ethical issues

1. Ethics in E-Business/E-Commerce
Establish Core Values
As a major component of a company’s guiding principles, core values help a small business set
priorities and plan for the future. These are the rules that govern how your company is run. Values
give a company direction while a company code of ethics defines the behavior you expect your
business to exemplify. Identifying a set of business values tells your customers that you are
committed to providing quality service and that you take responsibility for the business decisions
you make. Some companies publish their business principles on their websites for visitors
trafficking the site to view.
Gain Consumer Trust
Customers are more likely to view your business as legitimate if your website looks official. For
instance, when customers see the Better Business Bureau seal displayed on your website, they
know your business is making a commitment to meet their needs. A small business owner looking
for accreditation can use the BBB seal to convey the message to consumers that the business is
trustworthy. Consumers can identify if a business is a member of the Better Business Bureau by
looking for the online BBB seal on the website.
Secure Customer Data
Security of information is a major concern even for a small e-commerce website. It is the
responsibility of e-commerce businesses to protect sensitive consumer data such as addresses,
customer account numbers and bank and credit card information. Secure Socket Layer, more
commonly referred to as SSL, is a system that encrypts information that is transmitted between
the customer and Web server. Data encryption prevents hackers from gaining access to a
customer's personal and billing information. Business owners must purchase a SSL certificate for
their website’s server. Visitors to your site will know the site is using a secure SSL connection if
the URL changes from http:// to https:// and the padlock icon on the browser window is closed.
Create Ethical Web Content
Pay special attention to the marketing materials you include on your website. Avoid publishing
misleading statements that could give consumers the wrong idea about the products you offer. For
example, don’t exaggerate claims about the quality of a product. If you fail to deliver what you
promise, the Internet can work against you as dissatisfied customers may spread the word to
others via social networking sites. Keep the content on your site current so you continue to offer
consumers reliable information. An additional factor to consider is that while search engine
optimization can bring more traffic to your website, it’s your responsibility to supply useful and
original content. According to SEO Workers, a group of Internet marketing consultants, websites
that fail to offer valuable information are sometimes viewed as spam, which consumers usually
don’t like.
Ethical issues in E-Commerce

2. 1. Ethical Issues Web Spoofing
•Fake web sites created to gather the confidential information of people. •www.micros0ft.com
Cyber-Squatting Purchase and uses the existing domain name belong to the well-known
organization for the purpose of infringing its trademarks.
2. Privacy Invasion
• Personal details belong to consumers expose.
• Malicious programs delivered quietly via web pages could reveal confidential information. •
Cookie cutters, Spam Butcher. Email Spamming
• Send or broadcast unwanted advertisement or correspondence over the Internet.
3. Online Piracy
• Unauthorized copyright of electronic intellectual property such a e-books, music or videos •
Transfer of music and videos without the authorization of rights holders. Web trackin
• Do you need to know who's visiting your website, and what they do when they get there? •
SahAgent collects and combines Internet browsing history of users and sends it to servers.
4. Copyright
• The copyright laws protect Intellectual property in its various forms, and cannot be used
freely.
• The distribution rights are with the copyright holder. The Threats Posed to E-Commerce
Servers • The server can be viewed as the central repository for your “E-Commerce Place of
Business” [which consists of the actual website which displays your products and services, the
customer database, and the payment mechanism].
• Financial loss
5. Social Issues Security & privacy
• Customer will scared get cheated by the seller.
• Affect of IT department
• Loose confident of customer Shipping issues
• It effects both sides
• very high cost
• complexity of process
6. Conclusion
• Increase the security & privacy
• Make laws
• Provide friendly environment
• Do not expose your data so easily
• Be careful while entering your data at any site
• Update security tools regularly
• Firstly make sure to whom you are dealing is the real party
Ethics in Human Resource Management (HRM)
MEANING OF HRM

