Types of Business Ethics

The following are the types of moralities in a company:

  • Personal responsibility.
  • Representative or official responsibility.
  • Personal loyalties.
  • Corporate responsibilities.
  • Organizational loyalties.
  • Economic responsibilities.
  • Technical morality.
  • Legal responsibility.

Personal Responsibility

It refers to a man's personal code of ethics. If a man behaves in honesty, he will behave in a very honest and straight forward manner. According to Walton, "A morally responsible executive is one who knows the various kinds of value systems that may be employed in a particular situation and has a rather clear idea of what values hold ascendancy (precedence or priority) over others in a conflict ". This definition of Walton is rather an over-simplification. A business man may think he is acting ethically but others may not consider his behaviour as ethical.

Representative or Official Responsibility

A manager's action often represents the position he holds or the office he occupies rather than his personal beliefs. This is so because the manager represents the business. He has to follow the rules and regulations of the business, e.g. a manager may want to do something but the regulations may forbid him from doing it and therefore his hands are tied and he may not do it.

Types of Business Ethics with Examples

The Following are the types of Business ethics

Personal Loyalties

Sometimes personal loyalties are so strong that ethical standards may not be applied when acting towards a particular individual. Personal loyalties include the loyalties of a subordinate to his superior and superior's loyalty towards his subordinate.

  1. Loyalties of a subordinate to his superior: If a subordinate has strong personal loyalty towards their superior, they turn a blind eye towards the blunders committed by their superiors and attempt to defend their omissions and commissions. For example, if the branch manager of a bank is sanctioning loan without any security and this act on his part may bring disastrous financial troubles to the organization, his subordinates who were men of high moral character and who had close connections with the head office did not inform them of the financial irregularities because of strong personal loyalty towards their branch manager.

  2. Superior's loyalty towards his subordinate: If a superior has strong personal loyalty towards their subordinates, they turn a blind eye towards the mistakes committed by their subordinates. This is done because the superior does not want to hurt the feeling of his subordinates because of their close personal contact. For example, if the subordinates who are close to the manager do not do their work properly, the manager may not reprimand (rebuke or scold) them for their poor performance. He may rather defend their poor quality work with his superiors because of his personal attachment towards his subordinates.

  3. Corporate Responsibilities: Every individual living in society has a moral obligation towards it. Corporations are entities which are "artificial persons", therefore they too have moral responsibilities towards the society. There moral responsibilities are not necessarily identical with the personal moral codes of the executives who run them. Every corporation must have moral codes which help it in deciding matters connected with shareholders, employees, creditors, customers, government and society.

  4. Organizational Loyalties: Some employees have a deep sense of loyalty to the organization. Their loyalties to their organization are so strong that they even neglect their own self interest for the sake of the organization.

  5. Economic Responsibility: According to Milton Fried man, "there is one and only one social responsibility of business – to use its resources efficiently and engage in activities designed to increase profits without deception or fraud". Therefore, every business must contribute to the general welfare of the society by making efficient and economical use of resource at their command. This type of morality guides individual action towards economy in the use of resources put at his disposal.

  6. Technical Morality: In any country, the state of technology plays an important role in determining what products and services will be produced. Technological environment influences organizations in terms of investment in technology, consistent application of technology and the effects of technology. A manager having technical morality will refuse to compromise with quality. Every organization which is actively engaged in technological advancement will create more challenging situations for the organizations because they are not prepared to accept lower standards.

  7. Legal Responsibility: Legal environment provides the framework with in which the business is to function. The viability of business depends upon the ability with which a business can meet the challenges arising out of the legal framework.

However, it must be observed here that legal responsibility is more than an intention to conform to laws, orders etc. It is a belief in the need for effective co-operation and justice in organized life. It is morality that transcends conformity to law.

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Principles of Management and Organisational Behaviour Topics