Lecture 3 - Business Ethics | Business Environment - Business Basics PDF Download

 Page 1


 
Institute of lifelong learning, University of Delhi     0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business Environment 
Lesson: Business Ethics 
Lesson Developer: Dr. Vibhash Kumar 
College/Dept: Ramanujan College 
University of Delhi 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Page 2


 
Institute of lifelong learning, University of Delhi     0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business Environment 
Lesson: Business Ethics 
Lesson Developer: Dr. Vibhash Kumar 
College/Dept: Ramanujan College 
University of Delhi 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Institute of lifelong learning, University of Delhi     1 
 
Table of Contents 
 
 Chapter : Business Ethics 
? 1: Learning Outcomes 
? 2: Introduction 
? 3: Ethical Relativism 
? 4: Concepts in Business Ethics 
? 4.1: Utilitarianism 
? 4.2: Deontological Ethics 
? 4.3: Theory of Rights 
? 4.4: Theory of Justice 
? 5: Problems in Business Ethics 
? 5.1: Environmental Pollution & Societal Marketing Ethics 
? 5.2: Ethics in Human Resource Management 
6: Work Ethics 
7. Ethical Decision Making 
? Summary  
? Exercises 
? Glossary 
? References 
? Quiz 
 
1. Learning Outcomes 
 
After reading this lesson, you should be able to: 
? define the term ethics, 
? understand the concept of business ethics,  
? identify the types of ethical issues, 
? understand the problems in business ethics, 
? appreciate the concept of work ethics, 
? apply the knowledge of ethics in real life situations. 
 
2. Introduction 
 
“Ethics deals with no small things, but with how we ought to live”- Socrates 
Ethics is a vast field of study which addresses the question- How should the lives of 
individuals be dealt with? Individuals may have come across many occasions in their life 
when they made a judgement about certain things, not being right. Basically, this 
judgement is determined by the investigation, done by self, to come to a conclusion 
about right and wrong outcome, for a given situation. People live their lives according to 
their beliefs, attitudes, and values that are followed in their own culture. Ethics differs 
from ethos. People generally tend to accept the customaries in ethos whereas ethics is 
all about questioning those customs. 
  
In the same sense, philosophy discards authority as a foundation of ethics. Philosophical 
ethics seeks a reasonable analysis of customs, which are being followed, and a logical 
Page 3


 
Institute of lifelong learning, University of Delhi     0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business Environment 
Lesson: Business Ethics 
Lesson Developer: Dr. Vibhash Kumar 
College/Dept: Ramanujan College 
University of Delhi 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Institute of lifelong learning, University of Delhi     1 
 
Table of Contents 
 
 Chapter : Business Ethics 
? 1: Learning Outcomes 
? 2: Introduction 
? 3: Ethical Relativism 
? 4: Concepts in Business Ethics 
? 4.1: Utilitarianism 
? 4.2: Deontological Ethics 
? 4.3: Theory of Rights 
? 4.4: Theory of Justice 
? 5: Problems in Business Ethics 
? 5.1: Environmental Pollution & Societal Marketing Ethics 
? 5.2: Ethics in Human Resource Management 
6: Work Ethics 
7. Ethical Decision Making 
? Summary  
? Exercises 
? Glossary 
? References 
? Quiz 
 
1. Learning Outcomes 
 
After reading this lesson, you should be able to: 
? define the term ethics, 
? understand the concept of business ethics,  
? identify the types of ethical issues, 
? understand the problems in business ethics, 
? appreciate the concept of work ethics, 
? apply the knowledge of ethics in real life situations. 
 
2. Introduction 
 
“Ethics deals with no small things, but with how we ought to live”- Socrates 
Ethics is a vast field of study which addresses the question- How should the lives of 
individuals be dealt with? Individuals may have come across many occasions in their life 
when they made a judgement about certain things, not being right. Basically, this 
judgement is determined by the investigation, done by self, to come to a conclusion 
about right and wrong outcome, for a given situation. People live their lives according to 
their beliefs, attitudes, and values that are followed in their own culture. Ethics differs 
from ethos. People generally tend to accept the customaries in ethos whereas ethics is 
all about questioning those customs. 
  
In the same sense, philosophy discards authority as a foundation of ethics. Philosophical 
ethics seeks a reasonable analysis of customs, which are being followed, and a logical 
 
Institute of lifelong learning, University of Delhi     2 
 
defence on how we ought to live. In order to understand the concept of business ethics, 
it must be clear what ethics means.  
 
