Principles of Business Ethics: Notes | Corporate & Other Laws for CA Intermediate PDF Download

 Page 1


 
 
7 
Principles of Business Ethics 
Learning Objectives 
After reading this chapter, you will be able to 
? Define business ethics 
? Distinguish between Business Ethics and Morality 
? Understand Ethical Dilemmas 
? Explain how businesses can promote Ethical Behaviour  
? List the benefit of Business Ethics  
"Whether men understand it or not, they are impelled by that power behind to become 
unselfish. That is the foundation of morality. It is the quintessence of all ethics, preached in 
any language, or any religion, or by any prophet in the world. "Be thou unselfish", "Not 'I', but 
'Thou'" - that is the background of ethical codes." 
Swami Vivekananda  
7.1 Introduction 
Corporate scandals such as Enron are illustrative of the relationship between ethics and 
business. Investigation into the fraud committed by corporate senior executive officers as well 
as the stress on the employees, who have to follow the unreasonable and sometimes illegal 
orders of their superiors have also come to the fore in recent times. In a general sense, ethics 
is the concern for good behaviour - doing the right thing. Human beings have always been 
puzzled with moral questions of right and wrong behaviour; struggling to develop a system that 
produced the maximum good for the individual and for the group. They understood the 
importance of “right” behavior and realized that there was danger of extinction if violent acts 
and pilferage were not curtailed. Over time, codes of conduct were developed to ensure 
survival. These codes were for nurturing children, forming of family and tribal units, hunting 
rituals and so on. Thus, a system of acceptable behavior was formed. One example that 
comes to mind most readily is the Ten Commandments from the Bible. Other traditions and 
religions have comparable sacred or ancient texts that have guided people's actions in all 
areas, including business, for centuries, and still do.  
Page 2


 
 
7 
Principles of Business Ethics 
Learning Objectives 
After reading this chapter, you will be able to 
? Define business ethics 
? Distinguish between Business Ethics and Morality 
? Understand Ethical Dilemmas 
? Explain how businesses can promote Ethical Behaviour  
? List the benefit of Business Ethics  
"Whether men understand it or not, they are impelled by that power behind to become 
unselfish. That is the foundation of morality. It is the quintessence of all ethics, preached in 
any language, or any religion, or by any prophet in the world. "Be thou unselfish", "Not 'I', but 
'Thou'" - that is the background of ethical codes." 
Swami Vivekananda  
7.1 Introduction 
Corporate scandals such as Enron are illustrative of the relationship between ethics and 
business. Investigation into the fraud committed by corporate senior executive officers as well 
as the stress on the employees, who have to follow the unreasonable and sometimes illegal 
orders of their superiors have also come to the fore in recent times. In a general sense, ethics 
is the concern for good behaviour - doing the right thing. Human beings have always been 
puzzled with moral questions of right and wrong behaviour; struggling to develop a system that 
produced the maximum good for the individual and for the group. They understood the 
importance of “right” behavior and realized that there was danger of extinction if violent acts 
and pilferage were not curtailed. Over time, codes of conduct were developed to ensure 
survival. These codes were for nurturing children, forming of family and tribal units, hunting 
rituals and so on. Thus, a system of acceptable behavior was formed. One example that 
comes to mind most readily is the Ten Commandments from the Bible. Other traditions and 
religions have comparable sacred or ancient texts that have guided people's actions in all 
areas, including business, for centuries, and still do.  
7.2 Business Law, Ethics and Communication 
 
