Business Ethics

Code of Ethics

Dr. Palki Sharma

Associate Professor
MBA Ist Semester
Chandigarh Group of Colleges
 Meaning
A code of ethics is a guide of principles designed to help professionals
conduct business honestly and with integrity. All companies will have
a different code of ethics with different areas of interest, based on the
industry they are involved in, but the five areas that companies
typically focus on include integrity, objectivity, professional
competence, confidentiality, and professional behavior.
Eg. Starbucks’ Code of Conduct for employees is their focus on “Speak
Up”, encouraging their workforce to raise concerns and providing
resources to do so. It shows that the business’ code of conduct isn’t
simply limited to discouraging negative behaviors, rather promotes
a speak up culture in the workplace.
 What Is a Code of Ethics in
Business?
A code of ethics in business is a set of guiding principles intended to
ensure a business and its employees act with honesty and integrity in
all aspects of its day-to-day operations and to only engage in acts that
promote a benefit to society.
An example of a code of ethics would be a business that drafts a code
outlining all the ways the business should act with honesty and
integrity in its day-to-day operations, from how its employees behave
and interact with clients, to the types of individuals it does business
with, including suppliers and advertising agencies.
 What is the Purpose of a Code of
Ethics?
The purpose of a code of ethics is to inform those acting on behalf of
the organization how they should conduct themselves. A code of
ethics repeats the organization’s values and morals so that employees
and third parties understand the standards they are accountable to
uphold.
 Functions of Codes of Ethics:
1. Inspiration and Guidance: Codes provide a positive stimulus for ethical conduct
and helpful guidance and advice concerning the main obligations of the
members of the group to which it applies.
2. Support : Codes give positive support to those seeking to act ethically.
3. Deterrence (as well as) and Discipline: Codes can serve as the formal basis for
investigating unethical conduct. Where such investigation is possible,
prudence(care) becomes a motive for acting ethically.
4. Education and Mutual Understanding: Codes can be used in the classroom and
elsewhere to prompt discussion and reflection on moral issues and to
encourage a shared understanding among professionals, the public, and
government organizations concerning the special moral responsibilities of
individuals in professions, organizations, and/or a specific practice.
5. Contributions to Public Image: odes can present a positive image to
the public of an ethically guided profession, organization, or
practice. Where the image is warranted, it can help members more
effectively serve the public.
6. Shared Standards: The diversity of moral viewpoints among
individual practitioners makes it essential that a profession,
organization, or practice establish explicit standards, in a particular
minimum standard beyond what law, market, morality, and public
opinion would otherwise require.
The five fundamental principles
1) Integrity: It means straightforwardness and honesty in all
professional and business relationships.
2) Objectivity: It should not allow biasness, conflict of interest or undue
influence of others to override/over rule or dominate professional or
business judgments.
3) Professional competence and due care: It should have to maintain
professional knowledge and skill at the level required to ensure that a
client or employer receives competent professional services based on
current developments in practice, legislation and techniques.
4) Confidentiality: A professional accountant should respect the
confidentiality of information acquired as a result of professional and
business relationships and should not disclose any such information
to third parties without proper and specific authority unless there is a
legal or professional right or duty to disclose.
5) Professional behavior: A professional accountant should comply
with relevant laws and regulations and should avoid any action that
discredits the profession.
Principles:
1. Honesty: Honesty is an essential value required to conduct business in an ethical
manner. An honest company avoids dishonest business practices like under-
measurement, pushing substandard products and making misleading statements.
2. Integrity: Integrity refers to moral soundness as reflected by your thoughts and
actions. Possessing integrity helps you gain the trust and respect of others.
3. Trustworthiness: Trustworthiness mainly comes from the quality of keeping your
promise. One become trustable when one make sincere efforts to fulfil your
commitments and promises.
4. Loyalty: An Organisation must be loyal to their employees and customers.
Similarly, employees can be loyal to their organisation by avoiding conflict of
interest and maintaining the confidentiality of sensitive business information.
5. Fairness: Another essential principle of ethics is to be fair in your
dealings. It prevents one from gaining undue advantage from others'
unfavourable situations.
6. Empathy: Empathy is the quality of understanding others' feelings.
In a business context, it includes caring about employees, customers
and other stakeholders.
7. Respect: Ethical businesses and professionals treat others with
respect and dignity.
8. Compliance: Ethical businesses comply with the law of the land.
9. Pursuit of excellence: Ethical companies are committed to
excellence in whatever they do. They try to add value through their
product or service instead of simply focusing on profits.
10. Leadership: Ethical businesses and executives strive to be positive
role models for others.
 Why these are important?
• It provides a common set of rules or standards for all in the profession
to adhere/ remain to .
• It defines best practices for the profession
• It provides a basis to meet compliance requirements for the
profession
• It provides a legal standard( BASIS OF COMPARISON) for the
profession
 Significance/ Importance
1. Sets the right culture : The most important benefit of a code of
ethics is that it can foster an environment of trust, ethical behavior,
integrity, and excellence. In this environment, employees who might
otherwise be afraid to voice their opinion feel encouraged to
contribute, which is how good teams become excellent. Companies
that foster an environment of trust, ethical behavior, integrity, and
excellence are also better prepared to deal with unforeseen
challenges because they have a very strong foundation to stand on.
2. Builds a good reputation : Companies that pay strong attention to
ethics also find it easier to establish lasting partnerships both within
and outside their industry.
3. Helps remain in compliance with laws and regulations : The
companies that implement a code of conduct have a strong incentive/
encouragement to ensure ethical treatment of its employees, clients,
partners, as well as the public.
4. Attracts outstanding employees : Outstanding employees come
from all walks of life, and they all expect to be treated justly and
ethically. Companies with a code of ethics reassure potential
employees that they won’t be discriminated against, bullied/ to hurt
someone weaker than you, or subjected to any other type of
workplace harassment.
5. Promotes social change : Adopting a code of ethics is that
it promotes social change. By promoting positive social change,
companies can contribute to making the world a better place for
everyone, not just a select few.
6. More Trust from Stakeholders:
7. Increased Profits:
8. Employee Loyalty:
9. -Higher Levels of Customer Satisfaction:
 COMPARISON CODE OF ETHICS CODE OF CONDUCT

Meaning An aspirational document, issued by A directional document containing

the board of directors containing specific practices and behavior, that
core ethical values, principles and are followed or restricted under the
ideals of the organization is Code of organization is Code of Conduct.
Ethics.

Nature General Specific

Scope Wide Narrow
Governs Decision making Actions
Length Short Comparatively longer

Disclosure Publicly disclosed. Employees only.

Focused on Values or principles Compliance and rules
Case Study – Integrity and Professional
Behaviour
A junior member of staff has just returned to work after taking special
leave to care for her elderly mother. For financial reasons she needs to
work full-time. She has been having difficulties with her mother’s home
care arrangements, causing her to miss a number of team meetings
(which usually take place at the beginning of each day) and to leave
work early. She is very competent in her work but her absences are
putting pressure on her and her overworked colleagues. You are her
manager, and you are aware that the flow of work through the practice
is coming under pressure. One of her male colleagues is beginning to
make comments such as “a woman’s place is in the home”, and is
undermining her at every opportunity, putting her under even greater
stress.
Question:
• How should you proceed so as not to discredit/ question yourself, your
profession or the practice for which you work and at the same time
maintaining integrity and confidentiality in your actions?
Presented by: Dr. Palki Sharma
Email id: palki.j1609@cgc.ac.in
Contact no. 9646998835