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Managing Business

Ethics & Compliance


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Managing Business Ethics & Compliance

Dr. Amit Das

Ph.D., MBA (HRM, International Business,

Marketing), Fellowship in Talent Management,

PGDHRM, EDP- XLRI

EDUCREATION PUBLISHING (Since 2011)

www.educreation.in


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Acknowledgement First and foremost, thanks to God for giving me wisdom that

was necessary to write this book. I would like to express my

gratitude to people who saw me through this book that

includes my wife, the real source of inspiration to start and

complete this book and who provided all kind of moral

supports throughout the journey of this book.

After fulfilling all personal and professional commitment

writing this book was real challenge because it‟s a solitary

task of searching, selecting, gathering thoughts and

embedding numerous bytes of learning, information to

generate the content of the book and to make it so

contemporal for readers.

I would like to thank the entire crew of Educreation

Publication House for their unconditional supports.

Dr. Amit Das


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Introduction

Business Ethics as a concept has been quite old in the western

countries but is relatively of recent concept in the east

including South East regional countries like India. Business

has been in existence since time immemorial. However, with

the progression of time, the motive and processes of doing

business have undergone radical changes over times &

climes.

Ethics is a subject of social science that is related with moral

principles and social values. 'Business Ethics' can be termed

as a study of proper business policies and practices regarding

potentially controversial issues, such as corporate governance,

insider trading, bribery, discrimination, corporate social

responsibility, and fiduciary responsibilities. A business must

perform other duties such as distributing fair wages,

providing good working conditions, not exploiting the

workers, encouraging competition, etc. Business ethics can be

studied at three levels: systemic, corporate and individual.

Systemic issues deal with economic, political, legal and other

related systems within which production and distribution


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activities are carried out. Questions related to the morality of

capitalism, regulation of business etc. fall into this level.

Corporate level issues deal with actions of corporate concerns

or corporate citizens. This book on Business Ethics and

Compliance provides an introduction to some of the major

challenges facing anyone concerned with standards of

behaviour in organizations. It starts from a consideration of

the resources provided by philosophical ethics and moves on

to consider the challenges inherent in working in a

competitive business environment.

Many people remain unconvinced by the Business ethics

movement. Business ethics matters because plenty of

evidence that unethical behaviour can cost a company its

reputation and reduce its stock price. Moreover, companies

that are perceived as ethical are more likely to build trust

among their shareholders, employees, customers and the

wider community and surely is good for business.

Given the continuously changing and challenging business

VUCA (Volatile, Uncertainty, Complexity and Ambiguity)

landscape, earning profit has no longer been the only

objective of running a business. Instead, reciprocate in caring

society, environment have become an equally business

imperative to sustain in longer run in this competitive world.

Remember, to survive and thrive in this competitive


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environment and to become prosperous business has to have

good corporate governance to be conformed to all business

compliances.

Having considered all unethical practices like dumping

pollutants into the water supply rather than cleaning up the

pollution properly which gives deleterious effect to

environment and questioning the safety issues of

environment, releasing toxins into the air in levels above what

is not permitted, coercing an injured worker not to report a

work injury to workers' compensation by threatening him

with the loss of a job or benefits, refusing to give an

employee a final paycheck for hours worked after the

employee leaves the company. Using bait and switch or false

advertising tactics to lure customers in or convince them to

buy a product, refusing to honor a warranty claim on a

defective product, these all unethical practices water down

business impact in long run. Looking at global corruption

index India still far away to be in top 25 corruption free

countries, the use of unethical business practices has by now

become so rampant in business in India that ultimately

flounder and fizzle out leaving behind bad impression about

business opportunity in India.


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Efforts have been made to make this Business Ethics and

Compliance book more presumptuous, comprehensive and

contemporaneous for readers.


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Contents Chapter 1 Ethics in Business Environment 1-24

Chapter 2 Ethical Organization & COBC 25-46

Chapter 3 Business Ethics in Management 47-62

Chapter 4 Business Ethics & Decision Tools 63-76

Chapter 5 Building Ethical Leadership 77-92

Chapter 6 Organizational CSR 93-124

Chapter 7 Org. Ombudsman & OEC 125-158

Chapter 8 Corporate Governance 159-206

About The Author 207-208

Reading References 209-213


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Chapter

1

Ethics in Business Environment

“There are seven things that will destroy us. Wealth without

work; pleasure without conscience; knowledge without

character; religion without sacrifice; politics without

principles; science without humanity and business without

any ethics.” Mahatma Gandhi

Ethics is a branch of social science. It deals with moral

principles and social values. It helps us to classifying, what is

good and what is bad? It tells us to do good things and avoid

doing bad things.


