Please refer to our new main site.

Monday, June 11, 2012

Ethics! a way forward

The best amongst you are those who are best in morals. i

Prophet Muhammad (PBUH)


Basically the evolvement of ethical behavior dates back to several centuries ago, but the emphasis on more ethical and moral behavior is considered to be placed during the second half of the 20th century.

There were certain reasons which lead to the universal acceptance and recognition of ethical practices in society e.g in economics, the father of economics, Adam smith used the term �invisible hand' to refer to the transparent role of government in the market to regulate and smoothly drive the economy in an environment friendly and consumer friendly manner leads to the development of ethical thoughts in economic concepts. Further, neo classical pioneer, Alfred marshall, also advocated for material well being of the society, implying to the ethical way of thinking in economic policies, later economists also supported the ethical aspects in economic thinking and decision making, many economists today consider ethicality as first priority of organizations prior to profit maximization.

Ethics also has an important implication on the environment. The environmentalists started realizing the impacts of harm caused to environment by heavy manufacturing industries, high population growth and other issues related to environmental damage in late 1960s. They therefore advocate for an approach that will restrict the individuals and organizations from practices that may harm the environment in anyway and to act in a manner consistent with environmental betterment. Environmental ethics was emerged as academic discipline in 1970 after the conduct of 1st earth day in the same year. Two papers which are considered of drawing attention of society towards environmental ethics, they are.

Historical roots of the environmental crisis (1967) by lynn white The population bomb (1968) by paul ehrlich.

Organizations are also directed towards ethical behavior in their routine operations by internal and external regulations. Business ethics emerged as an academic discipline in 1970 in US. Later, the society of business ethics was founded in 1980 to promote business ethics in US. In 1987, European business ethics network was organized by which business ethics reached Europe in late 80s, The ethical behavior started to take roots in organizations from late 1980s and early 90s through various laws passed to govern the behavior of organizations in ethical manner. Some of the laws include

Foreign corrupt practices act (1977) Standards of ethical conduct for management account and finance management (1982)


What is said to be ethical and what is not?

"Ethics are the accepted principles of conduct that govern behavior within a society". (Bovee and Thill)

Ethics is also defined as "knowing the difference between what you have a right to do and what is the right thing to do" (former justice, potter stewart)

From above definitions it can be interpreted that ethics basically mean to act in good faith in rational as well as in environmental friendly manner.

"Ethics is the activity of man directed to secure the inner perfection of his own personality". (Albert Schweitzer)

The term ethics as is defined applies to various aspects of moral conduct. Ethics is viewed in different contexts with respect to the behavior that certifies not only the responsible behavior but also the right behavior that can be justified in law.

Ethical behavior is the most demanding and challenging task of any individual, organization and any other institution in present world. The various factors which stress for the ethical behavior or we can say the application of ethics are following.

1. Economics

2. Environment

3. Individuals and organizations

4. Culture

Now we elaborate each in little details.


As the market economic system is considered to be best among the rest of the systems, it is also feared that if this system is let free on its own, it may badly exploit the consumers and may cause a severe harm to the environment. therefore ethics was ever considered necessary to make market mechanism an efficient market system. A survey by American business schools supported this view by saying "greed is out, ethics is in". Most if not all economists, now rule out Milton friedman's idea that "corporate officials have no social responsibility other than to make as much for their stock holders as possible"

John shad, former chairman of US securities and exchange commission remarked, " its smart to be ethical" on giving $10 million to Harvard business school for ethics teaching.

These ideas supported that economic philosophy is not just about maintaining and improving economic indicators e.g GDP, inflation, unemployment etc, but these also imply that ethics must be given due weight age while formulating and implementing economic policies.

"Growth for the sake of growth is the ideology of the cancer cell." (Edward abbey)

In economics, ethics are considered in terms of policies that would protect and improve environment (technical, natural, etc), and maintain equity and justice in system besides general economic targets. For example,

"Since its inception in 1800, the bankruptcy law in the US has undergone several reforms, which were always alleged to be more in favour of the creditors. In early 2005, the US Senate gave its approval to the Bankruptcy Abuse Prevention and Consumer Protection Act. The proponents of the bill claim that it would curb the abuse of the bankruptcy law as a financial planning tool and would place personal responsibility on the debtors to pay off their debts."

The civil rights act of 1964, gave equal rights to all citizens of US irrespective of their cast, colour etc, various laws e.g Equal employment opportunity(EEO) are the result of this act.

The duties on the import of polluting materials and on the dumping of such materials are also the signs of ethical approach in the economic policy and implementation.


