Interrelationship Between Management Functions

BUSINESS ETHICS AND MANAGEMENT

The word ‘ethics’ comes from the Greek root ‘ethos’ which means character, guiding beliefs, standards or ideals that pervade a group of community. In simple words, ethics specify what is good or bad, fair or unfair, right or wrong? When applied to business, ethics mean the business practices which are desirable from the point of view of the society.

Meaning of Business Ethics

Business ethics refers to the moral principles of which should govern business activities. They are concerned with determining what is right and what is wrong while doing their business. Business ethics provide a code of conduct for the managers. The purpose of business ethics is to guide the managers and employees in performing their jobs. They lay down the norms of behaviour for the business and guide it in undertaking socially responsible activities.

Every business is expected to carry its operations in an ethical manner or socially desired desirable way. A few examples of ethical business practices are:

1. To charge fair prices from the customers.
2. To use fair weights for measurement of commodities.
3. To pay taxes to the government honestly.
4. To charge reasonable profits from the customers.
5. To ensure genuine (not duplicate) and safe products for the public.
6. To give fair treatment to the workers.

A business is a part of the society and so it should follow the ethical or moral norms of the society. It should be guided by the principles, which are considered right by the society. It is expected for every business firm to integrate ethical values which their business operations.

Another related concept is that of ‘values’ which denote society's beliefs regarding certain issues. In the light of the social values, we can evaluate policies and practices of a business. For example, an important value of our society is honest dealings. That means the society does not approve of sale of adulterated goods, use of false weights, hoarding of goods or black marketing of goods.

Nature of Business Ethics

The essential elements of business ethics are as follows:

1. ‘Business Ethics' is an umbrella term which covers all business practices which are desirable from the point of view of the society.
2. Ethics coexist with law, but has a much broader coverage. Ethics aim to perfection in the conduct of life.Thus, it guides the law-makers to have perfect rules for all human behavior.
3. The concept of equity is implied in ethics. It aims at fair and reasonable treatment to all. 
4. Business ethics emphasize making a business honest, just and responsible citizen.
5. Business ethics create self-imposed discipline on the part of the business films.

Ethical Dilemmas/Issues

In the working life of any manager, ethical dilemmas keep appearing. Let us considered some typical ethical dilemmas: If your travel agents offers you a deal which does not hurt your company covers but goes against company policy, then what should you do? Or, if your dealer offers, with no strings attached, admission to your son in the school of your choice, what should be your response? Or,when your relation is an aspirant for a job, Should you (a) tell your superiors about it, (b) keep quiet, (c) stay away from the recruitment process or (d) actively discouraged the relation? All these issues are ethical dilemmas which keep appearing quite often. Right responses to such dilemmas could be developed by conducting periodic workshops. Such dilemmas may necessarily entail huge financial losses, yet a little reflection will show that if clear answers are not provided to such problems, it could prove dangerous in future.

Waters, Bird and Chant conducted a research study in 1985 using open-ended interviews with a sample of managers at different positions in a variety of organisations. The question was “what ethical questions come up or have come up in the course of your work life?” From the answers to this question, Waters, Bird and Chant identified the following ethical issues:

1. With respect to employees: Feedback about performance and standing (or merit); employment security; appropriate working conditions.
2. With respect to peers and superiors: Truth telling, loyalty and support.
3. With respect to customers: Fair treatment, truth telling, questionable practices, collusion.
4. With respect to suppliers: Fair/impartial treatment, balanced relationships, unfair pressure tactics, truth telling.
5. With respect to other stakeholder: Respecting legal constraints, truth-telling in public relations, shareholders' interests.

Importance of Ethics for Managers

Business managers are often faced with the problem of deciding whether a particular act is ethical or not. However, there are certain acts which can be described as unethical. Some of these are given below:

• Bribing public officials to obtain undue favors.
• Using false claims in advertisement.
• Keeping two sets of books to evade taxes.
• Using company property for personal use.
• Overlooking safety norms and regulations to get the job done.
• Revealing confidential information or trade secrets to competitors.
• Artificially inflating profits to get re-elected as directors.

Managerial ethics relate to the behavior of managers in various business situations. The managers have to evaluate the impact of their actions on customers, workers, investors and society at large in terms of business ethics. If a manager is just end fair in his actions, his behavior will be deemed to be ethical. Every manager has to follow the social norms of behavior, whether he personally likes or not.

Business ethics have gained importance because of the following factors:

1. Business is a part of the society. Social values must become the guiding principles for doing business.
2. When an organization fails to behave in accordance with the society’s expectations, it may lose its large mage, market share, and its very right to exist.
3. A manager is expected to serve as a trustee of various groups, such as customers, workers, shareholders and suppliers. Thus, he must respect the social norms and expectations.
4. Consumers are no longer at the mercy of the business firms. They have organized powerful associations to discipline the business films. To avoid any confrontation with the consumers' associations, it is advisable for the business to follow ethical practices.
5. Various laws reflect the ethics of society. If a business is not ethical, it will attract the intervention of government and courts of law.
6. For every manager, job is the center of life. Job values must be in harmony with social values if the manager is to live happily.

Determinants of Business/Managerial Ethics

Business ethics develop as a result of constant interaction among a multiplicity of factors. The following are the main factors influencing the ethical behavior of those managing business:

1. Social Factors. Ethics are basically concerned with social morality. In other words, ethical business conduct is that which is socially moral. Accordingly, it is the social values, norms, traditions and customs, etc.,which prescribe business ethics and govern business conduct.And as societal norms and values undergo changes, business ethics are also adapted to the changed social environment.

2. Economic Factors. The level of economic development also influences the nature and spread of business ethics. In general, business ethics assume liberal character with the development in economic spheres, particularly business activities. Consider, for example, the advertisement on mint:“You don’t have a hole in your head. So why have one in your mind?”(Indicating the competitor’s product and its punchline ‘A mint with the hole'). Today, this type of advertisement is not considered unethical, but surely it would have been an immortal advertisement had it been issued during the 1950s or 1970s.

3. Cultural Factors. The code of conduct for individuals as well as organizations develop under constant influence of culture values. And the sources of these cultural values are historical heritage, family system, religion and education, government, etc. The constant influence of these factors determines the form and nature of social ethics or behavior.

4. Political Factors. Business ethics are also influenced by the ideology and philosophy of the political party in power. Through appropriate legislative measures, the government enforces business firms in respect of such important aspects as business location, maintenance of quality, fair prices, fair treatments to the workers, safety measures, prevention of pollution, etc.

5. Organizational Factor. organizational factors like philosophy and policy of the firms, attitudes of the managers and superior-subordinate relations have great impact on ethical perception and judgment of business managers and subsequent behavior.

6. Institutional Codes. Business conduct is also governed by codes of conduct prescribed by various sectoral institutions. The codes of ethical behavior have been prescribed by the professional bodies like the Institute of Chartered Accountants of India, the Institute of Costs and Works Accountants of India, the Institute of Company Secretaries of India, and All India Management Association for their respective members. Organisations like Chambers of Commerce and Industry and Trade associations have also formulated codes of conduct for business enterprises. Such codes of conduct act as trend-setters and create a conducive environment for business firms to adopt ethical behavior.