Business Ethics – Meaning, Definitions, Theories, Sources and Importance

Sources of Business Ethics

Managers in every society are influences by three repositories of ethical values : religion, culture and law.

i. Religion
One of the oldest sources of ethical inspiration is religion. The great religions preach the necessity for an orderly social system and emphasize social responsibility in such a way so as to contribute to the general welfare. Build upon such verities are many other rules of conduct.

ii. Cultural Experience
Culture refers to a set of values, rules and standards transmitted among generations and acted upon to produce behaviours that all within acceptable limits. These rules and standards always play an important part in determining values, because individuals anchor their conduct in the culture of the groups. Civilization itself is a cumulative cultural experience in which people have passed through three distinct phases of moral codification – Hunting and gathering stage, agricultural stage and industrial stage.

iii. Legal System
Laws are rules of conduct, approved by legislatures, that guide human behavior in any society. They codify ethical expectations and keep changing as new evils emerge. But laws cannot cover all ethical expectations of society. Law is reactive, new statutes and enforcement always lag behind the opportunity for corporate expediency. Whatever ethics that law codifies, it is binding on business. Society expects to business to abide by law and obeying law is presumed to be ethical behavior.

Ethics and Social Responsibility: Difference

At this stage, it is desirable to understand the difference between ethics and social responsibility as both aim at positive and acceptable behaviour and, therefore, confusion! arises whether both are same or different. In fact, both are related to each other in some respects but they are essentially different. Social responsibility is an organisation’s obligation to protect and contribute to the social environment in which it functions while ethics deals with moral principles in human behaviour. Because of this difference in orientation, ethics and social responsibility differ in the following ways:

1. Ethics provides guidelines for human behavior in every field, whether organizational or non-organizational. Social responsibility works in organizational context. Thus, implications of ethics are much wider than those of social responsibility.

2. Distinction between ethics and social responsibility is in terms of a decision’s implications for the society as a whole. Ethics is concerned with micro asect, that is , relating to daily operating decisions with limited social impact. Social responsibility is concerned with macro aspect elating to decision with broad implications for a large segments of the society.

Importance of Business Ethics

Ethics is important to business for several reasons as stated below:

(i) Ethics corresponds to basic human need
It is human trade that man desire to ethical not only in his private life but also in his business affairs where, being a manager he know his decisions may affect the lives of thousands of employees. Moreover, most people want to be part of the organization which they respect and be publically proud of because they preserve its purpose and activities to be honest and beneficial to the society. Most top managers would like to respond to this need on their employees and they themselves feel an equal need to be genuinely proud of the company they are directing. These basic ethical needs compel the organization to be ethically oriented

(ii) Values create credibility with public.
A company perceived by the company to be ethically and socially responsive will be honoured and respected. Even by those who have no intimate knowledge and its actual working. There will be instinctive prejudice in favour of its products since people believe that the company offers value for money.

(iii) Values give management credibility with employees
Values are supposed to be a common language to bring leadership and its people together. organizational ethics when perceived by the employees as genuine creates common goals, values and language. The management has credibility with its employees precisely because it has credibility with the public.

(iv) Values help better decision making
Ethical attitude helps the management make better decision i.e. decision which are in the interest of public, their employees and the company’s own long term good, even though decision making is slower.

(v) Ethics and profits
Ethics and profits go together. A company which is inspired by ethical products are also profitable ones. Value driven companies are sure to be successful in long run though in short run they may loose money.

(vi) Law cannot protect society ethics can.
Ethics is important because the government, law and lawyers cannot do everything to product society. Technology develops faster that the government can regulate. People in an industry often known the dangers in a particular technology better than the regulatory agencies. Further government cannot always regulate all the activities which are harmful to the society. Where law fails ethics can succeed. An ethical oriented management takes measures to prevent pollution and protect workers’ health even before mandated by law.

Business Ethics – Meaning, Definitions, Theories, Sources and Importance

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