Business ethics: an integrated perspective

Business ethics is about managing values and conflict resolution. It refers to the moral principles, policies, and values that govern the way companies and individuals engage in business activity. It goes beyond legal requirements to establish a code of conduct that drives employee behavior at all levels and helps build trust between a business and its customers.

Here are some ways to integrate ethics into a business:

Ethics as company’s values: Incorporating ethics as a factor in performance management and employee of the month nominations.

Ethics as a priority for leadership: Ensure that leadership recognizes the importance of ethics and acts on it.

Ethics in decision-making meetings: incorporating ethics as an agenda item at executive and senior management meetings.

Build ethics into HR practices: incorporating ethics as a formal part of HR practices and procedures.

Action against corruption: Initiate formal action against bribery, insider trading, and other forms of corruption.

Value diversity: Value diversity in the workplace through hiring and training programs.

Protect customer data: Introduce policies to protect customer data privacy.

These principles not only ensure the ethical behaviour of leaders but also create an organizational culture rooted in integrity and trust.

By incorporating transparency, responsibility, and empathy into their decision-making processes, businesses can navigate complex ethical dilemmas and uphold ethical standards. These principles not only ensure the ethical behaviour of leaders but also create an organizational culture rooted in integrity and trust.

There are several principles of business ethics including accountability, integrity, care and respect, honesty, healthy competition, loyalty, transparency, and respect for the rule of law.

Limited Companies do have ethical responsibility which is however not protected by the limited liability of the Promoters and Directors from the consequences of their actions. The long-term success or failure of a company’s reputation depends upon a company’s record and the perception of its ethics. The foundation of the ethics is none of the stakeholders in a business relationship should feel cheated. This is more so in the case of the banking and financial industry.

Business ethics of banks:

The public deposits their money with the Banks for safety and return. Here safety does not merely mean that the money is deposited by individuals and other entities for safety purposes. The depositor should get back the safety of the intrinsic value of money. The purchasing value of Rupees one hundred today may not be the same after ten years. Due to inflation, its real value erodes. Therefore, customers must be compensated with the appropriate rate of interest to match the real value of money deposited by him/her at the end of the contractual period to neutralise the impact of inflation. However, banks in India artificially keep deposit rates low to maximize their Net Interest Margin (NIM) between interest earned from lending and the cost of funds. Banks are required to lend money received by the customers by way of deposits. However, due to regulatory instructions from the banking regulator and the government, banks are providing certain types of loans at a rate less than the deposit interest. Banks are incurring huge losses year after year due to bad loans due to their inability to recover the loan amount. To make up such losses and earn a profit, banks are paying low interest to depositors, as well as levying higher rates of interest on some types of borrower accounts. Strictly speaking, it is not ethical to penalise both depositors and borrowers like this. To do justice to depositors banks must endeavour to accept inflation-indexed deposits like inflation-indexed bonds and lend with a justifiable margin over the deposit rate.
The second ethical question is the protection of small depositors’ money from bank failures. In the global and Indian context, we have seen numerous bank failures, both small and large in size. In our country, up to Rs.5 lakh is insured by the DI&CGC (Deposit Insurance and Credit Guarantee Corporation) which was not revised since 2020 despite a rise in per capita income and inflation.
A third ethical issue is hidden charges levied by banks from time to time on depositors, borrowers, or simple service seekers. There should not be any hidden charges cropping up from time to time because of the ‘fine print’. Therefore, bankers must place moral considerations above legal or opportunistic measures. This is because their business prospers purely on customers’ confidence. The good intentions are most important for business ethics and the moral behavior of bankers.
A fourth ethical issue is accounting disclosures made by the banks. The balance sheets with other statutory disclosures published by a bank must reflect full, fair, accurate, timely, and understandable disclosure to reflect the true scenario of the bank. Data and integrity are of paramount importance for banks from the viewpoint of all stakeholders.
Last but not least bank staff at all levels shall take reasonable measures to protect the confidentiality of non-public information relating to their clients.
Conclusion:
Banks run on public trust which, in turn, is a function of the ethical principles and moral values they follow. They shall be mindful of the reputation they carry amongst their customers and the public at large while discharging their obligations. Bank policies should be customer-centric and ethics should dominate customer service rendered by them.

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