INTRODUCTION AND OVERVIEW OF ETHICS

ETHICS
Meaning
 The word Ethics is derived from the Greek word ‘Ethos’ which means
character, habit, customs, ways of behaviour, etc.
 ‘Ethics’ are the principles of conduct governing an individual or a group.
 Ethics is the branch of study dealing with what is the proper course of action
for a man. It is concerned with norms of conduct of people as members of
society as it related to what is good or bad, and having to do with moral duties
and obligations.
 Ethics concerns attempts to distinguish ‘right’ from ‘wrong’, ‘good’ from
‘bad’ and constitution of desirable conduct in a particular set of social
circumstances.
 In simple words ethics refers to what is good and the way to get it, and what
is bad and how to avoid it. It refers to what ought to be done to achieve what
is good and what ought not to be done to avoid what is evil.

Definition
 Churchill defines ethics as the application of moral values or codes to
complex problems using a rational decision-making process. The outcome of
this process is usually a behaviour or set of behaviours.
 Mackenzie defines ethics as “the study of what is right or good in human
conduct” or the “science of the highest good”. So, it is clear that ethics is the
study which determines rightness or wrongness of actions.

Golden Rules of Ethics

• Everything you want others to do you, you should do to others.
• Do not do to others anything, which you do not wish them to do to you.
• Do not do anything to others that, if done to you, would cause harm to you.
 ETHICS MORALS
The word Ethics originated from the The word Morals originated from the Latin
Greek word ethos. The meaning of word Mos. The meaning of Mos is custom.
ethos is character.
Ethics are principles and standards that Morals are personal beliefs and values
guide conduct in a social context.
Ethics are objective and intended to Morals are subjective and can vary
apply universally. between individuals,
ethics are external and rooted in societal Morals are internal and based on personal
expectations. conscience
ethics are formalized and developed Morals are often informal and shaped by
through critical reasoning and personal experiences and cultural
philosophical inquiry. influences
ethics rely on rational thinking and Morals are deeply rooted in emotions and
logical analysis. personal convictions
ethics govern professional conduct and Morals guide personal behavior and
organizational practices. decision-making
ethics evolve over time to address new Morals tend to be long-standing and
social, technological, and ethical resistant to change
challenges.
Ethics are followed because society has Morality is followed because a person
decided it is the right course of action. believes that it is the right course of action.
A person who follows the ethical There could be situations where a moral
principles need not necessarily have person violates ethics to maintain to uphold
strong moral values, in fact, there are his moral values.
even possibilities that he may not have
any morals.
Ethics is something usually associated Morality has a religious connotation.
in the field of law, medicine or business.
Ethics does not have a religious
connotation.

ROLES AND RESPONSIBILITIES ON ETHICS

1. Individuals

Personal Integrity:

 Honesty: Being truthful in all interactions and communications.

o Example: A student admitting to a mistake on an assignment rather
than cheating to get a better grade.
 Responsibility: Taking ownership of one’s actions and their consequences.
o Example: An employee accepting blame for a project delay and
working extra hours to meet the deadline.
 Respect: Treating others with dignity and valuing their rights and
contributions.
o Example: Listening to and valuing the opinions of coworkers in team
meetings.
 Fairness: Ensuring equitable treatment of all individuals.
o Example: A manager providing equal opportunities for promotions to
all team members based on performance.
 Accountability: Being answerable for personal decisions and actions.
o Example: A driver taking responsibility for a traffic accident they
caused and cooperating with authorities.

Ethical Decision-Making:
  Informed Choices: Seeking out relevant information to make well-informed
decisions.
o Example: A consumer researching the ethical practices of a company
before making a purchase.
 Moral Courage: Standing up for what is right, even in the face of adversity.
o Example: A whistleblower exposing fraudulent practices within their
company.
 Consistency: Applying ethical principles consistently across different
situations.
o Example: An individual who refuses to engage in gossip at work,
regardless of who is involved.
 Transparency: Being open about one's actions and the reasons behind them.
o Example: A public figure disclosing potential conflicts of interest in
their professional dealings.

2. Corporations

Corporate Governance:

 Ethical Leadership: Ensuring that leaders model ethical behavior and set a
positive example.
o Example: A CEO promoting a company culture that prioritizes ethical
behavior over profits.
 Code of Conduct: Establishing and enforcing a clear set of ethical guidelines
for all employees.
o Example: A tech company implementing a comprehensive code of
conduct that addresses data privacy and employee behavior.
 Stakeholder Engagement: Considering the interests and rights of all
stakeholders, including employees, customers, suppliers, and the community.
 o Example: A manufacturing company holding regular stakeholder
meetings to address community concerns about environmental
impacts.