Dr. Amit Das

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The word “ethics” is derived from the latin word „ ethicus‟

and the greek word „ethikos‟, meaning character or manners.

Ethics is thus said to be the science of moral, moral principle

and recognized rules of conduct.

When an action is in harmony with our morals, we say that

the action is ethical. Ethics are defining codes governs „Dos‟

and „Don‟ts‟. Ethical or unethical conducts are byproducts of

cultural influence like religion, social media, organizational

influence like role models, perceived pressure, political and

economic system etc. which completely depends upon

organizational, social

and cultural climate and moral principles of an individual. In

short, business ethics means to conduct business with a

human touch in order to give welfare to the society.

“Business ethics is the study of business situations, activities,

and decisions where issues of right and wrong are

addressed.” Andrew Crane

“The ethics of business is the ethics of responsibility. The

business man must promise that he will not harm

knowingly.” Raymond.C.Baumhart



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“Business ethics (also corporate ethics) is a form of applied

ethics or professional ethics that examines ethical principles

and moral or ethical problems that arise in a business

environment. It applies to all aspects of business conduct and

is relevant to the conduct of individuals and entire

organizations.” Wikipedia

“Business ethics are the moral values, norms or moral

standards which determine and govern the business practices

and decisions. It is an applied ethics which deals with the

factors of business environment, corporate issues in the

organization and conducting business in an honest way

fulfilling the expectations of stakeholders”.

Manuel G Velasquez

Lets‟ discuss what ethics doesn‟t mean

Ethics is not the same as feelings. Often our feelings will tell

us it is uncomfortable to do the right thing if it is hard. Ethics

is not religion. 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. Law can

become ethically corrupt; 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


Dr. Amit Das

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culturally accepted norms. Ethics is not science. Science may

provide an explanation for what humans are like. But ethics

provides reasons for how humans ought to act.

Lets‟ find what are those key characteristics of Business

Ethics are:

Business ethics is a code of conduct. Business ethics is based

on moral and social values. Business ethics give protection to

different social groups. Business ethics provide a basic

framework for doing business. Business ethics must be

voluntary. Businessmen must be given proper education and

guidance before introducing business ethics. Business ethics

is a relative term. It changes from one country to another.

Business ethics focuses primarily on the interests and

fulfilling the needs of their stakeholders and interact with

them constantly. Business Ethics provides quality of goods

and services timely through their every conduct. Every

individual of the organization is responsible for his/her

professional ethics and work responsibilities.

While finding connection between Values and ethics in

simple words mean principle or code of conduct that govern

transactions; in this case business transaction. These ethics

are meant to analyze problems that come up in day to day

course of business operations. Apart from this it also applies



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to individuals who work in organizations, their conduct and to

the organizations as a whole.

The origin of Business Ethics started a period where profit

maximization was seen as the only purpose of existence for a

business. There was no consideration whatsoever for non-

economic values, be it the people who worked with

organizations or the society that allowed the business to

flourish. It was only in late 1980‟s and 1990‟s that both

intelligentsia and the academics as well as the corporate

began to show interest in the same.

Nowadays almost all organizations lay due emphasis on their

responsibilities towards the society and the nature and they

call it by different names like corporate social responsibility,

corporate governance or social responsibility charter. In India

Maruti Suzuki, for example, owned the responsibility of

maintain a large number of parks and ensuring greenery.

Hindustan Unilever, similarly started the e-shakti initiative for

women in rural villages.

Many organizations, for example, IBM as part of their

corporate social responsibility have taken up the initiative of

going green, towards contributing to environmental

protection. It is not that business did not function before the

advent of business ethics; but there is a regulation of kinds


Dr. Amit Das

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now that ensures business and organizations contribute to the

society and its well-being.

Nowadays business ethics determines the fundamental

purpose of existence of a company in many organizations.

There is an ensuing battle between various groups, for

example between those who consider profit or share- holder

wealth maximization as the main aim of the company and

those who consider value creation as main purpose of the

organization.