3. HRM can be understood in simple terms as employing people, developing their
resources, utilising, maintaining and compensating their services in tune with the job and
organizational requirements with the view to contribute to the goals of the organization,
individuals and the society. ‘OR’ HRM is the process of planning, organizing, directing
and controlling human activities to achieve the organizational goal and individual goals.
MEANING OF ETHICS Ethics are those values, which has been imbibed within an
individual on reinforced externally that help him to distinguish between right and wrong
and to act accordingly. There can be several sources of ethics like religion,
organizational culture, legal obligations etc.
ETHICS IN HRM Ethics in HRM indicates the treatment of employees with ordinary
decency and distributive justice. The ethical business contributes to the business goals
as the employees will feel motivated and they will work with efficiency and effectiveness.
Ethics in HRM basically deals with the affirmative moral obligations of the employer
towards employees to maintain equality and equity justice. Areas of HRM ethics Basic
human rights, civil and employment fight. (E.g. Job security, feedback from tests); Safety
in the workplace; Privacy; Justifiable treatment to employees. (E.g. Equity and equal
opportunity); Respect, fairness and honesty based process in the workplace.
Why Ethics in HRD?
Ethics is not a cosmetic of life. It has to be an inherent quality of an individual, whether in
business or society for various reasons described below. Ethics is
important to business in general and HR manager in particular.
( 1 ) Ethics is a need : To be ethical all through life is a wish of everyone. This is a fundamental
need of a human being after the satisfaction of physiological needs. He lives to be ethical at home
and also at the place of work. He endorses
the fact that the decision taken by him, as a part of his duty, might affect number of people. Over
and above this, he, as an HR manager wants to be a proud employee of that organisation which is
highly respected and adored in the
business world. Then why not adorn that organisation by his ethical acts. This feeling, far and
wide, forces organisations to go ethical.
( 2 ) Public image : Organisation with quality products and services, enjoy superlative position
compared to their competitors. An organisation which is perceived by public as honest,
considerate and ethically responsive receives greater patronage from public. To attain this status,
organisations prefer to follow set norms.
( 3 ) Values: the cementing force : Values are symbols of acknowledgement. When employees
feel and accept that management is value-driven and value-oriented, they start respecting it. The
credibility of management is raised to a

4. highest degree. The employees understand management’s desire and whole heartedly cooperate in
creating common goals, values and language. The lacuna between management and employees is
shortened to minimum.
( 4 ) Facilitates decision making : Adoption of values and ethics in management helps , a great
deal in making better decision. While taking any decision, because of being valuedriven,
management will take care of every aspect and impact. It will become a normal practice of taking
decisions which are in the interest of employees, customers, share holders and the company itself.
( 5 ) Ethics and profits walk hand in hand : Value motivated companies are most likely to lose
money initially. But, having passed through a certain stage, such companies turn successful in
long run. Such companies will be accepted
as torch-bearers and model companies.
( 6 ) Low limits, Ethics enthuse : Ethics is that thread which keeps and binds society together.
Law and law maker or government cannot protect society. Government cannot regulate
undesirable and harmful activities. Management
which is proactive can take steps to save environment through preventing pollution and thereby
protect worker’s health even before enactment in that respect.
( 7 ) Contribution to human welfare : Every business is an important unit of larger economic
system which aims at enhancing human welfare in the society.
( 8 ) Protection of social interest : By guaranteeing and maximising economic interests and well
being of people, the social interest is protected by business.
(9) Recognition of neighbors and competitions : This is possible for a company which endorses
due cognizance to its ancillaries and competitors. It stems out of the principle of co-existence and
united functioning.
(10) Respect to Employees : An Ethics-driven HR manager would accept and recognise the role
of employees in business operations. They form an integral part of the business system.
( 11 ) Balancing all stake holders interests : Regardless of any department, people employed
therein can make difference. They as a team, can help through the HRmanager, the management
of company to strike a balance among the interests of share holders, customers, employees,
suppliers, competitors, financial institutions, government authorities and public. In short, it is like
drawing a demarcation line between the economic interests of the organisation and social interests
of the country.
Role of HR in Promoting Ethics
1. Improve recruitment and selection tests - Follow the recruitment policy that is identification of the
recruitment needs, monetary aspects, criteria of selection and preference etc.; Follow the
situational factors such as economic factors, social factors, technological factors etc.; Selection
must be in planned manner; Avoid illegal questions.
2. Conduct ethics trainingIt is a short term process of training given to the HR of the organization to do
their work in adherence to the ethical code of conduct. The main advantages are increased
productivity, higher employee morale, less supervision, less wastage, etc.
3. Ensure that there are no pitfalls in performance appraisalPerformance appraisal should be factual
and there should not be any partiality or bias in the attitude towards the employees.
4. Rewards and disciplinary system
5. Improve and facilitate two way communication