Organizations whether profitable or not, are required to adopt ethical standards to improve their internal and external performance. The organizations are not forced to be ethical, but it is left on their discretion to adopt it or not, however certain laws and standards are developed in each country to promote ethical behavior and to categorize what is right and acceptable and what is wrong. See the following ,

Many organizations now to promote ethical behavior within their organization establish a written code of ethics to provide guidance in this matter, which contains almost all aspects of operations like training, reporting, behavior etc. to ensure that this code is being complied with, many companies conduct ethical audit to monitor ethical progress and point out weaknesses.

A survey by International association of business communicators reveled that 70% of the communication professional said that their companies clearly defined what is considered ethical and un ethical behavior. All these efforts identify the importance of ethical conduct with in an organization, many laws have been passed to conduct various operations ethically e.f

The institute of management accountants(IMA) has developed an ethical code "standards of ethical conduct for practitioners of management accounting and financial management" The guideline on ethics for professional accountants by international federation of accountants (IFAC). The foreign corrupt practices act 1977 to avoid the unethical practices related to foreign operations. Sarbanes-Oxley Act to put responsibility on the public companies to act in the interests of its shareholders first and then in its own interests.

Jeff hanley, the executive vice president and CFO of oracle corp, has this to say about ethics "you must have a strong sense of ethics, as a finance person, you get pushed by people at times to do things that will make results right but aren't necessarily right, so you've got to push back on people but then remember the team, you aren't adding value unless you're in a business partnership."

George fellows , the CEO of Revlon says "personal integrity is the cost of entry to this position"

about 84% of CEOs ranked personal integrity as 2nd in importance only to technical expertise.

There has evolve a term "ethical portfolio" which is a portfolio of investment shares and unit trusts made up of organizations which behave in an ethical manner to promote ethics in organizations. Also the term "bounded rationality" use by companies to act in a rational manner but with in ethical boundaries.

Not only internally, organizations also have to behave ethically in their external environment. E.g maintain good relations with suppliers, creditors, environmental concerns etc. for example

"United technologies, an aerospace company of US offers employees, customers and suppliers a confidential way to report suspected fraud and ethical concerns, which are then replied by firm.

"Companies like Body shop (International cosmetic chain) and �Ben & jerry' ice cream producer receive free media publicity as a result of their identification with popular social issues."

Body shop, an international cosmetics chain, has aligned itself with popular social issues e.g green and animal rights movements. The company promotes �trade not aid' slogan for developing countries by paying fair prices for goods produced in these countries. Moreover its products are not tested on animals for such reasons.

Once there was a campaign for environmental protection and improvements, various firms participated in this campaign, MC Donalds participated in this campaign by publishing the efforts and plans it had for environmental protection, these were published on a �recycled paper'.

Robert Dye , president and CEO of CMA Canada says "employees like to work for a firm that they can trust. Customers like to deal with an ethically reliable business. Suppliers like to sell to firms with which they can have a real partnership. Communities are more likely to co operate with organizations that deal honestly and fairly with them".

non profit organizations:

besides profitable organizations, non profit organizations are also required to behave ethically even if they are charitable and trust organizations. As per Joel Fleishman, director of heyman center on ethics, there are two aspects of ethical practices for non profit organizations which are

1. Accountability

2. Transparency

They must be accountable to law and governments for their actions and must maintain transparency in their operations.

Certain laws have been passed to promote ethical compliance in non profit organizations. E.g

Serbanes oxley act 2002 which prohibit organizations from destruction of important documents. Non profit integrity act establishes various requirements of accountability applicable to nonprofits in California . IRS form 990 identifies several questions focusing on accountability and transparency, e.g about board of directors, management conflicts etc.

"William Aramony, the former CEO of United Way of America, who served six years in prison after an investigation uncovered misuse of the charity's funds to finance a lavish lifestyle, including luxury condominiums, personal trips, and payments to his mistress".

"If ethics are poor at the top, that behavior is copied down through the organization."

(Robert Noyce, inventor)


Environmentalists have been active for promoting ethical and responsible behavior with respect to environment in general public as well as in organizations. Especially after the rising concerns over damage of ozone layer and heavy air and water pollution have taken place after 1970s.

Many environmental protection movements have brought up a dramatic change in large multinational companies decision making, for example

"Shell, oil supplier, was planning to dump its brent spar oil platform at sea which contained unused oil. �Green peace', an international environmental pressure group claimed that this act of dumping bren spar would ruin the local sea if oil is leaked out. This campaign received high level of publicity against this act of shell, and thus UK government refused shell's permission to carryout its plan."

There are several instances in which companies found guilty of environmental damage and thus are penalized by the state or regulatory bodies.

"Yorkshire water services pleaded guilty and was fined 17000 on charges relating to water pollution."

The term �Environmental audit' was evolved in 1970 in US to asses whether a company is complying with environmental legislation. Since then there has been serious focus of international bodies and companies to adopt ethics for environmental protection.

