A Project Report On

Business Ethics
Submitted to:

Prof.Nailesh Sir
Prepared by:

Matang Rajyaguru
(11SOMBA21041)

What is ethics?
Ethics is the branch of philosophy that focuses on morality and the way in which moral principles are applied to everyday life. Ethics has to do with fundamental questions such as What is fair? What is just? What is the right thing to do in this situation? Ethics involves an active process of applying values, which may range from religious principles to customs and traditions

What is business ethics?

Business ethics focuses on what constitutes right or wrong behavior in the world of business. Corporate business executives have a responsibility to their shareholders and employees to make decisions that will help their business make a profit. But in doing so, businesspeople also have a responsibility to the public and themselves to maintain ethical principles. Although ethics provides moral guidelines, individuals must apply these guidelines in making decisions. Ethics that applies to business (business ethics) is not a separate theory of ethics; rather, it is an application of ethics to business situations

Business Ethics and Corporate Social Responsibility

A. Terminology Ethics Standards or rules of conduct that help us distinguish between right and wrong. Can help individuals decide on the best course of action in situations where they arent sure what to do. Help us get along with others, living with ourselves and living out good character. Based on individual beliefs, values, morals, and standards in society They may vary from person to person, situation to situation and culture to culture. Values Tell us what we think is important which helps us make decisions about right and wrong. Examples include: trustworthiness, honesty, respect, responsibility, empathy, good citizenship, perseverance A person who values trustworthiness is unlikely to betray a friend. Morals Rules we use to decide whats good and whats bad. Examples: Stealing is bad because it harms the person you are stealing from Lying is bad because it breaks trust and harms relationships Morals vs. Values We tend to judge people more on their morals than their values Sometimes our values conflict with our morals and we make questionable decisions. Example: You might place a high value on friendships and wanting people to like you You may believe that you dont drink or drive or get into a car with someone who drinks and drives because irreparable harm and/or death may result Conflict You are at a party and you get into a car with someone you want to like you and this person has been drinking.

Ethical Behaviour Behaviour that conforms to ethics Unethical Behaviour When we make decisions that run counter to our values and/or morals and do things that our individual beliefs and social standards define as bad or wrong. B. The Role of Business Ethics Consider: Individual ethics are personal; Societys ethics are usually standards for decency and respect of others; Business ethics are tied both to societys ethics and the ethics of the individuals own, work for and buy products from the company. So How do you apply your personal beliefs in a business environment? Should you just do what your employer tells you to do especially since s/he is paying you? 1. Business Code of Ethics/Conduct Business Code of Ethics A document that outlines how employees and employers should respond in different situations Stakeholders affected by business decisions include: Customers Employees Suppliers Competition Society Business owners (i.e. shareholders) Society at large The Environment (including future generations) Sometimes a business code of ethics/conduct is embodied in a companys mission, vision, or credo statement.

2. Mission Statement Mission Statement A brief description of a companys fundamental purpose. A mission statement answers the question, Why do we exist? It articulates the companys mission for both those who work in the company and the public. Ward, Susan. Mission Statement. About.com: Small Business Canada, October 2009, [Online]. Available: http://sbinfocanada.about.com/od/businessplanning/g/missionstatemen.htm Canadian Tires Mission Statement: Canadian Tire is a growing network of interrelated businesses... Canadian Tire continuously strives to meet the needs of its customers for total value by offering a unique package of location, price, service and assortment. 3. Vision Statement Sometimes called a picture of your company in the future The vision statement answers the question, Where do we want to go? It articulates the hopes and dreams for the business. It reminds those in the company of what you are trying to build. While a vision statement doesnt tell you how youre going to get there, it does set the direction for your business planning. A vision statement is for members of the company, not for the customers or clients. When writing a vision statement, the mission statement can be a valuable starting point for articulating company values. Ward, Susan. Vision Statement. About.com: Small Business Canada, October 2009, [Online]. Available:http://sbinfocanada.about.com/od/businessplanning/g/visionstatement.ht m

Example: Within the next five years, ZZZ Tours will become the premier eco-tour company in the world, increasing revenues to 3 million dollars in 2013 by becoming internationally known for the comfort and excitement of the whale-watching tours it offers. Business Code of Ethics Challenges Drawing the line between right and wrong is not always easy. For example: Giving a gift to a valued client gift or bribery? A politician phones a bank on behalf of a friend who is seeking a loan legitimate character reference or political influence for personal gain? Code of Ethics will not necessarily address every possible situation.