5. 6. Avoid any kind of discrimination among the employees based on certain factors like caste, colour,
culture, religion, appearances etc.
7. Equal opportunities must be given to every employee for his advancement and development.
8. Measures should be taken for employee safety while working in the organization.
Unethical Practices of HRM
THE ETHICAL ISSUES IN HRD
4.1 Job Design, Restructuring and Lay offs : Job design as a regular course of action, does not
involve any ethical issue as such. The redesign of job, as a
part of restructuring of an organisation, sometimes includes laying off employees and downsizing
of the staff. It is relevant also because of inferior administration and unemployabaility of
particular employee/s. The job design alternatives encompass job redefinition, job simplification,
job change, job enlargement, job enrichment, job autonomy, flex time, core teams, employee
empowerment and de-jobbing. Below is the scant narration of each of these.
( I ) Job Redefinition : On account of change in management style or adoption of new technology
the need for redefining job arises. It affects integrity of some
employees.
(II ) Job Simplification : As a result of new technological innovations and extensive use of
computers and electronic gadget the work of an employee gets over-simplified. This gives birth to
boredom and develops tendencies among
employees to commit errors while working. They think of leaving their jobs. The unethical part of
the story is over simplification of job itself.
(III) Job Change : Job change is a kind of job rotation. Sometimes, employees feel it disgusting.
The unethical issue here is that chances of improvement of jobs are diminished. The employees
experience dejection and alienation.
(IV) Job Enlargement: It is presumed that job enlargement is a source of motivation to an
employee. But more often than not, it turns fatiguing also to him. This is an ethical issue.
(V) Job Enrichment: This appears to be reasonably ethical because it instigates employees and
increases the level of zeal and zest of an employee. It however, might hurt the feelings of those
who are deprived of job enrichment because of one reason or the other.
(VI) Job Autonomy : This is an ethical option, provided it is not resorted to by manager to shirk
his own responsibility. Job autonomy will result into these work teams which can freely
participate in decision making, planning, coordinating and controlling their activities.
(VII) Flex Time : This is a sort of freedom endowed to employees to use their time at work
flexibly. This also includes time-in and time - out. This is an ethical consideration.

6. (VIII) Core Teams : These are high performance teams. They are given complete freedom asto
their duties and responsibilities. It encourages team members to become more punctual, efficient,
effective, creative and innovative.
(IX) Employee Empowerment : This act of management involves taking steps to develop
employee through helping him acquire skill and knowledge of an area in which he has aptitude.
This is in addition to his regular job.
(X) De-jobbing : Organisation under the changed liberalised business environment, have to be
more competitive and sharp-edge cutting. De-jobbing is cutting down overstaffing and at the same
time concentrating on development of more committed employees. The job design options which
exhibit potential to benefit both organisation and the employees are considered ethical.
4.2 Human Resource Planning
Morally, it is ethical to plan human resource for the future benefits of an organisation. But, if
some mistake is committed intentionally or otherwise, it can sink the ship, e.g. A company while
executing merger and acquisition, firmly holds a policy of making no change in the manpower.
Situationally, most of the employees of both the companies merged, had 20 per cent of the staff
exceeding 50 years of age. Eventually, 10 years later or so, this company will badly face the
problem of shortage of skilled and experienced workforce.
4.3 Recruitment
The ethical considerations to be made at this juncture are mainly two:
( a ) To what extent is it just and fair to replace internal employees , since they were working for
many years with the company.
( b ) Is it moral to man the position by external recruitee by depriving and at the cost of promotion
of those who had welded with the company and have been working since long? Is it not going to
attack on their right of career planning? Who is responsible for this? They themselves or the
company? These and many other questions shoot up.
On the other hand, the demand for highly competent and skilled workers is on upsurge. If this is
not taken care of systematically, it will hammer on future of the organisation. The quality of
products and services and the image of the
organisation will be in danger. This is an ethical dilemma on the part of HR manager.
4.4 Selection
The important issues involved in selection procedure may be stated as under.
(a) Matching a job with person or vice-versa
(b) Role of out side pressures in selection of wrong ones
(c) Selecting more than required number of people

7. The cardinal principle of HRD is matching an employee with his job and vice- versa. This indeed
is a difficult proposition. There lies the role of HRD manger.
Selecting a candidate to the job is a common acceptable practice. But turning it around is
considered to be an unethical practice. This is very common in Indian polity.
4.5 Performance Appraisal:
The primal objective of appraisal should be to arrive at the most honest, sincere and trustworthy
assessment of performance of employees. Central tendency, halo effect, mirror personality etc.
will lead to unethical tendencies, e.g.
underrating a man who belongs to a particular race, religion, village, community or a group is
unethical.
4.6 Dealing with Trade Unions
Trade unions have their representation in organisations through employee membership. They
work for justice to their member workers. They disregard anomalies in wages, welfare and
promotions. The HR manager, to solicit active union support in industrial operations, have to
develop friendly relations with union leadership. Hitherto, such interrelatedness of union and
factory management is a common phenomenon.
4.7 Training and Development:
The training ritual begins with identifying training needs on such bases as customer complaints,
lower output, poor quality, supervisors readings and observations, increased wastage and scrap,
increase in number of accidents, poor state of industrial relations, indifferent behavior of
employees and adoption of new technology with a plan for expansion and diversification.
The HR manager has to plan accordingly for training and chalk out training programme to
administer the desired training to a particular group of personnel. All this is ethical.
Even in the sphere of training and development, we notice a variety of circumstances where an
HR manager encounters ethical dilemmas. They are listed below:
(i) When training programme is implemented as a routine training requirement by HR Manager.
(ii) When training need of employee is identified on the basis of a single or nebulous factor.
(iii) When there is absence of relativity between training purposes and training output.
(iv) When the trainees consider attending training programmes merely as a change and a medium
of gaining pleasure.
(v) When there is absence of feedback on training
(vi) When training is considered as an instrument of individual growth by employees.
(vii) When training programme has been ‘finished’ and not ‘completed’.