At all times, wise men and religions all over the world have considered “value centred 
perfection” and not “material success” as the ultimate goal of every human being. 
Unfortunately with passage of time, we started witnessing a degradation of values-ethics, 
forgetting the wise teachings; associating material success and fame as highest achievement. 
According to Vedanta one of the world's most ancient religious philosophies based on the 
Vedas, the sacred Hindu scriptures of India, it is crucially important that our thoughts and 
actions be governed by ethical values and habits.  
Vedanta, is in agreement with Socrates in holding the view that the practice of virtue should be 
preceded by a rational understanding of the implications and the nature of virtue. It says that 
Viveka (understanding) should precede Vairagya (dispassion) and the practice of Shatsampat 
(six ethical virtues – tranquility, training, withdrawal, forbearance, faith and focus), are 
cultivated to stabilize the mind and emotions. “The knowledge of the importance of virtue does 
not deter people from moving to the evil side of things. This is the unknown illusion covering 
the consciousness of man, says the Vedanta.  
Mahatma Gandhi, Father of India, promoted non-violence, justice and harmony between 
people of all faiths. Satyagraha, Gandhi's approach to conflict, was to "hold firmly to Truth.” He 
stressed that people follow ethical principles and listed following seven Social Sins:  
(i) Politics without Principles.  
(ii) Wealth without work.  
(iii) Commerce without Morality.  
(iv) Knowledge without Character.  
(v) Pleasure without Conscience.  
(vi) Science without humanity.  
(vii) Worship without sacrifice.  
The first deals with the political field. The Kings in Indian tradition were only the guardian 
executors and servants of ‘Dharma’. For Gandhi Rama was the symbol of a king dedicated to 
Principles. The second and the third dicta deal with the sphere of Economics. Tolstoy and 
Ruskin inspired Gandhi on the idea of bread-labour. The Bhagavad Gita also declares that he 
who eats without offering sacrifice eats stolen food. Gandhi put this into practice at his 
community centers. The third maxim was developed into the idea of Trusteeship by Gandhiji. 
A business man has to act only as a trustee of the society for whatever he has gained from the 
Society. Everything finally belongs to the society. "Trusteeship provides a means of 
transforming the present capitalist order of society into an egalitarian one". The fourth dictum 
deals with knowledge. Education stands for the all round development of the individual and his 
character. Gandhi's system of basic education was the system for development of one's 
character. True knowledge leads to the development of one's character where one evolves his 
`Rational self.' Gandhi held that Science without the thought of the welfare of humanity is a 
Sin. Science and humanity together pave the way for welfare of all. In religion, we worship, but 
Page 3


 
 
7 
Principles of Business Ethics 
Learning Objectives 
After reading this chapter, you will be able to 
? Define business ethics 
? Distinguish between Business Ethics and Morality 
? Understand Ethical Dilemmas 
? Explain how businesses can promote Ethical Behaviour  
? List the benefit of Business Ethics  
"Whether men understand it or not, they are impelled by that power behind to become 
unselfish. That is the foundation of morality. It is the quintessence of all ethics, preached in 
any language, or any religion, or by any prophet in the world. "Be thou unselfish", "Not 'I', but 
'Thou'" - that is the background of ethical codes." 
Swami Vivekananda  
7.1 Introduction 
Corporate scandals such as Enron are illustrative of the relationship between ethics and 
business. Investigation into the fraud committed by corporate senior executive officers as well 
as the stress on the employees, who have to follow the unreasonable and sometimes illegal 
orders of their superiors have also come to the fore in recent times. In a general sense, ethics 
is the concern for good behaviour - doing the right thing. Human beings have always been 
puzzled with moral questions of right and wrong behaviour; struggling to develop a system that 
produced the maximum good for the individual and for the group. They understood the 
importance of “right” behavior and realized that there was danger of extinction if violent acts 
and pilferage were not curtailed. Over time, codes of conduct were developed to ensure 
survival. These codes were for nurturing children, forming of family and tribal units, hunting 
rituals and so on. Thus, a system of acceptable behavior was formed. One example that 
comes to mind most readily is the Ten Commandments from the Bible. Other traditions and 
religions have comparable sacred or ancient texts that have guided people's actions in all 
areas, including business, for centuries, and still do.  
7.2 Business Law, Ethics and Communication 
 