Corporate Social Responsibility (CSR):

 Sustainable Practices: Implementing environmentally sustainable business

practices.
o Example: A retailer reducing its carbon footprint by adopting green
energy and reducing plastic use.
 Community Involvement: Contributing to the social and economic
development of communities.
o Example: A corporation sponsoring local educational programs and
community events.
 Transparency and Accountability: Regularly reporting on CSR activities
and their outcomes.
o Example: A multinational corporation publishing an annual CSR report
detailing its environmental and social impact.
 Fair Labor Practices: Ensuring fair wages, safe working conditions, and
non-discriminatory policies.
o Example: A fashion brand committing to fair trade practices and
auditing factories for compliance with labor standards.

Ethical Business Practices:

 Fair Trade: Engaging in fair trade practices and avoiding exploitation.

o Example: A coffee company sourcing beans from farms that pay fair
wages and provide good working conditions.
 Consumer Rights: Respecting and protecting consumer rights, including
privacy and product safety.
 o Example: A software company being transparent about data usage
policies and protecting user privacy.
 Anti-Corruption: Implementing strong anti-corruption policies and
practices.
o Example: A global firm enforcing strict policies against bribery and
corruption, including regular training for employees.

3. Government

Regulation and Enforcement:

 Legislation: Creating laws that promote ethical behavior and protect rights
(e.g., anti-discrimination, labor rights, anti-corruption laws).
o Example: Enacting laws that mandate equal pay for equal work to
combat gender wage gaps.
 Enforcement: Ensuring laws are effectively enforced and that violations are
penalized appropriately.
o Example: Regulatory bodies imposing fines on companies that violate
environmental regulations.
 Oversight: Monitoring corporate and individual activities to ensure
compliance with ethical standards.
o Example: Government agencies auditing companies for compliance
with financial regulations.

Public Policy:

 Promotion of Ethics: Developing and promoting policies that encourage

ethical behavior in all sectors.
o Example: Implementing national anti-corruption strategies and public
awareness campaigns.
 Education: Implementing educational programs that emphasize the
importance of ethics in schools and communities.
 o Example: Integrating ethics education into school curriculums from an
early age.
 Transparency: Ensuring government operations are transparent and officials
are accountable.
o Example: Public disclosure of government officials' financial interests
to prevent conflicts of interest.

Public Service Ethics:

 Conflict of Interest: Establishing rules to prevent conflicts of interest among

public officials.
o Example: Requiring public officials to recuse themselves from
decisions where they have a personal interest.
 Public Accountability: Holding public officials accountable for their actions
and decisions.
o Example: Imposing penalties on public servants found guilty of
corruption or abuse of power.
 Integrity in Governance: Promoting integrity and ethical behavior within all
levels of government.
o Example: Instituting codes of conduct for government employees and
elected officials.

Facilitating Corporate Responsibility:

 Incentives for Ethical Practices: Offering incentives for businesses that

demonstrate ethical practices.
o Example: Providing tax breaks for companies that adopt sustainable
practices and fair labor standards.
 Public-Private Partnerships: Collaborating with businesses to address
social and environmental issues.
 o Example: Partnering with corporations to fund and support public
health initiatives.
 Standards and Guidelines: Developing standards and guidelines for ethical
business practices.
o Example: Creating and enforcing guidelines for ethical advertising to
prevent misleading claims.

