Chapter 2

Social Responsibility of Business and Business Ethics

 

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2.8 Business Ethics

 

2.8.1 Concept of Business Ethics

Business ethics refers to the standards of right and wrong in the society. These standards are flexible. They are different from place to place. Ethical values develop over a long period under the influence of culture, religion etc. These standards vary in accordance with the change in the society due to education, knowledge and interaction with peoples of other cultures.

 

 

Law is a codified from of ethics. Law sets the minimum standards of behavior. Ethics has a wider meaning than law. In other words obedience to law does not mean keeping of all ethical standards.

 

Ethics involves critical analysis of human acts to determine whether they are right or wrong. There are two major standards in assessing human act; justice and truth. An act against any of these two standards is considered an unethical act. However an act that looks unethical may be justified on the bases of circumstances. Law itself provides exceptions to general law of crimes on the basis of circumstances. For example killing in self defense is not considered murder under criminal law.

 

Deciding between right and wrong is not easy when different ethical values are in conflict. Many people have defined business ethics differently. One of the definitions of ethical business behavior is “any business decision that creates value for the customer by matching quality with price”. Thus ethical decisions are expected to:

i.                     Provide the customer with correct information about the product and price

ii.                   Enable the customer to make a free choice

iii.                  Generate customer commitment to the product and the producer.

Violation of the above rules implies unethical behavior.

 

2.8.2 Ethics vs. Law

Ethics and law are interrelated. Ethics is the background and the law developed from ethics. This may cause the law and ethics overlap. The law may be seen as a reflection of what society considers the minimum standard of behavior. The law is codified ethics of the society. Violation of law in most cases is violation of ethics as well.

 

Ethics

Law

1.       Ethics is the primary indicator reflecting the character of the society

 

2.       The scope of ethics is wider than that of law. It involves everything that the society considers the rule of behavior in a given situation.

 

 

 

3.       Ethics have universal application; it is not restricted to the political boundaries of a country

 

4.       There can be different ethical standards in a large country with population of different cultural standards.

 

5.       Rights arising from ethical issues are not enforceable through court, unless they are secured by law

 

Law is the factor reflecting the prevailing ethical norms of the society.

 

Law states the only the minimum standard. A person is free to do more than that minimum at his own will.

For Example. If someone is in trouble, it is not the law but the ethics that requires others to help him.

 

Law is applicable only within the political boundaries of the country.

 

 

Law can be more or less same for everyone in a country.

 

 

Legal rights are enforceable through count.

 

 

2.8.3 Elements of Business Ethics

 

Elements of ethics are the factors that help to make ethical judgment. Following are the major elements of ethics:

 

a.       Ethical imagination

Ethical imagination implies how far the business is sensitive to ethical issues in decision making. It is the ability to identify the situations where people are likely to be affected adversely by business decisions.

 

b. Ethical identification and setting of priorities

It refers to the ability to judge the relevance and non relevance of ethical factors of decision making. The ethical issues should be ranked according to importance.

 

c. Ethical evaluation

Ethical evaluation means the assessment ethical factors on the basis of definite principles.

 

d. Tolerance of ethical disagreement and ambiguity

All decisions in a business cannot absolutely satisfy every principle of ethics. However, there should be predetermined level of tolerance for deviation from ethical principles.

 

e. Integration of managerial and ethical competence

Ethical competence is an integral part of managerial competence. All business decisions must be taken with due care because there is a price to pay for unethical behavior.

 

f. A sense of ethical obligation

Every organization has an obligation to the society. A business should be socially profitable. It should give to the society more than what it takes from the society. The society expects the business to give increased attention to its social profitability.

 

 

 End of Chapter 2

 

 

 

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