At all times, wise men and religions all over the world have considered “value centred 
perfection” and not “material success” as the ultimate goal of every human being. 
Unfortunately with passage of time, we started witnessing a degradation of values-ethics, 
forgetting the wise teachings; associating material success and fame as highest achievement. 
According to Vedanta one of the world's most ancient religious philosophies based on the 
Vedas, the sacred Hindu scriptures of India, it is crucially important that our thoughts and 
actions be governed by ethical values and habits.  
Vedanta, is in agreement with Socrates in holding the view that the practice of virtue should be 
preceded by a rational understanding of the implications and the nature of virtue. It says that 
Viveka (understanding) should precede Vairagya (dispassion) and the practice of Shatsampat 
(six ethical virtues – tranquility, training, withdrawal, forbearance, faith and focus), are 
cultivated to stabilize the mind and emotions. “The knowledge of the importance of virtue does 
not deter people from moving to the evil side of things. This is the unknown illusion covering 
the consciousness of man, says the Vedanta.  
Mahatma Gandhi, Father of India, promoted non-violence, justice and harmony between 
people of all faiths. Satyagraha, Gandhi's approach to conflict, was to "hold firmly to Truth.” He 
stressed that people follow ethical principles and listed following seven Social Sins:  
(i) Politics without Principles.  
(ii) Wealth without work.  
(iii) Commerce without Morality.  
(iv) Knowledge without Character.  
(v) Pleasure without Conscience.  
(vi) Science without humanity.  
(vii) Worship without sacrifice.  
The first deals with the political field. The Kings in Indian tradition were only the guardian 
executors and servants of ‘Dharma’. For Gandhi Rama was the symbol of a king dedicated to 
Principles. The second and the third dicta deal with the sphere of Economics. Tolstoy and 
Ruskin inspired Gandhi on the idea of bread-labour. The Bhagavad Gita also declares that he 
who eats without offering sacrifice eats stolen food. Gandhi put this into practice at his 
community centers. The third maxim was developed into the idea of Trusteeship by Gandhiji. 
A business man has to act only as a trustee of the society for whatever he has gained from the 
Society. Everything finally belongs to the society. "Trusteeship provides a means of 
transforming the present capitalist order of society into an egalitarian one". The fourth dictum 
deals with knowledge. Education stands for the all round development of the individual and his 
character. Gandhi's system of basic education was the system for development of one's 
character. True knowledge leads to the development of one's character where one evolves his 
`Rational self.' Gandhi held that Science without the thought of the welfare of humanity is a 
Sin. Science and humanity together pave the way for welfare of all. In religion, we worship, but 
Principles of Business Ethics  7.3 
 
if we are not ready to sacrifice for social service, worship has no value; it is sin to worship 
without sacrifice . Gandhiji's everyday prayer was a recitation of the virtues of an ideal person 
as depicted in the Bhagvad Gita. His prayer addressed to better one's own self, the 
conscience, the true self. There is little doubt that unethical behaviour results in unspeakable 
restlessness, tension, secret fear and loss of peace.  
7.2 Ethics and Morals 
The word ‘Ethics’ is derived from the Ancient Greek ethikos- meaning character is the 
essence of values and habits of a person or group. It covers the analysis and employment of 
concepts such as right and wrong, good and evil, and acting with responsibility. It has many 
definitions . According to one “ethics are the principles of conduct governing an individual or a 
group”. Another describes “ethics as relating to what is good or bad, and having to do with 
moral duty and obligation.”  
 Let us draw a distinction between Ethics and Morals. The word “Moral” is defined as relating 
to principles of right and wrong. Although both words are broadly defined in contemporary 
English as having to do with right and wrong conduct, the root word for ethics is the Greek 
"ethos," meaning "character", while the root word for Moral is Latin "mos," meaning 
"custom."Character and custom, however, provide two very different standards for defining 
what is right and what is wrong. Character is a personal attribute, while custom is defined by a 
group over time. People have character. Societies have custom. To violate either can be said 
to be wrong, within its appropriate frame of reference. 
Another way to look at the distinction is to say that morals are accepted from an authority 
(cultural, religious, etc.), while ethics are accepted because they follow from personally 
accepted principles. For example, if one accepts the authority of a religion, and that religion 
forbids stealing, then stealing would be immoral. An ethical view might be based on an idea of 
personal property that should not be taken without social consent (like a court order). Moral 
norms can usually be expressed as general rules and statements such as “always tell the 
truth.” and are typically first absorbed as a child from family, friends, school, religious 
teachings and other associations. Morals work on a smaller scale than ethics, more reliably, 
but by addressing human needs for belonging and emulation, while ethics has a much wider 
scope. 
7.3 Nature of Ethics 
Simply stated, ethics refers to standards of behavior that tell us how human beings ought to 
act in the many situations in which they find themselves-as friends, parents, children, citizens, 
businesspeople, teachers, professionals, and so on. It is helpful to identify what ethics is NOT: 
Ethics is not the same as feelings. Feelings provide important information for our ethical 
choices. Some people have highly developed habits that make them feel bad when they do 
something wrong, but many people feel good even though they are doing something wrong. 
And often our feelings will tell us it is uncomfortable to do the right thing if it is hard. 
Page 4