ETHICAL DILEMMA
 An ethical dilemma occurs when a person faces a situation in which they must
choose between two or more conflicting moral principles, making it difficult
to determine the right course of action.
 An ethical dilemma is a situation a person faces in which a decision must be
made about the appropriate behaviour.
 An ethical dilemma (ethical paradox or moral dilemma) is a problem in the
decision-making process between two possible options, neither of which is
absolutely acceptable from an ethical perspective.
 A closely related definition characterizes ethical dilemmas as situations in
which every available choice is wrong.
 An ethical dilemma is a moral situation in which a choice has to be made
between two equally undesirable alternatives. Dilemmas may arise out of
various sources of behaviour or attitude, as for instance, it may arise out of
failure of personal character, conflict of personal values and organizational
goals, organizational goals versus social values, etc.
 For instance, a situation arises in which an agent has promised to return a
weapon to a friend, who is likely to use it to harm someone. In this case, the
duty to keep a promise stands in conflict with the duty to prevent that other
from being harmed.
 The novel Sophie's Choice by William Styron presents one more widely
discussed example. In it, a Nazi guard forces Sophie to choose one of her
 children to be executed, adding that both will be executed if she refuses to
choose.
 Although we face many ethical and moral problems in our lives, most of them
come with relatively straightforward solutions. On the other hand, ethical
dilemmas are extremely complicated challenges that cannot be easily solved.
Therefore, the ability to find the optimal solution in such situations is critical
to everyone.
 Every person may encounter an ethical dilemma in almost every aspect of
their life, including personal, social, and professional.
 A simple example of an ethical dilemma is finding a diamond ring, which
necessitates deciding whether to attempt to find the owner or to keep it.

Illustration
Michael had several friends including Roger and Daniel. Roger has recently met and
started dating a wonderful lady named Phyllis. He is convinced this is a long-term
relationship. Unknown to Roger, Michael observed them at a restaurant several days
ago and realized Phyllis is the wife of his other friend Daniel. Michael is deciding
whether to tell Roger that Phyllis is married when he receives a call from Daniel.
Daniel suspects his wife is having an affair. Since Daniel and his wife share many
friends and contacts with Michael, Daniel asks if Michael has heard anything
regarding an affair. What should Michael do in this ethical dilemma?
 To whom does Michael owe greater friendship or loyalty in this situation?
 No matter who he tells, he knows that it is going to end up hurting one, if not
both friends.
 Should Michael reveal to Roger that Phyllis is married?
 Should Michael tell Daniel what he knows about Roger and Phyllis?
 Should Michael speak up to both Daniel and Roger? Does he remain silent
and hope his knowledge is never discovered?
In this situation, Michael has to weigh the variables in the situation to make the
decision he feels is best. If truth is a guiding principle of his morality, he’s likely to
tell both of his friends what he knows and hope that they don’t blame him for any
negative consequences they experience as a result of telling the truth.

Below are a few classic examples and case studies that highlight various ethical
dilemmas across different fields.

1. Medical Ethics: The Trolley Problem

Scenario: A trolley is headed towards five people tied up on the tracks. You are
standing next to a lever that can switch the trolley to a different track, where there is
one person tied up. Do you pull the lever, sacrificing one to save five?

Dilemma:

 Pull the lever and actively cause the death of one person.
 Do nothing and passively allow five people to die.

Case Study: This thought experiment, introduced by Philippa Foot, is widely

discussed in ethics and philosophy to explore utilitarianism versus deontological
ethics. Utilitarianism would support pulling the lever to minimize overall harm,
while deontological ethics might argue against taking an action that directly causes
harm.

2. Business Ethics: The Ford Pinto Case

Scenario: In the 1970s, Ford Motor Company discovered that the fuel tank design
of the Pinto model could lead to deadly fires in rear-end collisions. The company
performed a cost-benefit analysis comparing the cost of fixing the design to the
potential costs of lawsuits from resultant deaths and injuries.

Dilemma:
  Fix the design, incurring higher costs but potentially saving lives.
 Not fix the design to save money, potentially resulting in fatalities.

Case Study: Ford decided not to fix the design, leading to several deaths and
injuries. The public outcry and legal battles that followed highlighted the ethical
implications of prioritizing profits over human safety.

3. Technology Ethics: Data Privacy

Scenario: A tech company develops a social media platform that collects vast
amounts of user data to improve services and target advertisements more effectively.
This data collection can enhance user experience but also poses significant privacy
risks.

Dilemma:

 Collect detailed user data to optimize services and increase revenue.

 Restrict data collection to protect user privacy, potentially sacrificing some
business advantages.

Case Study: Facebook's Cambridge Analytica scandal is a prominent example. The

misuse of user data for political advertising without explicit consent raised serious
ethical questions about privacy, consent, and the extent to which companies should
be allowed to exploit personal data for profit.

4. Environmental Ethics: Whaling

Scenario: A whaling company in a country where whaling is a cultural tradition

wants to continue its practices, arguing it is crucial for the local economy and cultural
heritage. Environmental groups argue that whaling threatens endangered species and
disrupts marine ecosystems.

Dilemma:
  Allow whaling to continue, preserving cultural practices and local economies.
 Ban whaling to protect marine life and biodiversity.