Figure 1: Right or Wrong 
 
 
 
Ethics can be considered a part of philosophy which engages in the standardizing, 
preserving and counseling the concepts of things and actions which are right or wrong. 
This can be termed as philosophical ethics. Ethics generally involves in addressing the 
disagreements in topics of moral diversity. Simply, ethics can be portrayed as „study or 
investigation of morality?. On the other hand, morality signifies the norms and standards 
that individuals and groups set about what is right or wrong, in a particular situation. On 
a common parlance, ethics is a discipline which investigates the moral standards of an 
individual or the society at large, to assess and appraise the rationality and impact of an 
action on the lives of others.  
 
Business ethics is a variant of applied or professional ethics. Applied ethics refers to the 
philosophical examination of issues, in public and private domain, which are related to 
moral judgment. In other words, application of philosophical means to identify the 
morally viable course of action is called applied ethics. Professional ethics, on the other 
hand, includes the standard set of personal, organizational, and corporate behaviour 
which is expected from a professional. 
 
Business ethics is a branch of philosophical ethics which examines whether the customs 
that are being followed in business are appropriate or not. It questions the business 
decisions which have a say in our lives. Business ethics can be referred to as „a 
concentrated study of moral right and wrong that ponders and deliberates upon moral 
rules, as they would be relevant and appropriate to the business establishments, 
associations, and behaviour?. In the same context, a question arises, whether the actions 
of corporations, on the prisms of rightness and wrongness, can be judged or not; and, is 
it sensible enough to apply morality to organizations, in entirety, when individuals make 
up an organization? John Searle while, giving his technical claims, asserts that corporate 
organizations exist only because they are governed and regulated by individuals who 
bear specific responsibilities in the organization. So, an act of the organization is 
basically the act of the individuals, associated with the organization, who meet the 
responsibilities and commitments of the organization. Ethical issues can be of three 
types: 
Figure 2: Types of Ethical Issues 
Page 4


 
Institute of lifelong learning, University of Delhi     0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business Environment 
Lesson: Business Ethics 
Lesson Developer: Dr. Vibhash Kumar 
College/Dept: Ramanujan College 
University of Delhi 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Institute of lifelong learning, University of Delhi     1 
 
Table of Contents 
 
 Chapter : Business Ethics 
? 1: Learning Outcomes 
? 2: Introduction 
? 3: Ethical Relativism 
? 4: Concepts in Business Ethics 
? 4.1: Utilitarianism 
? 4.2: Deontological Ethics 
? 4.3: Theory of Rights 
? 4.4: Theory of Justice 
? 5: Problems in Business Ethics 
? 5.1: Environmental Pollution & Societal Marketing Ethics 
? 5.2: Ethics in Human Resource Management 
6: Work Ethics 
7. Ethical Decision Making 
? Summary  
? Exercises 
? Glossary 
? References 
? Quiz 
 
1. Learning Outcomes 
 
After reading this lesson, you should be able to: 
? define the term ethics, 
? understand the concept of business ethics,  
? identify the types of ethical issues, 
? understand the problems in business ethics, 
? appreciate the concept of work ethics, 
? apply the knowledge of ethics in real life situations. 
 
2. Introduction 
 
“Ethics deals with no small things, but with how we ought to live”- Socrates 
Ethics is a vast field of study which addresses the question- How should the lives of 
individuals be dealt with? Individuals may have come across many occasions in their life 
when they made a judgement about certain things, not being right. Basically, this 
judgement is determined by the investigation, done by self, to come to a conclusion 
about right and wrong outcome, for a given situation. People live their lives according to 
their beliefs, attitudes, and values that are followed in their own culture. Ethics differs 
from ethos. People generally tend to accept the customaries in ethos whereas ethics is 
all about questioning those customs. 
  
In the same sense, philosophy discards authority as a foundation of ethics. Philosophical 
ethics seeks a reasonable analysis of customs, which are being followed, and a logical 
 
Institute of lifelong learning, University of Delhi     2 
 
defence on how we ought to live. In order to understand the concept of business ethics, 
it must be clear what ethics means.  
 
Figure 1: Right or Wrong 
 
 
 
Ethics can be considered a part of philosophy which engages in the standardizing, 
preserving and counseling the concepts of things and actions which are right or wrong. 
This can be termed as philosophical ethics. Ethics generally involves in addressing the 
disagreements in topics of moral diversity. Simply, ethics can be portrayed as „study or 
investigation of morality?. On the other hand, morality signifies the norms and standards 
that individuals and groups set about what is right or wrong, in a particular situation. On 
a common parlance, ethics is a discipline which investigates the moral standards of an 
individual or the society at large, to assess and appraise the rationality and impact of an 
action on the lives of others.  
 