 
 
7 
Principles of Business Ethics 
Learning Objectives 
After reading this chapter, you will be able to 
? Define business ethics 
? Distinguish between Business Ethics and Morality 
? Understand Ethical Dilemmas 
? Explain how businesses can promote Ethical Behaviour  
? List the benefit of Business Ethics  
"Whether men understand it or not, they are impelled by that power behind to become 
unselfish. That is the foundation of morality. It is the quintessence of all ethics, preached in 
any language, or any religion, or by any prophet in the world. "Be thou unselfish", "Not 'I', but 
'Thou'" - that is the background of ethical codes." 
Swami Vivekananda  
7.1 Introduction 
Corporate scandals such as Enron are illustrative of the relationship between ethics and 
business. Investigation into the fraud committed by corporate senior executive officers as well 
as the stress on the employees, who have to follow the unreasonable and sometimes illegal 
orders of their superiors have also come to the fore in recent times. In a general sense, ethics 
is the concern for good behaviour - doing the right thing. Human beings have always been 
puzzled with moral questions of right and wrong behaviour; struggling to develop a system that 
produced the maximum good for the individual and for the group. They understood the 
importance of “right” behavior and realized that there was danger of extinction if violent acts 
and pilferage were not curtailed. Over time, codes of conduct were developed to ensure 
survival. These codes were for nurturing children, forming of family and tribal units, hunting 
rituals and so on. Thus, a system of acceptable behavior was formed. One example that 
comes to mind most readily is the Ten Commandments from the Bible. Other traditions and 
religions have comparable sacred or ancient texts that have guided people's actions in all 
areas, including business, for centuries, and still do.  
7.2 Business Law, Ethics and Communication 
 
At all times, wise men and religions all over the world have considered “value centred 
perfection” and not “material success” as the ultimate goal of every human being. 
Unfortunately with passage of time, we started witnessing a degradation of values-ethics, 
forgetting the wise teachings; associating material success and fame as highest achievement. 
According to Vedanta one of the world's most ancient religious philosophies based on the 
Vedas, the sacred Hindu scriptures of India, it is crucially important that our thoughts and 
actions be governed by ethical values and habits.  
Vedanta, is in agreement with Socrates in holding the view that the practice of virtue should be 
preceded by a rational understanding of the implications and the nature of virtue. It says that 
Viveka (understanding) should precede Vairagya (dispassion) and the practice of Shatsampat 
(six ethical virtues – tranquility, training, withdrawal, forbearance, faith and focus), are 
cultivated to stabilize the mind and emotions. “The knowledge of the importance of virtue does 
not deter people from moving to the evil side of things. This is the unknown illusion covering 
the consciousness of man, says the Vedanta.  
Mahatma Gandhi, Father of India, promoted non-violence, justice and harmony between 
people of all faiths. Satyagraha, Gandhi's approach to conflict, was to "hold firmly to Truth.” He 
stressed that people follow ethical principles and listed following seven Social Sins:  
(i) Politics without Principles.  
(ii) Wealth without work.  
(iii) Commerce without Morality.  
(iv) Knowledge without Character.  
(v) Pleasure without Conscience.  
(vi) Science without humanity.  
(vii) Worship without sacrifice.  
The first deals with the political field. The Kings in Indian tradition were only the guardian 
executors and servants of ‘Dharma’. For Gandhi Rama was the symbol of a king dedicated to 
Principles. The second and the third dicta deal with the sphere of Economics. Tolstoy and 
Ruskin inspired Gandhi on the idea of bread-labour. The Bhagavad Gita also declares that he 
who eats without offering sacrifice eats stolen food. Gandhi put this into practice at his 
community centers. The third maxim was developed into the idea of Trusteeship by Gandhiji. 
A business man has to act only as a trustee of the society for whatever he has gained from the 
Society. Everything finally belongs to the society. "Trusteeship provides a means of 
transforming the present capitalist order of society into an egalitarian one". The fourth dictum 
deals with knowledge. Education stands for the all round development of the individual and his 
character. Gandhi's system of basic education was the system for development of one's 
character. True knowledge leads to the development of one's character where one evolves his 
`Rational self.' Gandhi held that Science without the thought of the welfare of humanity is a 
Sin. Science and humanity together pave the way for welfare of all. In religion, we worship, but 
Principles of Business Ethics  7.3 
 