Case Study: Japan’s whaling practices have been controversial, with international
pressure and legal battles through the International Court of Justice (ICJ) leading to
temporary halts and ongoing debates. This case illustrates the conflict between
cultural preservation and environmental conservation.

5. Professional Ethics: Whistleblowing

Scenario: An employee at a pharmaceutical company discovers that their employer

is knowingly selling a drug with harmful side effects not disclosed to the public.
Reporting this could save lives but also result in personal and professional
repercussions.

Dilemma:

 Blow the whistle, exposing the company and protecting the public.
 Stay silent to avoid retaliation and potential career damage.

Case Study: The case of Dr. Jeffrey Wigand, a former executive at Brown &
Williamson, is a notable example. Wigand exposed the company’s practices of
manipulating tobacco products to increase addiction, facing significant personal and
professional risks. His story, popularized by the film “The Insider,” underscores the
complexities and consequences of whistleblowing.

How to Solve an Ethical Dilemma?

The biggest challenge of an ethical dilemma is that it does not offer an obvious
solution that would comply with ethical norms. The following approaches to solve
an ethical dilemma were deduced:
Value theory approach: Choose the alternative that offers the greater good or the
lesser evil.

Find alternative solutions: In some cases, the problem can be reconsidered, and new
alternative solutions may arise.

UNETHICAL BEHAVIOUR
Unethical behaviour is an action that falls outside of what is considered morally right
or proper for a person, a profession or an industry. An unethical behaviour would
therefore be defined as one that is not morally honourable or one that is prohibited
by the law.
Examples:
Unethical behaviour among Individuals
 Stealing money from the petty cash drawer at work.
 Lying on your resume in order to get a job.
 Taking money out of your friend's wallet when he is sleeping.
 Using your position of power at work to sexually harass someone.
 Selling a house and not disclosing known defects to the buyers.

Unethical behaviour among Businesses

 Dumping pollutants into the water supply rather than cleaning up the pollution
properly.
 Releasing toxins into the air in levels above what is permitted by the
Environmental Protection Agency.
 Coercing an injured worker not to report a work injury to workers' compensation
by threatening him with the loss of a job or benefits.
 Not paying an employee for all of the hours worked.
 Using false advertising tactics to lure customers in or convince them to buy a
product.
 Refusing to honour a warranty claim on a defective product.
 Employing children under the legal working age and unsafe or unsanitary working
conditions

Unethical behaviour by Professionals

 Doctors, dentists and lawyers dating their clients.
 A lawyer representing parties on both sides of a legal transaction.

Illustration
A middle level executive, Mr. X, based in Delhi, opts for a 3 days training
programme in Bangalore, which happens to be his hometown. He also applies leave
for 3 days immediately following the training which is granted to him. Mr. X reaches
the venue of the training. On the first day, registers himself, takes the training kit,
attends the training for two hours, befriends a dealing officer and arranges to have
the presentations etc. sent to him. He does not attend the training programme
thereafter.

Unethical behaviour can take many forms across different contexts, including
personal conduct, professional practices, business operations, and more. Here are
several common forms of unethical behaviour:
1. Dishonesty
 Lying: Providing false information or deceiving others.
 Fraud: Intentional deception to secure unfair or unlawful gain.
 Plagiarism: Presenting someone else’s work or ideas as your own without
proper acknowledgment.
2. Misuse of Power
 Abuse of Authority: Using one’s position of power to take advantage of
others or for personal gain.
 Discrimination: Treating people unfairly based on race, gender, age,
religion, or other characteristics.
  Harassment: Creating a hostile or intimidating environment through
unwanted behavior.
3. Financial Misconduct
 Embezzlement: Theft or misappropriation of funds placed in one’s trust or
belonging to one’s employer.
 Bribery: Offering, giving, receiving, or soliciting something of value to
influence a decision or action.
 Insider Trading: Trading stocks or other securities based on confidential
information not available to the public.
4. Unfair Practices
 Exploitation: Taking unfair advantage of someone, often for personal gain.
 Monopolistic Practices: Engaging in anti-competitive practices to dominate
a market.
 False Advertising: Misleading consumers about the qualities or benefits of a
product or service.
5. Negligence and Harm
 Professional Negligence: Failing to provide the standard of care that is
reasonably expected in a profession, resulting in harm.
 Environmental Harm: Engaging in practices that cause undue damage to the
environment.
 Product Safety Neglect: Failing to ensure that products are safe for consumer
use.
6. Conflict of Interest
 Self-Dealing: Acting in one’s own interest rather than in the interest of clients
or stakeholders.
 Nepotism: Favoring relatives or friends in professional decisions.
 Kickbacks: Receiving something of value in return for facilitating a
transaction or service.
7. Privacy Invasion
 Data Breaches: Failing to protect personal or confidential information.
  Surveillance Abuse: Using surveillance inappropriately or without consent.
 Doxxing: Publishing private information about someone without their
consent.
8. Moral and Ethical Violations
 Violence and Coercion: Using force or intimidation to achieve a goal.
 Deception in Relationships: Engaging in deceitful practices in personal or
professional relationships.
 Violation of Ethical Codes: Failing to adhere to established ethical standards
in a profession.

