Module 4 Business Ethics

Aldersgate College Corporate Governance and Social Responsibility
Business Management and Accountancy
Module 4: Business Ethics

Learning Objectives:
After studying the chapter, the students should be able to...
1. Explain what business ethics is
2. Discuss the purposes of business ethics
3. Describe the scope and impact of business ethics on
a) the economy
b) society
c) environment
d) business managers
4. Explain the ethical challenges in today’s world
BASIC CONCEPT OF BUSINESS ETHICS
Business ethics refers to standards of moral conduct, behavior and judgment in business. It involves making the moral and right
decisions while engaging in such business activities as manufacturing and selling a product and providing a service to
customers. Business ethics is an area of corporate responsibility where businesses are legally bound and socially obligated to
conduct business in an ethical manner.
Business ethics is based on the personal values and standards of each person engaged in business.
PURPOSES OF BUSINESS ETHICS
Main Purpose
The main purpose of business ethics is to help business and would-be business to determine what business practices are right
and what are wrong. Hopefully, they are going to use this knowledge to guide them in making the right business decisions.
Special Purpose
There are other purposes which are corollary to the main purpose. These purposes include the following:
1.To make businessmen realize that they cannot employ double standards to the actions of other people and to their own
actions.
2.To show businessmen that common practices which they have thought to be right because they see other businessmen doing
it, are really wrong.
3.To serve as a standard or ideal upon which business conduct should based.
Except for some country's organizations, professionals which have formulated and implemented their Code of Ethics, the
business world today does not have one universal standard code of ethics. Each man has to evaluate a situation according to
his own belief. Often, because there is no code of ethics to guide them, businessmen take actions that may be wrong. Therefore,
one of the specific purposes of business ethics is to assist the business world in formulating codes of conduct — personal,
company and professional — which can be used as a guide in formulating business plans and strategies and in making business
decisions.
1
SCOPE AND IMPACT OF BUSINESS ETHICS

Business ethics covers all conduct, behavior and judgment in business. This includes the slightest deviation from what is right
to illegal and dishonest acts that are punishable by law. It involves making the right choices while engaging in such business
activities as manufacturing and selling a product or selling and rendering a service.
Generally, actions that are not forbidden by law are ethical. In some cases, however, what is legal (not forbidden by law) may
be unethical. Business ethics therefore covers even acts that may be legal but which are wrong because they violate ethical
principles.
Business ethics is based on the personal values and standards of each person engaged in business. Since individual values
differ, what is ethical or unethical in making profit also varies from person to person. And here lies the problem. There is still no
uniform standards of right and wrong from which all business may base their actions.
The businessman who provides fair business competition is the most likely to observe the business ethical rules of conduct,
behavior and judgment. Fair business competition means achieving success solely by offering better products, services and
terms than the competitor. It is a form of business competition where success is gained by the merits of one's goods or services.
Economic Impact
A business has an economic impact on society through the wages it pays to its employees, the materials that it buys from their
suppliers and the prices it charges its customers. It would have a positive social impact on its employees if they are paid fair
living wages and benefits. It will have a positive effect on its suppliers that they paid fairly and on time for their supplies. The
effect on its customers is positive if the business gives them good value for the price they pay for the products and services.
Social Impact
The social impact of corporate governance contributes to the ethical climate of society. If businesses offer bribes to secure work
or other benefits, engage in accounting fraud or breach regulatory and legal limitations on their operations, the ethics of society
suffer. In addition to a deteriorating ethical environment, such as corruption may unfairly raise the price of goods for consumers
or the quality of the product or service compromised.
Environmental Impact
Environmental protection is a key area of business influence on society. Businesses that implement good environmental policies
to use energy more efficiently, reduce waste and in general lighten their environmental footprint can reduce their internal costs
and promote a positive image of their company. The environmental initiatives of a business leader often force competitors to
take similar action for an increased beneficial effect on the environment.
Impact on Business Managers
The concepts and principles for the ethical conduct in business are relegated to the managers of the business enterprise. Thus,
although the manager is expected to act in the best interest of the business, he cannot be expected to act in a manner that is
contrary to the law or to his conscience.
In particular, a manager should:
• acknowledge that his role is to serve the business enterprise and the community;
• avoid all abuse of executive power for personal gain, advantage or prestige.
• reveal the fact to his superior whenever his personal business of financial interests conflict with those of the company;
2
• be actively concerned with the difficulties and problems of subordinates, treat them fairly and by example, lead them effectively,
assuring to all the right of reasonable access and appeal to superiors;
• recognize that his subordinates have a right to information on matter affecting them, and make provision for its prompt
communication unless such communication is likely to undermine the security and efficiency of the business;
• fully evaluate the likely effects on employees and the community of the business plans for the future before taking a final
decision and
• cooperate with his colleagues and not attempt to secure personal advantage at their expense.
ETHICAL CHALLENGES IN TODAY’S WORLD
In an article, ’‘Ethical Challenges in Today’s World” written by Ms. Mercedes B. Suleik published in the Business Mirror on
February 13, 2018 the author expressed her insights on “Business Ethics” where an inherent conflict between ethics and the
pursuit of profit is more pronounced.
Cited in this article is the message of Pope Francis in his Ecumenical, Evangeli Gaudium
“Humanity is experiencing a turning point in its history as can be seen from the advances occurring in the sciences and
technology. We are in age of knowledge and information and that this has led to new and often anonymous kinds of power. We
have today an economy of exclusion and inequality”.
“In a system that idolizes increased profit, everything that stands in its way is pushed aside. Behind this attitude lurks a rejection
of ethics. Ethics has come to be viewed with derision as being counterproductive. Ethics is felt to be a threat because it
condemns the manipulation and debasement of the person and that ethics leads to a call for a committed response, which is
outside of the categories of the marketplace”
She also quoted Pope Benedict XVI’s Encyclical Caritas in Veritate
Humanity has a mission and the means to transform the world in justice and love in human relations, even in the social and
economic field. Market economics must be underpinned by commitments to particular moral goods and a certain version of the
human person if it is to serve rather than undermine humanity’s common good. The economy needs ethics in order to function
correctly - not an ethics which is people- oriented.”
Post Test
1. What does business ethics mean?
2. What is the main objective of observing ethical behavior in business?
3. Name the other purpose of business ethics.
4. What is the scope of business ethics?
5. Explain the economic impact of observing business ethics.
6. What is the impact of business ethics to society in general?
7. Explain how business managers could act ethically.
8. Describe the inherent conflict between ethics and pursuit of profit.
9. Explain and give example “Humanity has a mission and the means to transform the world in justice and love in human
relations, even in the social and economic field.
3
Activity and Final Requirements

Plan and Implement a Social Responsibility program or an outreach program in your respective Purok/Barangay or Office and
work on the following:
a. Outreach Proposal/Plan (Title, Target Beneficiaries, target Date, amount, etc) * dead line- October 16,2020
b. Narrative & Documentations *dead line- December 22, 2020

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Aldersgate College Corporate Governance and Social Responsibility

Business Management and Accountancy

Module 4: Business Ethics

SCOPE AND IMPACT OF BUSINESS ETHICS

Activity and Final Requirements

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