision-making can
sometimes seem at odds with short-term business goals and profitability.
Managers might face dilemmas where the ethically right decision may not be
the most profitable one. Striking a balance between adhering to ethical practices
and ensuring competitive business performance can be a significant challenge.

6. Personal Development and Organizational Goals:

Vedanta places a strong emphasis on personal growth and self-realization.

Aligning these personal development goals with the objectives of the
organization can be complex. While personal growth is beneficial, it must
also coincide with the employee’s role and the company’s strategic
objectives, which might not always align neatly.

Ethical issues, Ethics Management Key Roles

and Responsibilities

Ethical issues

In the complex global business environment of the 21st century, companies of

every size face a multitude of ethical issues. Businesses have the responsibility
to develop codes of conduct and ethics that every member of the organization
must abide by and put into action. Fundamental ethical issues in business
include promoting conduct based on integrity and that engenders trust, but more
complex issues include accommodating diversity, empathetic decision-making,
and compliance and governance consistent with a company’s core values.

Fundamental Ethical Issues

The most fundamental or essential ethical issues that businesses must face are
integrity and trust. A basic understanding of integrity includes the idea of
conducting your business affairs with honesty and a commitment to treating
every customer fairly. When customers think a company is exhibiting an
unwavering commitment to ethical business practices, a high level of trust can
develop between the business and the people it seeks to serve. A relationship of
trust between you and your customers may be a key factor in your company’s
success.
Diversity and the Respectful Workplace

Your current and potential employees are a diverse pool of people who deserve
to have their differences respected when they choose to work at your business.
An ethical response to diversity begins with recruiting a diverse workforce,
enforces equal opportunity in all training programs and is fulfilled when every
employee is able to enjoy a respectful workplace environment that values their
contributions. Maximizing the value of each employees’ contribution is a key
element in your business’s success.

Decision-Making Issues

A useful method for exploring ethical dilemmas and identifying ethical courses
of action includes collecting the facts, evaluating any alternative actions,
making a decision, testing the decision for fairness and reflecting on the
outcome. Ethical decision-making processes should center on protecting
employee and customer rights, making sure all business operations are fair and
just, protecting the common good, and making sure the individual values and
beliefs of workers are protected.

Compliance and Governance Issues

Businesses are expected to fully comply with environmental laws, federal and
state safety regulations, fiscal and monetary reporting statutes and all applicable
civil rights laws. For example, the Aluminum Company of America’s (ALCOA)
approach to compliance ensures no one at the company may ask any employee
to break the law or go against company values, policies and procedures. The
company’s commitment to compliance is shored up by its approach to corporate
governance: the company expects all ALCOA directors, officers and executives
to conduct business in accordance with its business conduct policies.

Some professions, such as health care and the law, have a clear code of ethics
that spell out what a person should and should not do in certain situations.
However, a great many of other professions don’t have guidelines to help
someone navigate tricky situations. It’s then up to each organization – or even
each person in some cases – to decide how to handle ethical issues.

Social Media Use

Whether you like it or not, social media is an important business marketing tool,
and it’s likely an integral part of employees’ lives. The evolving nature of social
media means that it’s becoming harder to distinguish between personal and
professional in a social media setting.
To ward off any potential ethical issues, a small business owner should create a
clear set of social media policies for employees. Policies can cover both how
and if workers can use any social media programs while in the office, as well as
what they are allowed to say about the workplace on public-facing social media
pages.

Technology and Privacy Concerns

Today’s technology security abilities mean that employers can easily monitor
their workers’ use of technology, such as emails and website history. However,
a business owner might run into the ethical issue of how much privacy an
employee can expect when on a company device, whether computer, tablet or
phone. As with social media usage, employees should have a clear
understanding of how much, if any, privacy they have when using a company-
owned device. They should be alerted if the company leadership plans to read
email or if their internet usage will be tracked.