Business ethics is a variant of applied or professional ethics. Applied ethics refers to the 
philosophical examination of issues, in public and private domain, which are related to 
moral judgment. In other words, application of philosophical means to identify the 
morally viable course of action is called applied ethics. Professional ethics, on the other 
hand, includes the standard set of personal, organizational, and corporate behaviour 
which is expected from a professional. 
 
Business ethics is a branch of philosophical ethics which examines whether the customs 
that are being followed in business are appropriate or not. It questions the business 
decisions which have a say in our lives. Business ethics can be referred to as „a 
concentrated study of moral right and wrong that ponders and deliberates upon moral 
rules, as they would be relevant and appropriate to the business establishments, 
associations, and behaviour?. In the same context, a question arises, whether the actions 
of corporations, on the prisms of rightness and wrongness, can be judged or not; and, is 
it sensible enough to apply morality to organizations, in entirety, when individuals make 
up an organization? John Searle while, giving his technical claims, asserts that corporate 
organizations exist only because they are governed and regulated by individuals who 
bear specific responsibilities in the organization. So, an act of the organization is 
basically the act of the individuals, associated with the organization, who meet the 
responsibilities and commitments of the organization. Ethical issues can be of three 
types: 
Figure 2: Types of Ethical Issues 
 
Institute of lifelong learning, University of Delhi     3 
 
 
 
1. Systematic – The corporations operate in varied environments viz., social, 
political, legal, economic, cultural, and so on. Ethical questions or issues, which 
arise in pretext of such environments, can be referred to as systematic ethical 
issues. For instance, pharmaceutical industry and its member enterprises offer 
commissions and other benefits to the medical professionals, practitioners of 
medicines and surgery, for the prescription of medicines and recommendation of 
various tests which are neither desirable nor necessary, but are suggested; the 
pharmaceutical companies, manufacturing the generic versions of drugs, need to 
carry out proper tests, as per the guidelines of Drug Controller General of India, 
but the companies do not conduct the desirable tests, are unethical on the part of 
such companies. This issue comes under the systematic legal issue in which the 
Government should create a proper mechanism to ward off such problems of the 
system. 
2. Corporate – A corporate entity can be taken as a whole and may have its own 
peculiar culture, climate and policies. Ethical issues, arising on such pretexts, can 
be termed as corporate ethical issues. The example of not conducting the 
desirable tests for the generic version of the drugs by the pharmaceutical 
companies, in above mentioned point, is a corporate issue. Cipla, Dr. Reddy?s and 
Ranbaxy are some leading makers of generic drugs in India. Looking after these 
issues should be on the priority list of these corporate entities.   
3. Individual – Ethical issues can also be related to an individual with respect to 
the decisions made, behaviour displayed, or character showcased. Such ethical 
issues may be referred to as individual ethical issues. These issues are related to 
the internal business environment of a company and should be tackled 
accordingly, keeping the ethical code of conduct in mind which the company 
follows in particular. 
 
Thus, Business ethics is an investigation of appropriateness of what rules are being 
followed up in business. Customary business rules, which are being followed since past, 
need not to be called unethical. It is just the conscious reflection and rational analysis of 
business values and beliefs upon which we act. For instance, there are certain rituals 
which Indian business people follow when they start a new business, i.e., seeking divine 
protection or worshipping the earth (Bhumi Pujan) at the plot sight, and so on and so 
forth. This is not unethical but can cause time lags. Conscious reflection of the same can 
save time.  
 
Interactive 1  
Page 5


 
Institute of lifelong learning, University of Delhi     0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business Environment 
Lesson: Business Ethics 
Lesson Developer: Dr. Vibhash Kumar 
College/Dept: Ramanujan College 
University of Delhi 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Institute of lifelong learning, University of Delhi     1 
 
Table of Contents 
 
 Chapter : Business Ethics 
? 1: Learning Outcomes 
? 2: Introduction 
? 3: Ethical Relativism 
? 4: Concepts in Business Ethics 
? 4.1: Utilitarianism 
? 4.2: Deontological Ethics 
? 4.3: Theory of Rights 
? 4.4: Theory of Justice 
? 5: Problems in Business Ethics 
? 5.1: Environmental Pollution & Societal Marketing Ethics 
? 5.2: Ethics in Human Resource Management 
6: Work Ethics 
7. Ethical Decision Making 
? Summary  
? Exercises 
? Glossary 
? References 
? Quiz 
 
1. Learning Outcomes 
 
After reading this lesson, you should be able to: 
? define the term ethics, 
? understand the concept of business ethics,  
? identify the types of ethical issues, 
? understand the problems in business ethics, 
? appreciate the concept of work ethics, 
? apply the knowledge of ethics in real life situations. 
 