Case Studies Illustrating Unethical Behaviour

Case Study 1: Enron Scandal
Scenario: Enron, once a highly regarded energy company, collapsed in 2001 due to
widespread accounting fraud. Executives hid debt and inflated profits to deceive
investors and maintain high stock prices.
Unethical Behaviors:
 Fraud: Manipulating financial statements.
 Conflict of Interest: Executives prioritizing personal gain over shareholder
interests.
 Deception: Misleading investors and employees about the company’s
financial health.

Case Study 2: Volkswagen Emissions Scandal

Scenario: In 2015, it was revealed that Volkswagen had installed software in diesel
engines to cheat emissions tests, making cars appear environmentally friendly while
emitting pollutants far above legal limits.
Unethical Behaviors:
 Deception: Intentionally misleading regulators and consumers.
 Environmental Harm: Contributing to pollution and environmental damage.
 Fraud: Manipulating test results for competitive advantage.
Case Study 3: Wells Fargo Account Scandal
Scenario: Wells Fargo employees created millions of unauthorized bank and credit
card accounts to meet sales targets and receive bonuses. This practice went on for
years before being exposed in 2016.
Unethical Behaviors:
 Fraud: Creating fake accounts without customer consent.
 Abuse of Authority: Pressuring employees to engage in unethical practices.
 Deception: Misleading customers and regulators.

Case Study 4: Theranos Fraud

Scenario: Theranos, a health technology company, falsely claimed to have
developed revolutionary blood testing equipment. The company deceived investors,
patients, and doctors about the capabilities and accuracy of their technology.
Unethical Behaviors:
 Fraud: Misrepresenting the efficacy of the product.
 Deception: Providing false information to investors and patients.
 Professional Negligence: Failing to ensure the accuracy and safety of
medical tests.

SOURCES OF ETHICS
The sources of ethics are diverse and stem from various aspects of human society,
culture, and philosophy. These sources guide individuals and communities in
determining what is considered right and wrong behaviour. Here are the primary
sources of ethics:
1. Religious Beliefs
Many ethical principles are derived from religious teachings and texts. Religion is
the oldest source of ethical inspiration. Every religion gives an expression of what
is wrong and right in business and other walks of life. Different religions provide
moral guidelines and codes of conduct for their followers.
  Christianity: The Bible, particularly the Ten Commandments and the
teachings of Jesus.
 Islam: The Quran and Hadith, providing guidance on all aspects of life.
 Hinduism: Scriptures like the Vedas, Upanishads, and Bhagavad Gita.
 Buddhism: The teachings of Buddha, including the Noble Eightfold Path and
Five Precepts.

2. Philosophical Theories
Philosophical inquiry has long been a source of ethical thought, with various schools
of thought offering different perspectives on morality.
 Utilitarianism: Proposes that the best action is the one that maximizes overall
happiness or well-being.
 Deontology: Focuses on the adherence to duty, rules, and obligations
regardless of the consequences.
 Virtue Ethics: Emphasizes the importance of developing good character
traits (virtues) such as courage, wisdom, and temperance.

3. Cultural Norms
Cultural traditions and social customs play a significant role in shaping ethical
behaviour. Culture is a pattern of behaviours and values that are transferred from
one generation to another, those that are considered as ideal or within the acceptable
limits. No wonder therefore that it is the culture that predominantly determines what
is wrong and what is right. These norms vary widely across different societies and
are often passed down through generations.
 Collectivist Cultures: Emphasize the importance of community, family, and
social harmony.
 Individualist Cultures: Focus on personal freedom, autonomy, and
individual rights.
4. Legal Systems
Laws and regulations established by governments are another source of ethics. Laws
are procedures and code of conduct that are laid down by the legal system of the
state. They are meant to guide human behaviour within the social fabric. While laws
often reflect societal ethical standards, they also enforce ethical behaviour through
legal requirements.
 Criminal Law: Prohibits behaviours deemed harmful to society, such as
theft, assault, and fraud.
 Civil Law: Governs disputes between individuals and organizations,
promoting fairness and justice.