Business Travel Ethics

Some businesses require both leadership and employees to travel on the

company dime. Ethical issues can result when someone takes advantage of
travel policies. Examples include using an allotted per diem to purchase alcohol
when it’s stated in the employee manual that it’s not allowed or using a personal
credit card to book trips to gain the rewards and pocketing the cash given to you
by the company. While these actions aren’t illegal, they can be considered
ethical issues if someone’s boss isn’t aware of what is going on or if the
employee knows the action would be frowned upon.

Perils of Employee Favouritism

While it’s not unreasonable for the owner of an organization to have employees
that they enjoy working with more than others, there can be ethical issues if the
person in a position of leadership shows favouritism to an employee without
any merit behind it. Giving in to playing favourites can cause a business to lose
valuable employees. However, keep in mind that favouritism is different from
forms of sexual harassment, which is not an ethical issue – it’s just illegal.

Bad Leadership Behaviour

Sometimes, it’s not the employee who exhibits unethical behaviour, but the
owner or head of the company. Putting rules in place for employees but not
following them yourself is an example of an ethical issue in the workplace. To
keep your employees motivated and satisfied with their workplace, a leader
should practice what he preaches and keep his own behaviour ethical.

Ethics Management Key Roles and Responsibilities

Depending on the size of the organization, certain roles may prove useful in
managing ethics in the workplace.

These can be full-time roles or part-time functions assumed by someone already

in the organization. Small organizations certainly will not have the resources to
implement each the following roles using different people in the organization.

However, the following functions points out responsibilities that should be

included somewhere in the organization.

1. The organization’s chief executive must fully support the program.

If the chief executive isn’t fully behind the program, employees will certainly
notice — and this apparent hypocrisy may cause such cynicism that the
organization may be worse off than having no formal ethics program at all.

Therefore, the chief executive should announce the program, and champion its
development and implementation.

Most important, the chief executive should consistently aspire to lead in an

ethical manner. If a mistake is made, admit it.

2. Consider establishing an ethics committee at the board level.

The committee would be charged to oversee development and operation of the

ethics management program.

3. Consider establishing an ethics management committee.

It would be charged with implementing and administrating an ethics

management program, including administrating and training about policies and
procedures, and resolving ethical dilemmas.

The committee should be comprised of senior officers.

4. Consider assigning/developing an ethics officer.

This role is becoming more common, particularly in larger and more
progressive organizations.

The ethics officer is usually trained about matters of ethics in the workplace,
particularly about resolving ethical dilemmas.

5. Consider establishing an ombudsperson.

The ombudsperson is responsible to help coordinate development of the policies

and procedures to institutionalize moral values in the workplace.

This position usually is directly responsible for resolving ethical dilemmas by

interpreting policies and procedures.

6. Note that one person must ultimately be responsible for managing

the ethics management program.

NOTE: One thought on “Ethical issues, Ethics Management Key Roles and
Responsibilities”

Institutionalizing of Ethics, Traditional View

Institutionalizing of Ethics

Ethical business practices do more than create a good name for a company.
They tell employees, suppliers, investors and shareholders they are associating
with a trustworthy company that will protect their interests and make decisions
not based solely on profit. Ethics reaches to every corner of a business and
requires that employees and everyone who represents the company or acts on its
behalf understands the policies and rules regarding ethical behavior. Ethics
should be part of the corporate culture and modeled at the highest levels of the
organization.

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Corporate Policies

Most people learn the difference between right and wrong at an early age. But
sometimes the difference between right and wrong in a business setting isn’t
black and white. A company should establish guidelines for ethical behavior
and identify the proper course of action in situations that might have several
possible outcomes. Train employees on the policies, and provide periodic
updates when situations arise that suggest a policy might be unclear or needs to
be reinforced.

Ethics Training

Establish annual ethics training for employees to ensure they understand the
corporate ethics policies and know how to respond if presented with a situation
that might compromise the company. Scenario-based training involving
employees, suppliers, management and others in hypothetical situations is an
excellent way to learn how to respond ethically to situations where there are
several possible outcomes. Give employees a printed or downloadable ethics
manual for reference during the training and throughout the year.

