Business ethics is the application of moral practices and principles to the day to day business operation. It ensures that a certain basic level of trust between the customers and other participants of the business in the marketplace. The concept of business ethics was developed in the 1960s as business societies become more aware of the growth of consumer communities. These consumer communities showed greater concerns regarding environmental, social causes and corporate responsibility issues.
The business ethics are the form of a voluntarily accepted set of code of conduct for doing business. They are quite distinguished from rules and regulations and other legal compliance’s which are enforced from outside authorities. They are aimed to establish trust among the consumers, businesses and all the participants of the business process. The objectives are to provide a transparent, fair and justified business culture and environment.
The characteristics which make a business decision ethical are categorized as under.
- The decisions to be justified and equal.
- They should be correct and due.
- They should be appropriate and generally acceptable.
- Should be good for a maximum number of concerned people.
- Should be honest and fair.
- It should reject that justice is done to all
The need for business ethics was felt necessary for the following reasons.
- Stop business malpractices.
- Safeguarding consumer’s right.
- Gain Confidence of customers.
- Survival and growth of the business.
- Creating a good will.
- Healthy competition.
- Consumer satisfaction.
- Building a strong relationship with clients and consumers.
Therefore business ethics are a set of principle and practices that form and determine acceptable behavior in the business organization. It guides the managers and other executives in taking everyday business decision. These set of ethics have a great impact on decisions taken by the stakeholders of the business like employees, consumers’ government societies, investors and shareholders, etc.
The objectives of business ethics are
- Internal Policy level – The business organizations should follow fair practices in dealing with employees and other stakeholders. The organizations should follow open and better communication at all levels. The organization leadership should motivate employees for better productivity and for common benefits.
- Societal level – The business organizations should focus on non-discrimination among different section of society, optimal use of resources, clean environment and better quality of life to all stakeholders should be stressed in the internal policies of the organization.
- Personal level – At the personal level, the policy should be set that not to misuse the properties of other or of the organization, keeping the promise and extending the mutual help, not to seek quick gains or not to indulge in politics to gain power.
- Stakeholders’ level – The organization should take care maximum number of stakeholders and follow ethical means with shareholders, customers, suppliers, employees, bank and financial institutions, government and all others concerned with the organization.
Elements of Business Ethics
The major elements of business ethics are
- A formal code of conduct – The code of conduct is established by those organizations who intend to inculcate ethical conduct among their employees and members. The codes are statements of the organizational values.
- Ethics Committee – Such committees are dedicated to maintaining ethics in the organization. They raise ethical issues, develop and update the code of conduct.
- Ethical communications – The effective ethical communication system in the organization is made to educate employees regarding ethical standards and norms.
- Ethics training program – Through such training program, employees of the organization undergo training to learn ethical norms and code of conduct of the company.
- Monitoring – The monitoring committee looks after the effective implementation of the code of conduct during the day to day operation and contracts the deviation if any.
The growth of business in any organization greatly depends upon the good ethics followed by its members. The unethical practices followed in any organization may pose a threat to its survival and growth. Good ethics create a positive reputation for the company at the market place, which opens various opportunities for profit.