5. Professional Codes of Conduct

Many professions have established ethical guidelines and standards to govern the
behaviour of their members.
 Medical Ethics: Includes principles like beneficence, non-maleficence,
autonomy, and justice.
 Legal Ethics: Involves duties to clients, the court, and society, including
confidentiality, integrity, and competence.
 Business Ethics: Encompasses corporate responsibility, transparency, and
fair treatment of employees, customers, and stakeholders.

6. Personal Conscience
An individual’s internal sense of right and wrong, influenced by personal
experiences, upbringing, and reflection.
 Moral Intuition: Immediate, gut-feeling judgments about the morality of an
action.
 Moral Reasoning: Deliberative process of determining ethical actions based
on principles and outcomes.
7. Educational Institutions
Education plays a crucial role in the development of ethical values and critical
thinking skills.
 Formal Education: Schools and universities often include courses on ethics
and moral philosophy.
 Informal Education: Family, mentors, and community leaders contribute to
ethical development.

8. Media and Literature

Books, films, news media, and other forms of communication can influence ethical
perspectives by presenting moral dilemmas, showcasing ethical behavior, or
highlighting injustices.

9. Historical Precedents
Historical events and societal responses to them can establish ethical norms and
lessons for future generations.

CONCEPT OF BUSINESS /CORPORATE ETHICS

Meaning
Corporate ethics, also known as business ethics, refers to the moral principles and
standards that guide the behaviour and decision-making processes of a company and
its employees. Corporate ethics encompass a broad range of practices and policies,
from compliance with legal standards to fostering a corporate culture that prioritizes
ethical conduct.
Business ethics is the application of general ethical ideas to business. It refers to the
application of everyday moral or ethical norms to business. Business ethics is
applied ethics.
Business Ethics or Ethical standards are the principles, practices and philosophies
that guide the business people in the day to day business decisions. It relates to the
behaviour of a businessman in a business situation.
Definition
According to Andrew Crane, “Business ethics is the study of business situations,
activities, and decisions where issues of right and wrong are addressed.”
According to William Shaw, “Business ethics is the study of what constitutes right
and wrong or good and bad human conduct in business context.”

Features of Business Ethics

1.Code of conduct: Business ethics is the code of conduct which businessmen
should follow while conducting their normal business activities.
2. Based on moral and social values: Business ethics is based on well-accepted
moral/principal values. It suggests moral of conduct for businessmen. They include
self-control, service to society and fair treatment to social groups and not to harm/
exploit others.
3. Provides basic framework: Business ethics provides the framework within
which business is to be conducted. It suggests legal, social, moral, economic and
cultural limits within which business has to be operated. It suggests what is good
and what is bad in business.
4. Needs willing acceptance for enforcement: Business ethics cannot be enforced
by law or by force. It must be accepted as self-discipline by businessmen. It should
come from within the businessmen.
5. Education and guidance required for introduction: Businessman should be
given proper education, guidance and training in order to motivate them to follow
ethical business practices.
6. Not against profit making: Business Ethics is not against fair profit making.
However, it is against profiteering by cheating and exploiting consumers, employees
or investors. It supports expansion of business activities but by fair means and not
through illegal activities or corrupt practices.
Benefits of Corporate Ethics
1. Reputation Management
o Trust Building: Ethical practices build trust with customers, investors,
and other stakeholders.
o Brand Loyalty: Customers are more likely to support companies with
strong ethical standards.
2. Risk Mitigation
o Legal Compliance: Reducing the risk of legal issues and penalties by
adhering to laws and regulations.
o Operational Risks: Minimizing risks related to fraud, corruption, and
other unethical behaviors.
3. Employee Satisfaction and Retention
o Work Environment: Creating a positive and ethical work
environment enhances employee morale and productivity.
o Talent Attraction: Ethical companies attract top talent who value
integrity and ethical conduct.
4. Financial Performance
o Investor Confidence: Ethical practices can lead to greater investor
confidence and potentially better financial performance.
o Cost Savings: Avoiding fines, lawsuits, and damage control associated
with unethical practices.