Ombudsman

Even with clearly defined ethics policies, employees may face situations
involving unethical behavior but don’t want to get a co-worker or supervisor in
trouble. Or an employee might be afraid that reporting unethical behavior could
jeopardize his job. Corporations can reinforce ethics policies and encourage
employees to abide by ethical standards by providing an ombudsman to discuss
sensitive situations with them, advise them on the proper course of action and
protect them from retaliation.

Industry Recognition

Look for opportunities for recognition among industry peers as an ethical

business. Ethisphere, which recognizes the “World’s Most Ethical Companies”
each year, uses a rating system to capture a company’s ethical performance. It
found that companies that make the cut have greater return on investment than
those that don’t. Having a designation as an ethical business can attract
employees and investors and earn positive press for your company. In turn, it
helps strengthen the corporate image, build equity in the brand and position the
company favorably on Wall Street and in the marketplace.

Modern Business Ethics and Dilemmas

Business Ethics

The system of moral and ethical beliefs that guides the values, behaviors and
decisions of a business organization and the individuals within that organization
is known as business ethics. Some ethical requirements for businesses are
codified into law; environmental regulations, the minimum wage, and
restrictions against insider trading and collusion are all examples of the
government setting forth minimum standards for business ethics.

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Ethics in Leadership

The management team sets the tone for how the entire company runs on a day-
to-day basis. When the prevailing management philosophy is based on ethical
practices and behavior, leaders within an organization can direct employees by
example and guide them in making decisions that are not only beneficial to
them as individuals, but also to the organization as a whole. Building on a
foundation of ethical behavior helps create long-lasting positive effects for a
company, including the ability to attract and retain highly talented individuals,
and building and maintaining a positive reputation within the community.
Running a business in an ethical manner from the top down builds a stronger
bond between individuals on the management team, further creating stability
within the company.

Employee Ethics

When management is leading an organization in an ethical manner, employees

follow in those footsteps. Employees make better decisions in less time with
business ethics as a guiding principle; this increases productivity and overall
employee morale. When employees complete work in a way that is based on
honesty and integrity, the whole organization benefits. Employees who work for
a corporation that demands a high standard of business ethics in all facets of
operations are more likely to perform their job duties at a higher level and are
also more inclined to stay loyal to that organization.

Ethics Vary by Industry

Business ethics differ from industry to industry. The nature of a business’s

operations has a major influence on the ethical issues with which it must
contend. For example, an ethical quandary arises for an investment brokerage
when the best decision for a client and his or her money does not coincide with
what pays the brokerage the highest commission. A media company that
produces TV content aimed at children may feel an ethical obligation to
promote good values and eschew off-color material in its programming.
A striking example of industry-specific business ethics is in the energy field.
Companies that produce energy, particularly nonrenewable energy, face
unrelenting scrutiny on how they treat the environment. One misstep – whether
it is a minor coal ash spill at a power plant or a major disaster such as the 2010
BP oil spill – forces a company to answer to numerous regulatory bodies and
society at large regarding whether it skirted its duty to protect the environment
in an aggressive pursuit of higher profits. A stringent, clearly defined system of
environmental ethics is paramount for an energy company if it wants to thrive in
a climate of increased regulations and public awareness on environmental
issues.

Companies such as Amazon and Google, which conduct most of their

operations online, are not scrutinized for their environmental impact the way
energy companies such as BP and Exxon are. When it comes to protecting their
customers’ privacy and security, however, their ethics are examined very
closely. A particular area in which technology companies must make tough
ethical decisions is marketing. Advancements in data mining technology enable
businesses to track their customers’ movements online and sell that data to
marketing companies, or use it to match customers with advertising promotions.
Many people view this type of activity as a major invasion of privacy. However,
such customer data is invaluable to businesses, as they can use it to increase
profits substantially. Thus, an ethical dilemma is born: To what extent is it
appropriate to spy on customers’ online lives to gain a marketing advantage?