if we are not ready to sacrifice for social service, worship has no value; it is sin to worship 
without sacrifice . Gandhiji's everyday prayer was a recitation of the virtues of an ideal person 
as depicted in the Bhagvad Gita. His prayer addressed to better one's own self, the 
conscience, the true self. There is little doubt that unethical behaviour results in unspeakable 
restlessness, tension, secret fear and loss of peace.  
7.2 Ethics and Morals 
The word ‘Ethics’ is derived from the Ancient Greek ethikos- meaning character is the 
essence of values and habits of a person or group. It covers the analysis and employment of 
concepts such as right and wrong, good and evil, and acting with responsibility. It has many 
definitions . According to one “ethics are the principles of conduct governing an individual or a 
group”. Another describes “ethics as relating to what is good or bad, and having to do with 
moral duty and obligation.”  
 Let us draw a distinction between Ethics and Morals. The word “Moral” is defined as relating 
to principles of right and wrong. Although both words are broadly defined in contemporary 
English as having to do with right and wrong conduct, the root word for ethics is the Greek 
"ethos," meaning "character", while the root word for Moral is Latin "mos," meaning 
"custom."Character and custom, however, provide two very different standards for defining 
what is right and what is wrong. Character is a personal attribute, while custom is defined by a 
group over time. People have character. Societies have custom. To violate either can be said 
to be wrong, within its appropriate frame of reference. 
Another way to look at the distinction is to say that morals are accepted from an authority 
(cultural, religious, etc.), while ethics are accepted because they follow from personally 
accepted principles. For example, if one accepts the authority of a religion, and that religion 
forbids stealing, then stealing would be immoral. An ethical view might be based on an idea of 
personal property that should not be taken without social consent (like a court order). Moral 
norms can usually be expressed as general rules and statements such as “always tell the 
truth.” and are typically first absorbed as a child from family, friends, school, religious 
teachings and other associations. Morals work on a smaller scale than ethics, more reliably, 
but by addressing human needs for belonging and emulation, while ethics has a much wider 
scope. 
7.3 Nature of Ethics 
Simply stated, ethics refers to standards of behavior that tell us how human beings ought to 
act in the many situations in which they find themselves-as friends, parents, children, citizens, 
businesspeople, teachers, professionals, and so on. It is helpful to identify what ethics is NOT: 
Ethics is not the same as feelings. Feelings provide important information for our ethical 
choices. Some people have highly developed habits that make them feel bad when they do 
something wrong, but many people feel good even though they are doing something wrong. 
And often our feelings will tell us it is uncomfortable to do the right thing if it is hard. 
7.4 Business Law, Ethics and Communication 
 
Ethics is not religion. Many people are not religious, but ethics applies to everyone. Most 
religions do advocate high ethical standards but sometimes do not address all the types of 
problems we face. Ethics is not following the law. A good system of law does incorporate 
many ethical standards, but Law can deviate from what is ethical. Law can become ethically 
corrupt, as some totalitarian regimes have made it. Law can be made to be a function of 
power alone and designed to serve the interests of narrow groups. Law may have a difficult 
time designing or enforcing standards in some important areas, and may be slow to address 
new problems.  
Ethics is not following culturally accepted norms. Some cultures are quite ethical, but others 
become corrupt or blind to certain ethical concerns (as the United States was to slavery before 
the Civil War or to using atomic weapons on civilians in Hiroshima and Nagasaki). "When in 
Rome, do as the Romans do" is not a satisfactory ethical standard.  
Ethics is not science. Social and natural science can provide important data to help us make 
better ethical choices. But science alone does not tell us what we ought to do. Science may 
provide an explanation for what humans are like. But ethics provides reasons for how humans 
ought to act. And just because something is scientifically or technologically possible, it may 
not be ethical to do it.  
Why Identifying Ethical Standards is Hard 
There are two fundamental problems in identifying the ethical standards we are to follow: 
1. On what do we base our ethical standards? 
2. How do those standards get applied to specific situations we face? 
If our ethics are not based on feelings, religion, law, accepted social practice, or science, what 
are they based on? Many philosophers and ethicists have helped us answer this critical 
question. They have suggested at least five different sources of ethical standards we should 
use. 
Five Sources of Ethical Standards 
The Utilitarian Approach: Some ethicists emphasize that the ethical action is the one that 
provides the most good or does the least harm, or, to put it another way, produces the 
greatest balance of good over harm. The ethical corporate action, then, is the one that 
produces the greatest good and does the least harm for all who are affected - customers, 
employees, shareholders, the community, and the environment. The utilitarian approach deals 
with consequences; it tries both to increase the good done and to reduce the harm done. 
The Rights Approach (The Deontological Approach): Other philosophers and ethicists 
suggest that the ethical action is the one that best protects and respects the moral rights of 
those affected. This approach starts from the belief that humans have a dignity based on their 
human nature per se or on their ability to choose freely what they do with their lives. On the 
basis of such dignity, they have a right to be treated as ends and not merely as means to 
other ends. The list of moral rights - including the rights to make one's own choices about 
Page 5