Case Studies in Corporate Ethics

1. Johnson & Johnson: Tylenol Crisis
o Scenario: In 1982, several people died after taking Tylenol capsules
laced with cyanide.
o Ethical Response: Johnson & Johnson quickly recalled all Tylenol
products, despite the significant cost, and introduced tamper-evident
packaging.
 o Outcome: The company’s decisive and ethical response restored
public trust and set a new standard for product safety.

2. Patagonia: Environmental Responsibility

o Scenario: Patagonia, an outdoor clothing company, integrates
environmental sustainability into its business model.
o Ethical Practices: Use of recycled materials, promotion of fair labor
practices, and active involvement in environmental causes.
o Outcome: Patagonia has built a loyal customer base and is widely
respected for its commitment to corporate social responsibility.

CODE OF ETHICS
Meaning
A Code of Ethics is a formal document that outlines a set of principles and guidelines
designed to influence the ethical behaviour of individuals within an organization. It
serves as a framework for ethical decision-making and establishes the expectations
for conduct in various situations. The Code of Ethics is vital for maintaining
integrity, accountability, and transparency within an organization.
Code of ethics is a written set of rules issued by an organization to its workforces
and management to help them conduct their actions in accordance with its primary
values and ethical standards.
The Code of Ethics describes the principles and anticipations governing the
behaviour of individuals and organizations in the conduct of business. It defines the
minimum requirements for conduct, and behavioural expectations instead of specific
activities.
A business code of ethics, usually based on the core values of the business, outlines
the company mission statement, how professionals should approach dilemmas and
the standards to which they hold their employees. An individual’s code of ethics can
include their beliefs, values and background.
Objectives
 To guide all managerial decisions, creating a common framework upon which all
decisions are founded.
 To create a unified understanding of the boundaries within an organization and
the standards set for interacting with external stakeholders.
 To shield a company's status and legal standing in case of a breach of ethics by an
individual worker.
 To show customers that it values integrity, define the terms of ethical behaviour
at work and guide decision-making in difficult situations.

GUIDELINES FOR DEVELOPING CODE OF ETHICS

Creating a Code of Ethics involves a structured approach to ensure it is
comprehensive, practical, and reflects the values and standards of the organization.
Here are some key guidelines for developing a Code of Ethics:
1. Understand the Purpose
 Define Objectives: Clearly outline the goals and purpose of the Code of
Ethics. It should provide a framework for ethical decision-making and
behavior within the organization.
 Reflect Organizational Values: Ensure that the code reflects the core values
and mission of the organization.
2. Involve Stakeholders
 Gather Input: Engage a diverse group of stakeholders, including employees,
management, and possibly customers or clients, to gather input and ensure the
code is relevant and inclusive.
 Form a Committee: Establish a committee to oversee the development
process, representing various departments and levels of the organization.
3. Identify Key Ethical Issues
 Assess Risks: Identify potential ethical risks and issues specific to the
industry and organization.
  Benchmarking: Review codes of ethics from similar organizations to
identify common practices and standards.
4. Drafting the Code
 Clear and Concise Language: Use clear, concise, and unambiguous
language. Avoid legal jargon to make it accessible to all employees.
 Structure and Format: Organize the code logically, with sections for
different types of ethical issues (e.g., conflict of interest, confidentiality,
harassment, compliance with laws).
5. Key Elements to Include
 Introduction: A preamble that explains the purpose and scope of the code.
 Core Values: A statement of the organization's core values and ethical
principles.
 Standards of Conduct: Specific guidelines on expected behaviors and
practices, including examples and scenarios.
 Compliance and Reporting: Procedures for reporting unethical behavior,
including anonymous reporting mechanisms, and consequences for
violations.
 Resources for Guidance: Information on where to seek advice or
clarification on ethical issues, such as an ethics hotline or ombudsperson.
6. Review and Feedback
 Draft Review: Circulate the draft code among stakeholders for feedback. Be
open to suggestions and make necessary revisions.
 Legal Review: Have the code reviewed by legal counsel to ensure compliance
with laws and regulations.
7. Implementation
 Approval: Obtain formal approval from top management and, if applicable,
the board of directors.
 Communication: Communicate the code to all employees through multiple
channels (e.g., meetings, emails, intranet).
  Training: Conduct training sessions to educate employees on the code, its
importance, and how to apply it in their daily work.
8. Enforcement and Monitoring
 Consistent Enforcement: Ensure consistent and fair enforcement of the
code. Disciplinary actions for violations should be clear and uniformly
applied.
 Ongoing Monitoring: Establish mechanisms for regular monitoring and
auditing of compliance with the code.
9. Review and Update
 Periodic Review: Regularly review and update the code to reflect changes in
laws, regulations, and the business environment.
 Feedback Loop: Maintain an open feedback loop for employees to suggest
improvements to the code.