Business Ethics Benefits

The importance of business ethics reaches far beyond employee loyalty and
morale or the strength of a management team bond. As with all business
initiatives, the ethical operation of a company is directly related
to profitability in both the short and long term. The reputation of a business
in the surrounding community, other businesses and individual investors is
paramount in determining whether a company is a worthwhile investment. If a
company is perceived to not operate ethically, investors are less inclined to buy
stock or otherwise support its operations.

Companies have more and more of an incentive to be ethical as the area

of socially responsible and ethical investing keeps growing. The increasing
number of investors seeking out ethically operating companies to invest in is
driving more firms to take this issue more seriously.

With consistent ethical behavior comes an increasingly positive public image,

and there are few other considerations as important to potential investors and
current shareholders. To retain a positive image, businesses must be committed
to operating on an ethical foundation as it relates to treatment of
employees, respecting the surrounding environment and fair market practices in
terms of price and consumer treatment.

Ethical Dilemma

An ethical dilemma (ethical paradox or moral dilemma) is a problem in

the decision-making process between two possible options, neither of which is
absolutely acceptable from an ethical perspective. Although we face many
ethical and moral problems in our life, most of them come with relatively
straightforward solutions.

On the other hand, ethical dilemmas are extremely complicated challenges that
cannot be easily solved. Therefore, the ability to find the optimal solution for
ethical dilemmas is critical to everyone.

Every person can encounter an ethical dilemma in almost every aspect of his
life, including personal, social, and professional.

How to solve an ethical dilemma?

The biggest challenge of ethical dilemma is that it does not offer an obvious
solution that would comply with ethical norms. Throughout the history of
humanity, people always faced ethical dilemmas, and philosophers aimed and
worked to find solutions to the problems.

By far, the following approaches to solve an ethical dilemma were deduced:

 Refute the paradox (dilemma): The situation must be carefully

analyzed. In some cases, the existence of the dilemma can be logically
refuted.
 Value theory approach: Choose the alternative that offers the greater
good and the lesser evil.
 Find alternative solutions: In some cases, the problem can be
reconsidered, and the new alternative solutions may arise.

Examples of ethical dilemmas

Some examples of thical dilemmas examples include:

 Taking credit for others’ work

 Offering a client a worse product for your own profit
  Utilizing inside knowledge for your own profit

Ethical dilemmas in business

Ethical dilemmas are especially significant in professional life as they

frequently occur in the workplace. Some companies and professional
organizations (e.g., CFA) adhere to their own codes of conduct and ethical
standards. Violation of the standards may lead to disciplinary sanctions.

Almost every aspect of the business can become a possible ground for ethical
dilemmas. It may include the relationships with the co-workers, management,
clients, and business partners.

The people’s inability to determine the optimal solution for ethical dilemmas in
the professional setting may result in serious consequences for businesses and
organizations. The situation may be common in companies that value results the
most.

In order to solve ethical problems, companies and organizations should develop

strict ethical standards for their employees. Every company must demonstrate
its concerns regarding the ethical norms within the organization. In addition, the
companies may provide ethical training for their employees.

Assessing Ethical Performance, Reasons

Ethical Performance in a business context refers to how well an organization
adheres to established ethical standards and practices in its operations. It
involves evaluating the extent to which the company’s activities align with
moral principles, such as integrity, fairness, transparency, and accountability.
Ethical performance is assessed through various metrics, including compliance
with legal and regulatory requirements, the effectiveness of ethical policies and
programs, stakeholder satisfaction, and the company’s overall impact on society
and the environment. High ethical performance not only helps in avoiding legal
penalties and reputational damage but also enhances trust among stakeholders,
contributes to a positive organizational culture, and supports sustainable
business success. Organizations often use ethical performance as a key indicator
of good governance and corporate social responsibility.

Assessing Ethical Performance:

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Assessing ethical performance within an organization is a comprehensive
process that involves evaluating how well the company adheres to its ethical
standards and values in its day-to-day operations. This assessment is critical to
ensure that the organization is not only compliant with laws and regulations but
also operates in a manner that is consistent with moral principles and
expectations of stakeholders.

