Ethics:
Ethics is a system of moral principles. They affect how people make decisions and lead their lives.
Ethics is concerned with what is good for individuals and society and is also described as moral philosophy.
The term is derived from the Greek word ethos which can mean custom, habit, character or disposition.
Ethics covers the following dilemmas:
- how to live a good life
- our rights and responsibilities
- the language of right and wrong
- moral decisions - what is good and bad?
What is Business Ethics?
Ethics has become a hype word in the corporate world. The reason for this is the globalization and the explosion in the communication in the organization. As a result, businesses are focusing more on the ethics part. The rules or the principles of the organization should be maintained. Business ethics are given much importance nowadays.
Ethics means the set of rules or principles that the organization should follow. While in business ethics refers to a code of conduct that businesses are expected to follow while doing business.
Through ethics, a standard is set for the organization to regulate their behavior. This helps them in distinguishing between the wrong and the right part of the businesses.
Like every thing has two faces similarly business ethics also has two faces-
- Ethical :- Ethical practices is refers to the standard of professional conduct that any industry professional is expected to uphold.
- Unethical :- Unethical behavior is an action that falls outside of what is considered morally right for a proper person,a profession or an industry,individually can behave unethically, as can businesses, professionalism,or politicians.
Ethical and Unethical practices in disciplines of management like in
- HR
- Finance
- Marketing
- Human Resource Management (HRM) :-
Ethical Issues in HRM
1. Employment Issues:
HR professionals are likely to face maximum ethical dilemmas in the areas of hiring of employees.
Major challenges in this area are:
a. Pressure to hire a friend or relative of a highly placed executive.
b. Faked credentials submitted by a job applicant.
c. Discovery that an employee who has been with the organisation for some time, is skilled and has established a successful record, had lied about his educational credentials.
2. Cash and Incentive Plans:
Cash and incentive plans include issues like basic salaries, annual increments or incentives, executive perquisites and long term incentive plans:
Basic Salaries:
HR managers have to justify a higher level of basic salaries or higher level of percentage increase than the competitors to retain some employees. In some situations, where the increase is larger than normal they have to elevate some positions to higher grades. Annual increment/incentive Plans. This situation is particularly true in case of top management executives. The fear of losing some outstanding executives, the HR managers is forced to give higher incentives to them than what the individuals actually deserve.
Executive Perquisites:
In the name of executive perquisites, sometimes excesses are often committed, the ethical burden of which falls on the HR managers. Sometimes the costs of these perquisites are out of proportion to the value added. For example, the CEO of a loss making company buys a Mercedes for his personal use or wants a swimming pool built at his residence.
Long term incentive Plans. Long term incentive plans are to be drawn by the HR managers in consultation with the CEO and an external consultant. Ethical issues arise when the HR manager is put to pressure to favor top executive interests over the interests of the other employees and the investors.
3. Race and Disability:
A framework of laws and regulations has been evolved to avoid the practices of treatment of employees on the basis of their caste, sex, religion, disability, age etc. No organisation can openly practice any discriminatory policies, with regard to selection, training, development, appraisal etc. A demanding ethical challenge arises when there is pressure on the HR manager to protect the firm or an individual at the expense of someone belonging to the group which is being discriminated against.
4. Performance Appraisal:
Ethics should be the basis of performance evaluation. Highly ethical performance appraisal demands that there should be an honest assessment of the performance and steps should be taken to improve the effectiveness of employees. However, HR managers, sometimes, face the dilemma of assigning higher rates to employees who are not deserving them; based on some unrelated factors e.g. closeness to the top management. Some employees are, however, given low rates, despite their excellent performance on the basis of factor like caste, religion or not being loyal to the appraiser.
5. Privacy Issues:
The private life of an employee which is not affecting his professional life should be free from intrusive and unwarranted actions.
HR managers face three dilemmas in this aspect:
(i) The first dilemma relates to information technology. A firm’s need for information particularly about employees while on job may be at odds with the employee’s privacy. Close circuit cameras, tapping the phones, reading the computer files of employees etc. breach the privacy of employees.