ETHICS MANAGEMENT PROGRAMME

Ethics Management Programmes are designed by an organisation or an employer as
an attempt to have formalised structures for ensuring that the organisation is
perceived as fair, honest, responsible and just. Ethics programs are designed to
ensure that there is no deviation from the standards laid down and also to ensure that
employees are fair and honest in their conduct to the organisation.
An Ethics Management Programme is a structured approach to integrate ethical
practices and principles into an organization’s operations and culture. It involves
establishing policies, procedures, and activities to promote ethical behaviour and
ensure compliance with ethical standards.
A company must have an effective ethics program to ensure that all employees
understand organizational values and comply with the policies and codes of conduct
that create its ethical climate. Two types of ethics program can be created. Both can
be adopted simultaneously. These are:
Compliance Orientation: A compliance orientation creates order by requiring that
employees comply with and commit to the required conduct. It uses legal terms,
statutes, and contracts that teach employees the rules and penalties for non-
compliance.

Value Orientation: Value Orientation strives to develop shared values. Although

penalties are attached, the focus is more on an abstract core of ideals, such as respect
and responsibility. Instead of relying on coercion, the company’s values are seen as
something to which people willingly aspire.

Steps to Implement the Ethics Management Programme:

1. Assess Current Ethical Climate
o Conduct an ethics risk assessment to identify potential ethical issues
and vulnerabilities within the organization.
2. Develop the Programme
o Design the Ethics Management Programme, incorporating the
components outlined above.
3. Launch the Programme
o Officially launch the programme with a strong message from top
management, emphasizing its importance.
4. Communicate and Train
o Communicate the programme details to all employees and provide
comprehensive training on ethical standards and reporting
mechanisms.
5. Monitor and Review
o Regularly monitor the effectiveness of the programme through audits,
feedback, and performance metrics.
o Review and update the programme periodically to address new ethical
challenges and regulatory changes.
6. Promote Continuous Engagement
 o Encourage ongoing engagement and dialogue about ethics to keep the
topic relevant and top-of-mind for all employees.

ETHICS COMMITTEE
An Ethics Committee plays a crucial role in overseeing the development,
implementation, and maintenance of an organization's ethical standards and
practices. Here are detailed guidelines on establishing and operating an effective
Ethics Committee:

Purpose of the Ethics Committee

1. Oversight and Governance: Ensure adherence to ethical standards and the
Code of Ethics.
2. Advisory Role: Provide guidance on ethical dilemmas and issues.
3. Policy Development: Assist in creating and updating ethics policies.
4. Training and Education: Promote awareness and understanding of ethical
standards.
5. Investigation and Resolution: Handle reports of unethical behavior and
ensure proper investigation and resolution.

Composition of the Ethics Committee

1. Diverse Representation: Include members from different departments,

levels of the organization, and, if appropriate, external experts.
2. Balanced Size: Typically, 5-10 members to ensure diverse viewpoints while
remaining manageable.
3. Leadership: Designate a chairperson to lead the committee and coordinate
activities.

Key Activities

1. Policy Development and Review

 o Develop and periodically review the Code of Ethics and related
policies.
o Ensure policies are up-to-date with legal and regulatory changes.
2. Ethics Training and Awareness
o Design and implement training programs to educate employees about
ethical standards and reporting mechanisms.
o Promote ongoing ethics awareness through campaigns, newsletters,
and workshops.
3. Reporting and Investigation
o Establish and maintain confidential reporting mechanisms for ethical
concerns (e.g., ethics hotline, online portal).
o Oversee the investigation of reported ethical violations, ensuring
fairness and confidentiality.
o Make recommendations for disciplinary actions or other corrective
measures.
4. Monitoring and Auditing
o Conduct regular audits to assess compliance with the Code of Ethics.
o Monitor ethical performance metrics and identify areas for
improvement.
5. Advisory Role
o Provide guidance to employees and management on ethical dilemmas
and issues.
o Serve as a resource for ethical decision-making.