1. Establish Clear Criteria:

Define what ethical performance means for the organization. This includes
identifying key areas such as compliance, integrity, transparency, and fairness.
The criteria should be specific, measurable, attainable, relevant, and time-bound
(SMART).

2. Develop an Ethical Framework:

Create a framework that outlines the company’s ethical policies, including

codes of conduct, compliance programs, and decision-making processes. This
framework serves as the baseline for measuring ethical performance.

3. Use Ethical Performance Indicators:

Develop specific indicators that can measure various aspects of ethical

behavior.

 Compliance Rates: Frequency of legal or policy violations.

 Employee Feedback: Results from surveys or interviews regarding
perceptions of ethical behavior and culture.
 Stakeholder Engagement: Levels of transparency and responsiveness to
stakeholder concerns.
 Audit Findings: Results from internal or external audits related to ethical
practices.

4. Implement Regular Audits and Reviews:

Conduct regular ethical audits to assess compliance with ethical standards and
policies. These audits should review both qualitative and quantitative data,
including financial records, business communications, and compliance records.

5. Conduct Surveys and Gather Feedback:

Use surveys and feedback tools to understand the perceptions of employees,
customers, and other stakeholders regarding the company’s ethical practices.
This feedback is crucial for gauging the lived experience of the company’s
ethics beyond formal policies.

6. Review External Assessments:

Consider external assessments and rankings related to corporate ethics, such as

those from industry watchdogs or ethical investment analysts. These
assessments can provide an independent view of the organization’s ethical
standing in comparison to industry norms.

7. Monitor and Address Ethical Dilemmas:

Track how the organization deals with ethical dilemmas and conflicts of
interest. Assessing responses to these situations can provide insight into the
real-world application of ethical guidelines.

8. Leadership Evaluation:

Evaluate the commitment of leadership to ethical practices. Leadership behavior

significantly influences organizational culture and ethical standards. Assess
whether leaders consistently model ethical behavior and support ethical
initiatives.

9. Evaluate Training Programs:

Assess the effectiveness of ethical training programs. Determine whether these

programs are comprehensive, up-to-date, and capable of addressing current
ethical challenges.

10.Report and Act:

Prepare reports on the findings from various assessments and use these reports
to make informed decisions. If gaps or inconsistencies in ethical performance
are identified, implement corrective actions and policies to address these issues.

Reasons of Assessing Ethical Performance:

1. Reinforcing Organizational Values:

Assessment helps ensure that the values espoused by the company are actually
being practiced on the ground. It aligns the actions of individuals and teams
with the organization’s stated ethical standards and values.

2. Risk Management:

By regularly assessing ethical performance, organizations can identify and

mitigate risks associated with unethical behavior. This includes legal risks,
financial penalties, and risks to the company’s reputation, which can all have
significant long-term consequences.

3. Regulatory Compliance:

Many industries are subject to stringent regulatory requirements regarding

ethical behavior. Assessing ethical performance helps ensure compliance with
these laws and regulations, avoiding legal issues and fines.

4. Enhancing Corporate Reputation:

Organizations known for strong ethical standards often enjoy enhanced

reputations in their industries and with the public. Regular assessment of ethical
practices can boost consumer and investor confidence and distinguish the
company from competitors.

5. Promoting Employee Engagement and Retention:

A workplace with high ethical standards typically sees higher employee morale,
engagement, and retention. Employees are more likely to stay with a company
they view as ethical and that reflects their personal values.

6. Improving Decision Making:

Regular assessment of ethical performance encourages a decision-making

process that considers ethical implications as well as business outcomes. This
leads to more sustainable and thoughtful decisions that can benefit the company
in the long term.

7. Building Trust with Stakeholders:

Stakeholders, including investors, customers, and the communities in which the

company operates, are more likely to trust and support organizations they
perceive as ethical. Assessing and communicating ethical performance can build
and maintain this trust.

8. Facilitating Continuous Improvement:

Ethical performance assessment is not just about identifying shortcomings; it’s

also an opportunity to continuously improve. It provides critical feedback that
organizations can use to refine their policies, training programs, and overall
ethical framework.