C. Resolving Ethical Dilemmas Examples of Business Ethical Dilemmas: Disposal of toxic waste Pollution control Downsizing staff Depletion and allocation of scarce natural resources Changes in law and technology (privacy issues) Employee rights (i.e. workplace safety) Discrimination against women and minorities Product safety Resolving Ethical Dilemma Requirements: Honesty The ability to work collaboratively or cooperatively Respect for others Prides in ones work Willingness to learn and admit when you are wrong Dependability Responsibility for ones actions Integrity Loyalty When the Code of Ethics is not clear or does not exist, consider the following questions: If I take this action: 1. Who are the stakeholders? 2. Who will be helped by what you do? How so? 3. Who will be hurt by what you do? How so? 4. What are the benefits and problems of such a decision? 5. Will the decision survive the test of time? D. The Law and Resolving Ethical Dilemmas Actions may be considered unethical, but they still may be legal Consider Mayor Larry OBrien Trial & The Global Economic Crisis Laws are created to address acceptable business practices, but a company can still behave unethically, without actually breaking the law. Unethical and Illegal Business Practices - FRAUD

Fraud The crime of lying or pretending The Competition Act 2002 bans these type of deceptive business practices: 1. False or misleading advertising 2. Advertising merchandise for a bargain price, but not having a reasonable quantity available for sale (bait and switch selling) 3. Placing two different price tags on a product and selling it to the consumer at the higher price (double ticketing) Common Fraud Examples Bank Fraud A bank officer makes a fraudulent loan to a non-existent business and then pockets the money. Consumer Fraud A business tricks customers into buying goods or services they dont really need through unethical advertising or false claims. Contract Fraud A business or individual uses temptations, such as bribes or kickbacks, to create a contract. Insurance Fraud A business or individual falsely claims lost, damaged, or stolen property in order to receive insurance settlements Mail Fraud An individual uses the postal service for fraudulent purposes, such as mailing phony job opportunities, chain letters, or inheritance scams. Pyramid Scheme Fraud A person participating in the scheme recruits others in order to receive more money than she or he invested in the scheme. Stock Market Fraud An individual uses insider trading or other techniques to buy and sell stocks at artificial values.

Telemarketing Fraud A company uses high-pressure phone calls to get customers to buy now or to donate funds to bogus charitable causes. Welfare Fraud An individual receives benefits without being eligible. E. Accounting Scandals Accounting Defined The process of identifying, measuring, classifying and communicating financial information about a business so that informed judgments and decisions can be made based on that information. Accounting Information Three formal statements that report financial information of a company are a companys: 1. Balance Sheet 2. Income Statement or Statement of Operations 3. Cash Flow Statement These statements will be found in corporations annual reports also called, shareholders reports. 1. Balance Sheet Reports a companys Assets, Liabilities and Equity. States the financial position of a company on a certain date. Assets Items that a business owns (building, land, equipment, supplies, cash, money owed by customers called receivables.) Liabilities Debts/money owed by the business to other businesses including banks Equity For a company, other than a coporation, it is called Owners Equity For a corporation it is called Shareholders Equity and Retained Earnings For an individual it is called Net Worth ASSETS LIABILITIES = NET WORTH

2. Income Statement/Statement of Operations Financial statement that shows all the revenues coming into a business and all the expenses associated with earning those revenues over a specific period of time. Between January 1 and December 31 of 2008 total revenues were $1 million and total expenses were $500,000. Revenues - Expenses = Net Income/Proft R>E = Net Profit R<E = Net Loss 3. Cash Flow Statement Financial statement that outlines where all the cash that is coming into the business is coming from and; Where all the cash that is leaving the business is going to over a specific period of time. Users of Financial Information Employees Management Banks Creditors businesses who extend credit (short term loans) to other businesses Shareholders Potential investors The government Accounting Scandals Accounting Scandal Crime involving accountants and/or senior executives of an organization who alter accounting records for personal benefit. Type of fraud Forensic Accountant An independent person brought in from outside a company to investigate the legal and financial documents of a company and find out what happened if a scandal has been uncovered. Embezzlement Is a type of accounting fraud in which an accountant or senior executive invents phony accounts and redirect money into them for personal gain Often occurs in smaller businesses

Cooking the Books An common expression used to indicate corporate fraud Often involves misusing or misdirecting funds overstating revenues understating expenses overstating the value of corporate assets to the public shareholders under-reporting liabilities