 
 
7 
Principles of Business Ethics 
Learning Objectives 
After reading this chapter, you will be able to 
? Define business ethics 
? Distinguish between Business Ethics and Morality 
? Understand Ethical Dilemmas 
? Explain how businesses can promote Ethical Behaviour  
? List the benefit of Business Ethics  
"Whether men understand it or not, they are impelled by that power behind to become 
unselfish. That is the foundation of morality. It is the quintessence of all ethics, preached in 
any language, or any religion, or by any prophet in the world. "Be thou unselfish", "Not 'I', but 
'Thou'" - that is the background of ethical codes." 
Swami Vivekananda  
7.1 Introduction 
Corporate scandals such as Enron are illustrative of the relationship between ethics and 
business. Investigation into the fraud committed by corporate senior executive officers as well 
as the stress on the employees, who have to follow the unreasonable and sometimes illegal 
orders of their superiors have also come to the fore in recent times. In a general sense, ethics 
is the concern for good behaviour - doing the right thing. Human beings have always been 
puzzled with moral questions of right and wrong behaviour; struggling to develop a system that 
produced the maximum good for the individual and for the group. They understood the 
importance of “right” behavior and realized that there was danger of extinction if violent acts 
and pilferage were not curtailed. Over time, codes of conduct were developed to ensure 
survival. These codes were for nurturing children, forming of family and tribal units, hunting 
rituals and so on. Thus, a system of acceptable behavior was formed. One example that 
comes to mind most readily is the Ten Commandments from the Bible. Other traditions and 
religions have comparable sacred or ancient texts that have guided people's actions in all 
areas, including business, for centuries, and still do.  
7.2 Business Law, Ethics and Communication 
 
At all times, wise men and religions all over the world have considered “value centred 
perfection” and not “material success” as the ultimate goal of every human being. 
Unfortunately with passage of time, we started witnessing a degradation of values-ethics, 
forgetting the wise teachings; associating material success and fame as highest achievement. 
According to Vedanta one of the world's most ancient religious philosophies based on the 
Vedas, the sacred Hindu scriptures of India, it is crucially important that our thoughts and 
actions be governed by ethical values and habits.  
Vedanta, is in agreement with Socrates in holding the view that the practice of virtue should be 
preceded by a rational understanding of the implications and the nature of virtue. It says that 
Viveka (understanding) should precede Vairagya (dispassion) and the practice of Shatsampat 
(six ethical virtues – tranquility, training, withdrawal, forbearance, faith and focus), are 
cultivated to stabilize the mind and emotions. “The knowledge of the importance of virtue does 
not deter people from moving to the evil side of things. This is the unknown illusion covering 
the consciousness of man, says the Vedanta.  
Mahatma Gandhi, Father of India, promoted non-violence, justice and harmony between 
people of all faiths. Satyagraha, Gandhi's approach to conflict, was to "hold firmly to Truth.” He 
stressed that people follow ethical principles and listed following seven Social Sins:  
(i) Politics without Principles.  
(ii) Wealth without work.  
(iii) Commerce without Morality.  
(iv) Knowledge without Character.  
(v) Pleasure without Conscience.  
(vi) Science without humanity.  
(vii) Worship without sacrifice.  
The first deals with the political field. The Kings in Indian tradition were only the guardian 
executors and servants of ‘Dharma’. For Gandhi Rama was the symbol of a king dedicated to 
Principles. The second and the third dicta deal with the sphere of Economics. Tolstoy and 
Ruskin inspired Gandhi on the idea of bread-labour. The Bhagavad Gita also declares that he 
who eats without offering sacrifice eats stolen food. Gandhi put this into practice at his 
community centers. The third maxim was developed into the idea of Trusteeship by Gandhiji. 
A business man has to act only as a trustee of the society for whatever he has gained from the 
Society. Everything finally belongs to the society. "Trusteeship provides a means of 
transforming the present capitalist order of society into an egalitarian one". The fourth dictum 
deals with knowledge. Education stands for the all round development of the individual and his 
character. Gandhi's system of basic education was the system for development of one's 
character. True knowledge leads to the development of one's character where one evolves his 
`Rational self.' Gandhi held that Science without the thought of the welfare of humanity is a 
Sin. Science and humanity together pave the way for welfare of all. In religion, we worship, but 
Principles of Business Ethics  7.3 
 