Governments are also highly active for promoting ethical behavior with regards to environmental protection. In 1970, US government passed �clean air' act to reduce air pollution by industries and by individuals, requiring them to act in ethical environmental friendly way.

The trade rules of general agreement on tariffs and trade (GATT), world trade organization (WTO), north American free trade association (NAFTA) and EU have been used to curb efforts to protect environment by public and companies.

The pressure groups from environmentalists and large business formed coalition of 120 international companies called world business council for sustainable development (WBCSD) to �green' the WTO.

The standards framed by ISO (international standards organization) are applied universally for the encouragement of use of environmental friendly products by public and by companies, thus promoting ethical compliance in consumption and production.

The term �Eco labeling' is devised to encourage organizations to establish environmental friendly production methods and also to reduce claims against their ethical behavior with regards to environment protection. Other terms like environmental management and auditing system (EMAS) and environmental standards are also designed to limit amount of pollution and environmental friendly use of resources by each organization.

"ICI in early 1990s required all its plants to be built to standards that will meet the regulations regarding environment in most demanding country in which it operates."


Ethics has always been of immense importance in our daily life, it is required in almost all areas of activities, e.g work, study, attending meetings, etc. most individuals are analyzed with respect to their character in ethical manner, for example

Susan landon, an executive recruiter with LAI worldwide says, "in most executives, CEOs look for personal character (ethics), in a CFO, it is an absolute requirement"

In your career, recruitment is the first step towards success, and almost all certified recruiters pledge to maintain ethicality in their workings, e.g member organizations of society of human resource management(SHRM) are pledged to maintain ethical standards in their human resource. About 80% of US employers conduct personality background check.

In 1996, US firm conduct employment interview of UK candidate in UK, he was asked to give the blood test which will be analyzed to check whether he is addict of drugs or not, he said he drank 10 ltrs beer per week, the test showed he drank more last week, he was rejected!.

Various organizations assign score to �ethical behavior' in their HR scorecard for recruitments. While 76% of the executives said that they have to consider impact of their decisions of workplace programs on the ethical behavior of their employees.

In work, personal integrity is the highly ranked prerequisite for personal development. A US ethics and workplace survey 2007 revealed that 91% of the employees said they were more likely to behave ethically at work when they had good career-life fit.

Also in studies, ethics is considered to be the subject matter of education, e.g one author opines "education is the art of making man ethical"

Many high ranked universities world wide offer degree programs in ethics including Harvard, Cambridge, oxford etc

About some famous authors ethics is the most important thing in a man's life

"A man without ethics is a wild beast loosed upon this world."
Albert Camus (French author)

"In law a man is guilty when he violates the rights of others. In ethics he is guilty if he only thinks of doing so."

Immanuel Kant, ( russian geographer and philosopher)


Different cultures and regions around the globe have different perspective with respect to behaviours or customs, but all of them recognize importance of ethics. For example

In US and UK, someone is presumed innocent until proved guilty at law, where as in mexico and turkey, someone is presumed guilty until proved innocent.

In various western and European countries, maintaining ethicality is considered to be a fair play, but in France it is a part of the law.

In arab culture, it is considered good to greet one with open arms while other cultures emphasize more on hand shakes and welcome notes.

In Pakistan and India, one is considered of high ethicality, if he/she holds upright to religious and family traditions. And the same is very much applicable to china and neighboring countries.

Besides culture, religions also stress on ethical behavior, e.g many Christianity books (gospels) iii etc contain verses regarding aspiration of ethical behavior. In Islam it is also considered an excellent trait to be ethical as holy Quran (ii), contains several verses related to kindness, justice and equity, also endorsed by the saying of prophet Muhammad(pbuh) quoted at the top. In Buddhism, pancasilani, a Buddhist code of ethics is followed. In other cultures , you will find endorsement of ethics rather than its rejection.

Besides all cultural and religious diversity, we found that there is one thing in common and that is �Ethics'. Finally I would like to conclude the importance of ethics by quoting this:

"Proper ethical behavior exists on a plane above the law. The law merely specifies the lowest common denominator of acceptable behavior."
(Gene Laczniak, "Business Ethics: A Manager's Primer," 1983)

"Ethics and equity and the principles of justice do not change with the calendar."
David Herbert Lawrence (English poet)

references :

[i]sahih muslim, book 30, hadith 5740 ii /LinkClick.aspx?fileticket=fXrgnDfaoiE=&tabid=58&mid=609&language=nl-NL iii /verseshonestya.html Business communication today 9th edition by Bovee and Thill managerial accounting 10th edition by Garrison and Noreen Economics 18th edition by Samuelson and Nordhaus Business economics by Cook and Farquharson US ethics and workplace survery 2010

No comments:

Post a Comment