Today, nobody can deny the importance of business ethics

because most of us would agree that it is ethics in practice

that makes sense; just having it carefully drafted and redrafted

in books may not serve the purpose. Of course all of us want

businesses to be fair, clean and beneficial to the society. For

that to happen, organizations need to abide by ethics or rule of

law, engage themselves in fair practices and competition; all

of which will benefit the consumer, the society and

organization.

Primarily it is the individual, the consumer, the employee or

the human social unit of the society who benefits from ethics.

In addition ethics is important because of the following.



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Being fair, honest and ethical is one the basic human needs.

Every employee desires to be such himself and to work for an

organization that is fair and ethical in its practices.

Even those who may have no information about the working

and the businesses or an organization respect an organization

that is believed to be driven by moral values in the society.

Infosys, for example is perceived as an organization for good

corporate governance and social responsibility initiatives.

This perception is held far and wide even by those who do not

even know what business the organization is into.

An organization driven by values is revered by its employees

also. They are the common thread that brings the employees

and the decision makers on a common platform. This goes a

long way in aligning behaviors within the organization

towards achievement of one common goal or mission.

For example an organization that does not value competition

will be fierce in its operations aiming to wipe out its

competitors and establish a monopoly in the market.

Organizations guided by ethics and values are profitable in

the long run, though in the short run they may seem to lose

money. Tata group, one of the largest business conglomerates


Dr. Amit Das

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in India was seen on the verge of decline at the beginning of

1990‟s, which soon turned out to be otherwise. The same

company‟s Tata NANO car was predicted as a failure, and

failed to do well but the same is picking up fast now.

Ethics tries to create a sense of right and wrong in the

organizations and often when the law fails, it is the ethics that

may stop organizations from harming the society or

environment.

Sustainability comes from an ethical long-term vision, which

takes into account all stakeholders. Companies which

recognize the importance of business ethics will need to

spend less protecting themselves from internal and external

behavioral risks, especially when supported by sound

governance systems and independent research. The financial

crisis marked another blow for the credibility of capitalism,

with resentment towards bank bailouts at the cost of

fundamental rights such as education and healthcare.

The planet has finite resources but a growing population;

without ethics, those resources are replete for purely

individual gain at huge cost both to current and future

generations.

While finding scope of business ethics that can be measured

in three areas like Systematic issues like economic, political,



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legal, social, Corporate issues like policies and procedures

and Individual issues like moral and practices. Compliance is

about obeying and adhering to rules and authority. The

motivation for being compliant could be to do the right thing

out of the fear of being caught rather than a desire to be

abiding by the law. An ethical climate in an organization

ensures that compliance with law is fuelled by a desire to

abide by the laws. Organizations that value high ethics

comply with the laws not only in letter but go beyond what is

stipulated or expected of them.

We live in an era of cut throat competition and competition

breeds enmity. This enmity reflects in business operations,

code of conduct. Business houses with deeper pockets crush

small operators and markets are monopolized. In such a

scenario certain standards are required to govern how

organizations go about their business operations, these

standards are called ethics.

Business ethics is a wider term that includes many other sub

ethics that are relevant to the respective field. For example

there is marketing ethics for marketing, ethics in HR for

Human resource department and the like. Business ethics in

itself is a part of applied ethics; the latter takes care of ethical

questions in the technical, social, legal and business ethics.


Dr. Amit Das

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"The business activity which generates those profits must be

ethical, and where based on taking of high risk, the

consequences of failure must fall on the shareholders and

those employees - not on the public purse."

David Rosser

In principle the business must give importance to the service

motive. That is, priority must be given to render service to

human beings over profit. Businessman must pay fair wages.

Better working conditions should be provided. Efficient

employees should be properly motivated and recognized.

Employees should be allowed to participate in management.

Monetary and non-monetary incentives must be given to

employees. Enough consideration should be given for clean

environment. Human feelings should be given importance.

Businessman shouldn‟t indulge in unscrupulous activities like

hoarding, black-marketing, sale and use of banned or harmful

goods, etc., for the sake of greed to earn exorbitant profits.

Businessman shouldn‟t cheat and exploit consumers by using

bad business practices such as artificial price rise and

adulteration. Scarce resources should not be wasted .It should

provide quality products at reasonable price. Businessman

must pay taxes and fulfill other obligations promptly. It must



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Sample Copy. Not For Distribution. - Book Publishing House · PDF filePh.D., MBA (HRM, International Business, Marketing), ... is relevant to the conduct of individuals and entire