if we are not ready to sacrifice for social service, worship has no value; it is sin to worship 
without sacrifice . Gandhiji's everyday prayer was a recitation of the virtues of an ideal person 
as depicted in the Bhagvad Gita. His prayer addressed to better one's own self, the 
conscience, the true self. There is little doubt that unethical behaviour results in unspeakable 
restlessness, tension, secret fear and loss of peace.  
7.2 Ethics and Morals 
The word ‘Ethics’ is derived from the Ancient Greek ethikos- meaning character is the 
essence of values and habits of a person or group. It covers the analysis and employment of 
concepts such as right and wrong, good and evil, and acting with responsibility. It has many 
definitions . According to one “ethics are the principles of conduct governing an individual or a 
group”. Another describes “ethics as relating to what is good or bad, and having to do with 
moral duty and obligation.”  
 Let us draw a distinction between Ethics and Morals. The word “Moral” is defined as relating 
to principles of right and wrong. Although both words are broadly defined in contemporary 
English as having to do with right and wrong conduct, the root word for ethics is the Greek 
"ethos," meaning "character", while the root word for Moral is Latin "mos," meaning 
"custom."Character and custom, however, provide two very different standards for defining 
what is right and what is wrong. Character is a personal attribute, while custom is defined by a 
group over time. People have character. Societies have custom. To violate either can be said 
to be wrong, within its appropriate frame of reference. 
Another way to look at the distinction is to say that morals are accepted from an authority 
(cultural, religious, etc.), while ethics are accepted because they follow from personally 
accepted principles. For example, if one accepts the authority of a religion, and that religion 
forbids stealing, then stealing would be immoral. An ethical view might be based on an idea of 
personal property that should not be taken without social consent (like a court order). Moral 
norms can usually be expressed as general rules and statements such as “always tell the 
truth.” and are typically first absorbed as a child from family, friends, school, religious 
teachings and other associations. Morals work on a smaller scale than ethics, more reliably, 
but by addressing human needs for belonging and emulation, while ethics has a much wider 
scope. 
7.3 Nature of Ethics 
Simply stated, ethics refers to standards of behavior that tell us how human beings ought to 
act in the many situations in which they find themselves-as friends, parents, children, citizens, 
businesspeople, teachers, professionals, and so on. It is helpful to identify what ethics is NOT: 
Ethics is not the same as feelings. Feelings provide important information for our ethical 
choices. Some people have highly developed habits that make them feel bad when they do 
something wrong, but many people feel good even though they are doing something wrong. 
And often our feelings will tell us it is uncomfortable to do the right thing if it is hard. 
7.4 Business Law, Ethics and Communication 
 
