Understanding Business Ethics: Importance, Principles and Ethical Dilemmas (2023)

Introduction: Business ethics plays a crucial role in shaping the behavior of organizations and individuals within them. It encompasses principles and values that guide ethical decision-making in the corporate world. This article delves into the definition of ethics, the significance of business ethics, its principles, and how ethical dilemmas are addressed.

We need to first understand what is Ethics ?

According to Oxford Dictionary, Ethics means “the system of moral principles, rules and conduct.” It commonly refers to the rules and principles that define right and wrong conduct of individuals.

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Have you ever been to a situation where you had to take decision between two rights or two wrongs?

Ethics is the study of morality and application of reasons for taking any decision or choosing any course of action, morality is related to norms, values and beliefs embedded in social process.

Ethical Behavior is accepted as “right” or “good” in the context of a governing moral code. Ethics refers to well-founded standards of right and wrong that prescribe what humans ought to do, usually in terms of rights, obligations, benefits to society, fairness, or specific virtues.

Ethics is not a Natural Science but a creation of mind. It is not absolute and is open to the influence of time, place and situation.

Let us now understand “what is Business Ethics”?

Business Ethics is the study of business situations, activities and decisions where the issues of right and wrong is addressed. Business ethics constitute the ethical/moral principles and challenges that arise in a business environment.

Few areas related with –business ethics include the following:

  • Finance and Ac-counting: Creative accounting, Earnings management, Financial analysis, Insider trad-ing, Securities Fraud, Facilitation payment.
  • Human Resource Manage-ment: Executive compensation, Affirmative action, Workplace surveillance, Whistle blowing, Occupational safety and health, Indentures servitude, Union busting, Sexual Harassment, Em-ployee raiding.
  • Sales and Marketing: Price fixing, price discrimination, green washing, spamming, using addictive messages/ images in adver-tising, Marketing to children, False advertising, Negative campaigning.

We shall also need to understand the importance of Business ethics in today’s busi-ness.

Present day global crisis has raised questions about the legitimacy of capitalism. Ethical failures certainly played a role. Business leaders must use their personal moral compasses to make ethical decisions. As for the business’s compass, it should be oriented toward satisfying customers above all stakeholders. That is the orientation that allows for the greatest competitive success and profitability.

The impact of business in the public eye is more noteworthy than at any other time. Numerous individ-uals from the network are uneasy with such advancements. Business ethics encourages to get it why this is going on, what its suggestions may be, and how the circumstances may be addressed?

Let us understand with real life example of Sri. Narayan Murthy:

He shared an incident that in February 1984, Infosys decided to import a super minicomputer so that they could start developing software for overseas clients. When the machine landed at Bangalore Air-port, the local customs official refused to clear it unless they “took care of him”—the Indian euphemism for demanding a bribe. A delay could have meant the end for them before they had even started. When an Infosys manager informed him about the problem, his only question was, “What is the alternative to paying a bribe?” The manager hesitantly replied that they could pay a customs duty of 135% and then appeal for a refund. He told him: “Do that.

They didn’t have enough money to pay the duty and had to borrow it. However, because they had de-cided to do business ethically, they didn’t have a choice. They would not pay bribes. They effectively paid twice for the machine and had only a slim chance of recovering our money. But a clear conscience is the softest pillow on which you can lay your head down at night.

Changes needed in Business Management Principles and Practices to build companies that are truly fit for the future.

This question was answered by Gary Hamel, World’s most influential business thinker (The Wall Street).

> “Modern” management much of which dates back to the late nineteenth century has reached the limits of improvement.

> Unless management innovators tackle those issues, companies will be unable to cope with tomor-row’s volatile world.

> Management pioneers must find ways to infuse mundane business activities with deeper, soul-stirring ideals, such as honor, truth, love, justice, and beauty. These timeless virtues have long inspired human beings to extraordinary accomplishment and can no longer be relegated to the fringes of man-agement.

> Most companies strive to maximize shareholder wealth – a goal that is inadequate. As an emotional catalyst, wealth maximization lacks the power to fully mobilize human energies Tomorrow’s manage-ment systems must give as much credence to such timeless human ideals as beauty, justice, and com-munity as they do to the traditional goals of efficiency, advantage, and profit.

> Tomorrow’s managers will require new skills, among them reflective learning, system-based think-ing, creative problem solving, and values- driven thinking. Business Schools and companies must rede-sign training programs to help executives develop such skills and reorient management systems to en-courage their application.

Importance of Business Ethics

a) Business is existing because of society: Philip Kotler had said “we sell products in the society not in the market” It is the society and the values of the people which creates desire.

b) Business relates to people and ethics are essential to people.

c) Ethical practices would result to social contribution.

d) Business malpractices can adversely effect all stakeholders, apart from Govt., environment etc.

e) Business will have positive effects on customers who will have the trust on the brand, either product or service. There will not be any trust unless the company follows ethical standards.

f) Cultivates strong team work& productivity among employees resulting to enhanced employee growth.

g) Helps to build a strong public image.


1. The alienation experienced by workers doing repetitive work.

2. The feelings of oppression created by the exercise of authority.

3. The responsibilities heaped on the shoulders of managers.

4. The power tactics employed by managers who are anxious to advance their career ambitions.

5. Health problems created by unsafe working conditions.

6. The absence of due process for non-unionised employees.

Conflict of interest in business arises when an employee or manager of a company is engaged in carrying out a task on behalf of the company and the employee has private interest in the outcome of the task:

1. Possibly antagonistic to the best interests of the company.

2. Substantial enough that it does or reasonably might affect.

3. The independent judgment of the company expects the employee to exercise on its behalf. Some-times, there are situations in the organization where there is conflict of interest and lack of independence.

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Dilemma is a situation that requires a choice between options that are or seem equally unfavorable or mutually exclusive. By definition, an ethical dilemma involves the need to choose from among two or more moral-ly acceptable courses of action, when one choice prevents selecting the other; or, the need to choose between equally unacceptable alternatives.

An ethical dilemma involves a situation that makes a person question what is the ‘right’ or ‘wrong’ thing to do. They make individuals think about their obligations, duties or responsibilities. These dilemmas can be highly complex and difficult to resolve. Easier dilemmas involve a ‘right’ versus ‘wrong’ answer; whereas, Complex Ethical dilemmas involve a decision between a right and another right choice. However, any dilemma needs to be resolved.

The ethical dilemma consideration takes us into the grey zone of business and professional life, where things are no longer black or white and where ethics has its vital role today. A dilemma is a situation that requires a choice between equally balanced arguments or a predicament that seemingly defies a satisfactory solution.


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Let us learn something from the Mahabharata

“जानामि धर्मं न च में प्रवृत्ति: जानाम्यधर्मं न च में निवृत्ति: I केनापि देवेन हृदि स्थितेन यथा नियुक्तोऽस्मि तथा करोमि।।

I know what is right but I am not able to practice it; I know what is wrong and I am not able to keep away from it. I act as I am directed to by some mysterious power that is seated in my heart.

This is the central knot of the immemorial ethical problem. The present ethical debate in the corporate world is focused mostly on values like honesty, integrity, fairness or transparency. But the scope of ethics is not confined to these values only.

Conclusion: Business ethics is not just a buzzword; it’s a fundamental aspect that shapes the foundation of organizations. It aligns companies with societal values and helps them contribute positively to the community. Ethical dilemmas are common, and resolving them requires careful consideration and decision-making based on core values. In a world where transparency and accountability are paramount, the role of business ethics becomes indispensable for a sustainable and responsible business environment.

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