2. Introduction 
 
“Ethics deals with no small things, but with how we ought to live”- Socrates 
Ethics is a vast field of study which addresses the question- How should the lives of 
individuals be dealt with? Individuals may have come across many occasions in their life 
when they made a judgement about certain things, not being right. Basically, this 
judgement is determined by the investigation, done by self, to come to a conclusion 
about right and wrong outcome, for a given situation. People live their lives according to 
their beliefs, attitudes, and values that are followed in their own culture. Ethics differs 
from ethos. People generally tend to accept the customaries in ethos whereas ethics is 
all about questioning those customs. 
  
In the same sense, philosophy discards authority as a foundation of ethics. Philosophical 
ethics seeks a reasonable analysis of customs, which are being followed, and a logical 
 
Institute of lifelong learning, University of Delhi     2 
 
defence on how we ought to live. In order to understand the concept of business ethics, 
it must be clear what ethics means.  
 
Figure 1: Right or Wrong 
 
 
 
Ethics can be considered a part of philosophy which engages in the standardizing, 
preserving and counseling the concepts of things and actions which are right or wrong. 
This can be termed as philosophical ethics. Ethics generally involves in addressing the 
disagreements in topics of moral diversity. Simply, ethics can be portrayed as „study or 
investigation of morality?. On the other hand, morality signifies the norms and standards 
that individuals and groups set about what is right or wrong, in a particular situation. On 
a common parlance, ethics is a discipline which investigates the moral standards of an 
individual or the society at large, to assess and appraise the rationality and impact of an 
action on the lives of others.  
 
Business ethics is a variant of applied or professional ethics. Applied ethics refers to the 
philosophical examination of issues, in public and private domain, which are related to 
moral judgment. In other words, application of philosophical means to identify the 
morally viable course of action is called applied ethics. Professional ethics, on the other 
hand, includes the standard set of personal, organizational, and corporate behaviour 
which is expected from a professional. 
 
Business ethics is a branch of philosophical ethics which examines whether the customs 
that are being followed in business are appropriate or not. It questions the business 
decisions which have a say in our lives. Business ethics can be referred to as „a 
concentrated study of moral right and wrong that ponders and deliberates upon moral 
rules, as they would be relevant and appropriate to the business establishments, 
associations, and behaviour?. In the same context, a question arises, whether the actions 
of corporations, on the prisms of rightness and wrongness, can be judged or not; and, is 
it sensible enough to apply morality to organizations, in entirety, when individuals make 
up an organization? John Searle while, giving his technical claims, asserts that corporate 
organizations exist only because they are governed and regulated by individuals who 
bear specific responsibilities in the organization. So, an act of the organization is 
basically the act of the individuals, associated with the organization, who meet the 
responsibilities and commitments of the organization. Ethical issues can be of three 
types: 
Figure 2: Types of Ethical Issues 
 
Institute of lifelong learning, University of Delhi     3 
 
 
 
1. Systematic – The corporations operate in varied environments viz., social, 
political, legal, economic, cultural, and so on. Ethical questions or issues, which 
arise in pretext of such environments, can be referred to as systematic ethical 
issues. For instance, pharmaceutical industry and its member enterprises offer 
commissions and other benefits to the medical professionals, practitioners of 
medicines and surgery, for the prescription of medicines and recommendation of 
various tests which are neither desirable nor necessary, but are suggested; the 
pharmaceutical companies, manufacturing the generic versions of drugs, need to 
carry out proper tests, as per the guidelines of Drug Controller General of India, 
but the companies do not conduct the desirable tests, are unethical on the part of 
such companies. This issue comes under the systematic legal issue in which the 
Government should create a proper mechanism to ward off such problems of the 
system. 
2. Corporate – A corporate entity can be taken as a whole and may have its own 
peculiar culture, climate and policies. Ethical issues, arising on such pretexts, can 
be termed as corporate ethical issues. The example of not conducting the 
desirable tests for the generic version of the drugs by the pharmaceutical 
companies, in above mentioned point, is a corporate issue. Cipla, Dr. Reddy?s and 
Ranbaxy are some leading makers of generic drugs in India. Looking after these 
issues should be on the priority list of these corporate entities.   
3. Individual – Ethical issues can also be related to an individual with respect to 
the decisions made, behaviour displayed, or character showcased. Such ethical 
issues may be referred to as individual ethical issues. These issues are related to 
the internal business environment of a company and should be tackled 
accordingly, keeping the ethical code of conduct in mind which the company 
follows in particular. 
 