(ii) The second ethical dilemma relates to the AIDS testing. AIDS has become a public health problem. HR managers are faced with two issues: Whether all the new employees should be subject to AIDS test and what treatment should be melted out to an employee who is affected with the disease. It is however generally understood that since AIDS cannot be contracted by casual and normal workplace contract, employees with this illness should not be discriminated against and they should be allowed to perform jobs for which they are qualified.
(iii) The third ethical dilemma relates to Whistle Blowing. Whistle blowing refers to a public disclosure by former or current employees of any illegal, immoral or illegitimate practices involving their employers. Generally, employees are not expected to speak against their employers, because their first loyalty in towards the organisation for which they work. However, if the situation is such that some act of the organisation can cause considerable harm to the society, it may become obligatory to blow the Whistle. The HR manager is in the dilemma how to solve this issue between the opponents and defenders of whistle blowing.
6. Safety and Health:
Industrial work is often hazardous to the safety and health of the employees. Legislation have been created making it mandatory on the organisations and managers to compensate the victims of occupational hazards. Ethical dilemmas of HR managers arise when the justice is denied to the victims by the organisation.
7. Restructuring and layoffs:
Restructuring of the organisations often result in layoffs and retrenchments. This is not unethical, if it is conducted in an atmosphere of fairness and equity and with the interests of the affected employees in mind. If the restructuring company requires closing of the plant, the process by which the plant is chosen, how the news is to be communicated and the time frame for completing the layoffs is ethically important.
8. Employee Responsibility:
Employees have responsibilities towards their employers, even if they work part time or don't have a written contract with their employers.
These are the main responsibilities of employees:
- to personally do the work they were hired to do
- to do their work carefully and seriously (In some cases, they could be fired or disciplined if they're often late for work, or if they're absent too often or for no good reason.)
- to avoid putting themselves or others in danger
- to follow their employer's instructions (There are some exceptions. For example, if an employer asks an employee to do something dangerous or illegal, the employee doesn't have to.)
- to be loyal
Unethical Issues in HRM
1. Misusing company time
Whether it is covering for someone who shows up late or altering a time sheet, misusing company time tops the list. This category includes knowing that one of your co-workers is conducting personal business on company time. By "personal business" the survey recognizes the difference between making cold calls to advance your freelance business and calling your spouse to find out how your sick child is doing.
2. Abusive behavior
Too many workplaces are filled with managers and supervisors who use their position and power to mistreat or disrespect others. Unfortunately, unless the situation you're in involves race, gender or ethnic origin, there is often no legal protection against abusive behavior in the workplace. To learn more, check out the Workplace Bullying Institute.
3. Employee theft
According to a recent study by Jack L. Hayes International, one out of every 40 employees in 2012 was caught stealing from their employer. Even more startling is that these employees steal on average 5.5 times more than shoplifters ($715 vs $129). Employee fraud is also on the uptick, whether its check tampering, not recording sales in order to skim, or manipulating expense reimbursements. Ethical alert: The FBI recently reported that employee theft is the fasting growing crime in the U.S. today.
4. Lying to employees
The fastest way to lose the trust of your employees is to lie to them, yet employers do it all the time. One of out every five employees report that their manager or supervisor has lied to them within the past year.
5. Violating company internet policies
Cyber-slackers. Cyber-loafers. These are terms used to identify people who surf the Web when they should be working. It's a huge, multi-billion-dollar problem for companies. A survey conducted recently by Salary.com found that everyday at least 64 percent of employees visit websites that have nothing to do with their work. Who would have thought that checking your Facebook page is becoming an ethical issue?
The good news from the E.R.C study is that most American workers and employers do the right thing. The survey reveals that most of us follow our company's ethical standards of behavior, and we are willing to report wrongdoing when we see it (unless it's the company's Internet use policy). But for those of us who track ethical behavior in the workplace, there are some troublesome trends in the E.R.C survey. The percentage of employees who experienced some form of retaliation for reporting non-ethical behavior climbed from 15 percent to 22 percent. Confidence in the ethics of senior leaders declined from 68 percent to 62 percent. When it comes to the ethical workplace, we may be on a downward shift.