Ethics is not religion. Many people are not religious, but ethics applies to everyone. Most 
religions do advocate high ethical standards but sometimes do not address all the types of 
problems we face. Ethics is not following the law. A good system of law does incorporate 
many ethical standards, but Law can deviate from what is ethical. Law can become ethically 
corrupt, as some totalitarian regimes have made it. Law can be made to be a function of 
power alone and designed to serve the interests of narrow groups. Law may have a difficult 
time designing or enforcing standards in some important areas, and may be slow to address 
new problems.  
Ethics is not following culturally accepted norms. Some cultures are quite ethical, but others 
become corrupt or blind to certain ethical concerns (as the United States was to slavery before 
the Civil War or to using atomic weapons on civilians in Hiroshima and Nagasaki). "When in 
Rome, do as the Romans do" is not a satisfactory ethical standard.  
Ethics is not science. Social and natural science can provide important data to help us make 
better ethical choices. But science alone does not tell us what we ought to do. Science may 
provide an explanation for what humans are like. But ethics provides reasons for how humans 
ought to act. And just because something is scientifically or technologically possible, it may 
not be ethical to do it.  
Why Identifying Ethical Standards is Hard 
There are two fundamental problems in identifying the ethical standards we are to follow: 
1. On what do we base our ethical standards? 
2. How do those standards get applied to specific situations we face? 
If our ethics are not based on feelings, religion, law, accepted social practice, or science, what 
are they based on? Many philosophers and ethicists have helped us answer this critical 
question. They have suggested at least five different sources of ethical standards we should 
use. 
Five Sources of Ethical Standards 
The Utilitarian Approach: Some ethicists emphasize that the ethical action is the one that 
provides the most good or does the least harm, or, to put it another way, produces the 
greatest balance of good over harm. The ethical corporate action, then, is the one that 
produces the greatest good and does the least harm for all who are affected - customers, 
employees, shareholders, the community, and the environment. The utilitarian approach deals 
with consequences; it tries both to increase the good done and to reduce the harm done. 
The Rights Approach (The Deontological Approach): Other philosophers and ethicists 
suggest that the ethical action is the one that best protects and respects the moral rights of 
those affected. This approach starts from the belief that humans have a dignity based on their 
human nature per se or on their ability to choose freely what they do with their lives. On the 
basis of such dignity, they have a right to be treated as ends and not merely as means to 
other ends. The list of moral rights - including the rights to make one's own choices about 
Principles of Business Ethics  7.5 
 
what kind of life to lead, to be told the truth, not to be injured, to a degree of privacy, and so 
on-is widely debated; some now argue that non-humans have rights, too. Also, it is often said 
that rights imply duties-in particular, the duty to respect others' rights. 
The Fairness or Justice Approach: Aristotle and other Greek philosophers have contributed 
the idea that all equals should be treated equally. Today we use this idea to say that ethical 
actions treat all human beings equally-or if unequally, then fairly based on some standard that 
is defensible. We pay people more based on their harder work or the greater amount that they 
contribute to an organization, and say that is fair. But there is a debate over CEO salaries that 
are hundreds of times larger than the pay of others; many ask whether the huge disparity is 
based on a defensible standard or whether it is the result of an imbalance of power and hence 
is unfair. 
The Common Good Approach: The Greek philosophers have also contributed the notion that 
life in community is a good in itself and our actions should contribute to that life. This approach 
suggests that the interlocking relationships of society are the basis of ethical reasoning and 
that respect and compassion for all others-especially the vulnerable-are requirements of such 
reasoning. This approach also calls attention to the common conditions that are important to 
the welfare of everyone. This may be a system of Laws, effective police and fire departments, 
health care, a public educational system, or even public recreational areas.  
The Virtue Approach: A very ancient approach to ethics is that ethical actions ought to be 
consistent with certain ideal virtues that provide for the full development of our humanity. 
These virtues are dispositions and habits that enable us to act according to the highest 
potential of our character and on behalf of values like truth and beauty. Honesty, courage, 
compassion, generosity, tolerance, love, fidelity, integrity, fairness, self-control, and prudence 
are all examples of virtues. Virtue ethics asks of any action, "What kind of person will I 
become if I do this?" or "Is this action consistent with my acting at my best?"  
Putting the Approaches Together: Each of the approaches helps us determine what 
standards of behavior can be considered ethical. There are still problems to be solved, 
however. 
The first problem is that we may not agree on the content of some of these specific 
approaches. We may not all agree to the same set of human and civil rights. 
We may not agree on what constitutes the common good. We may not even agree on what is 
a good and what is a harm. 
The second problem is that the different approaches may not all answer the question "What is 
ethical?" in the same way. Nonetheless, each approach gives us important information with 
which to determine what is ethical in a particular circumstance. And much more often than not, 
the different approaches do lead to similar answers. 
Making Decisions: Making good ethical decisions requires a trained sensitivity to ethical 
issues and a practiced method for exploring the ethical aspects of a decision and weighing the 
considerations that should impact our choice of a course of action. Having a method for ethical