Thus, Business ethics is an investigation of appropriateness of what rules are being 
followed up in business. Customary business rules, which are being followed since past, 
need not to be called unethical. It is just the conscious reflection and rational analysis of 
business values and beliefs upon which we act. For instance, there are certain rituals 
which Indian business people follow when they start a new business, i.e., seeking divine 
protection or worshipping the earth (Bhumi Pujan) at the plot sight, and so on and so 
forth. This is not unethical but can cause time lags. Conscious reflection of the same can 
save time.  
 
Interactive 1  
 
Institute of lifelong learning, University of Delhi     4 
 
 
Value Addition 1:  Case Study  
Topic: Business Ethics 
On Dec2, 2001, Enron Corporation, once listed as the seventh largest corporation 
among the Fortune 500, declared bankruptcy. In the months that followed, numerous 
other major corporations were found to have guilty of similar accounting and financial 
frauds. A wave of scandals swept through the corporate world as fraudulent and 
dishonest practices were uncovered at such firms as WorldCom, Merril Lynch, Citigroup 
Saloman Smith Barney, and even the New York Stock Exchange itself. 
Enron?s Collapse followed public disclosure of significant debts that had been concealed 
by complicated and fraudulent accounting practices. Not only Enron?s top executives 
were deeply involved in this scheme, they personally received tens of millions of dollars 
from it. This massive ethical fraud was perpetrated with the support of Enron?s 
accounting and auditing firms, Arthur Andersen, at the time one of the top five 
international accounting firms. Andersen played both ends of a conflict of interest by 
earning money both as Enron?s auditor and as consultants in concealing these debts. 
To make the matters worse, while the stock prices were collapsing senior executives 
sold hundreds of millions of dollars worth of stock to unwary investors, making 
personal fortunes from the collapse. During this same period, employees were 
prevented from selling their own stock that was held in their 401(k) retirement plans. 
Arthur Andersen?s accountant meanwhile, were busily shredding hundreds of 
documents that could have been used in criminal and civil legal cases. Enron?s board of 
directors and particularly their audit committee twice waived internal rules of ethical 
conduct that prohibited the conflict of interest practices that enabled Enron executives 
to profit at the expense of the shareholders. 
 
Discussion Questions 
1. Identify the ethical issues, involved in the Enron case. 
2. Identify all the people who were harmed by Enron?s Collapse and explain the 
ways in which they were harmed. 
3. Do you think that corporate scandals, such as Enron, are caused by individuals 
or the organizations can be held responsible for the same. Was Enron scandal a 
failure of individuals, of organization structure, or of the Government?  
4. What change would you make to prevent future Enrons? 
 
 
There are several lessons which can be learnt from the Enron case. First and foremost, 
that in this contemporary world in which we are living, there are a wide range of people 
who can be adversely affected by the actions and decisions of the corporate and 
businesses. Ethical perspectives and the results, which follow out of following those 
perspectives, affect millions of lives. The Enron case specifies the necessity of highest 
level of ethical conduct among the gatekeepers. Ironically, the arrogant and greedy 
individuals are way too many, who are more than willing to destroy the legal and ethical 
framework, and get benefitted in the process. However, the recent cases of fraudulent 
malpractices have been witnessed in all parts of the world but there is a need to prevent 
such cases in future. Indian investors have been recently tormented by the Satyam 
saga, which brings out the harsh reality of the Indian business diaspora. The need of the 
hour is to impart the highest level of ethical conduct among the employees, enforcement 
of strict statutes, continuous monitoring of the internal structures of the organizations, 
external checks and safeguards, to keep the corporate behaviour ethical and intact. 
 
Ethical Dilemma:  
Ethical dilemma is a phenomenon, which the individuals or organizations come across 
during certain situations, where decision making becomes very difficult, and the person 
concerned faces dilemma on what to decide. Generally, a dilemma arises when there is a 
conflict of interest, for example, self-interest overpowers the overall good for the