- Finance:
Finance is a broad term that describes activities associated with banking, leverage or debt, credit, capital markets, money, and investments. Basically, finance represents money management and the process of acquiring needed funds. Finance also encompasses the oversight, creation, and study of money, banking, credit, investments, assets, and liabilities that make up financial systems.
Ethical Issues in Finance:
Ethical Issues in Finance:
Financial statement: Fictitious revenue
Journal should be prepare on chronological basis
Concealed assets and liabilities
Swindling in asset valuation.
Improper disclosure of statement
For example: The Satyam computer service scandal
Financial marketing: Deception: an act of misinterpret the appropriate information.
Churning: It is a practice by stockbrokers of buying and selling a client investment more often then necessary in order to make more profit in commission.
Unfairness in market
Unworthiness
For example: Harshad Mehta Scam
Insider trading: It is defined as essentially denotes dealing in a company's securities on the basis of confidential information relating to the company which is not published or not known to the public used to make profit or loss
Hostile takeover: Hostile takeover is an accession in which the company being acquired doesn't want to b purchased by the particular purchaser that is making a offer. How can someone can purchase something which is not for sale ?
hostile takeovers only work with publicly traded company.That is , they have issued stock that can be bought and said the stock in market.
Unethical Issues in Finance:
- Deliberate abnormal delays in payments to (a)vendors (b)dealers, commissions and promotions costs.
- Delay in paying wages, interest to financier,investitures,bonus to employers.
- Holding up bills of vendor on silly reasons and ultimately buying from others to avoid payments to earlier'
- Cheating employee of their dues towards medical expenses,leave travel,assistance,children education fee etc.
- Marketing:
Marketing is the study and management of exchange relationships. It is the business process of creating relationships with and satisfying customers. Because marketing is used to attract customers, it is one of the primary components of business management and commerce.
Ethical Issues in Marketing:
Ethical problems in marketing stem from conflicts and disagreements. Each party in a marketing transaction brings a set of expectations regarding how the business relationship will exist and how transactions should be conducted. Each facet of marketing has ethical danger points as discussed below.
Ethical problems in marketing stem from conflicts and disagreements. Each party in a marketing transaction brings a set of expectations regarding how the business relationship will exist and how transactions should be conducted. Each facet of marketing has ethical danger points as discussed below.
Market Research
Some ethical problems in market research are the invasion of privacy and stereotyping. The latter occurs because any analysis of real populations needs to make approximations and place individuals into groups. However, if conducted irresponsibly, stereotyping can lead to a variety of ethically undesirable results
Market Audience
Selective marketing is used to discourage demand from so-called undesirable market sectors or disenfranchise them altogether. Examples of unethical market exclusion are past industry attitudes to the gay, ethnic minority, and plus-size markets.
Another ethical issue relates to vulnerable audiences in emerging markets in developing countries, as the public there may not be sufficiently aware of skilled marketing ploys.
Ethics in Advertising and Promotion
In the 1940s and 1950s, tobacco used to be advertised as promoting health. Today an advertiser who fails to tell the truth offends against morality in addition to the law. However the law permits puffer (a legal term). The difference between mere puffer and fraud is a slippery slope.
Sexual innuendo is a mainstay of advertising content, and yet is also regarded as a form of sexual harassment. Violence is an issue especially for children’s advertising and advertising likely to be seen by children.
The advertising of certain products may strongly offend some people while being of interest to others. Examples include: feminine hygiene products as well as hemorrhoid and constipation medication. The advertising of condoms has become acceptable in the interests of AIDS-prevention, but are nevertheless seen by some as promoting promiscuity.
Anti-competitive Practices
Bait and switch is a form of fraud where customers are “baited” by advertising for a product or service at a low price; second, the customers discover that the advertised good is not available and are “switched” to a costlier product.
Planned obsolescence is a policy of designing a product with a limited useful life, so it will become unfashionable or no longer functional after a certain period of time and put the consumer under pressure to purchase again.
A pyramid scheme is a non-sustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public.
Unethical Issues in Marketing:
- Making false, exaggerated, or unverified claims'
- Distortions of facts to mislead or confuse potential buyers.
- Sad mouthing rival product.
- Using fear tactics.
- Exploitation
- Spamming
- Plagiarism of marketing message
- concealing dark sides or side effects of product and services