8. (viii) When training infrastructure is not fully utilised.
(ix) When a trainer comes unprepared and completes his task in a hampy campy manner.
(x) When trainers are selected for training programme under pressure of favoritism or nepotism.
(xi) When the feedback about the training programme is featured as ‘dull’ ‘monotonous’ and
‘useless’. These and several other circumstances will stamp the training and development of
organisation as has been influenced by ethical dilemmas, because here also, the ultimate
responsibility is that of an HR manager.
4.8 Career Planning and Development:
Organisation has to provide opportunity for career planning and play the role of a facilitator to
help him walk up the ladder and fulfil his goal. Neither of them can become complacent about
growth. If this so happens, and an employee feels suffocated for the want of elevation in
hierarchy, the HR manager is said to have been facing ethical dilemma.
4.9 Promotion:
In government and public organisations the basis of promotion is seniority, the private sector
organisations endorse merit as a ground for promotion. If the
organisation practices the policy of seniority as a basis, it is ethical on the part of a company to
promote someone that way. Sometimes a compromise is made by adopting merit - cum - seniority
basis. But it cannot completely match
employee skills with the job descriptions. Ethical dilemma is involved when, under the cover of
merit, some one is promoted at higher level at the fancy of a
manger.
4.10 Transfer:
The employee requested transfers take place on request made by employee due to some personal
reasons. The company initiated transfers are done as a part of
routinical job and organisational requirements. The public demanded transfers occur in the light of
public opinion especially in public enterprises and utility concerns. If the transfer is resorted to, in
pursuit of organisational policy, without fervor or favor, it is ethical. But if it is handled as a
punitive action prejudicially, it is unethical. Sometimes, transfer is made on the basis of
favoritism or nepotism.
4.11 Absenteeism :
Absenteeism may be classified as authorised absenteeism, unauthorised absenteeism, intentional
absenteeism and circumstantianal absenteeism. Of these authorised absenteeism is ethical and

9. lawful. The rest are unethical because they are ultra vires the interest of either the absentee or the
organisation. If the absenteeism is based on some excuses or the authorised
person is involved in giving undue favor to the accused, such absenteeism is of course, unethical.
4.12 Employee Turnover:
Organisations also offer handsome pay packages to such employees and never mind some one
quitting them. The information technology and software
industry are noticing this, across the world. Whether, this creates any ethical dilemma is a matter
of delebrations.
4.13 Wage and Salary Administration :
The ethical issues associated with salary and wage administration are mentioned below.
(i) Paying same remuneration to one who is serious, sincere and hardworking and also to one
whose contribution is least.
(ii) Loss suffering company being expected to declare bonus.
(iii) Paying at different rate to man and a woman doing the same kind of work.
(iv) Getting an employee signed on full pay and actually paying him less than that.
The ethical issues discussed above are not exhaustive but illustrative. The HR manager may be
dabbled in other real life situations as well. As an employee of some organisation, he has to apply
his discretion and get out of ethical syndrome.
Solution of unethical issues
Following points must be considered to promote the fairness and justice in an organization:
1. The organization must realize the intrinsic value of its employees.
2. Treat people with dignity, respect and compassion to foster a trusting work environment free of
harassment, intimidation and unlawful discrimination.
3. Giving opportunities to the employees equally to develop their competency skills.
4. Bring in the feeling of owning the organization, within employees so that the employees would be
committed towards the organization.
5. Laying down such policies and procedure which will ensure equitable treatment for all. 6. The
individual goals on an employee must be streamlined with the organizational goals. Individual goal
of an employee should not obstruct him to achieve the organizational goals.
6. The organization must be fair and honest to its staff. Decisions taken by the management must be
ethical and legal.

10. Ethics in Accountancy
Accounting ethics is primarily a field of applied ethics and is part of businessethics and
human ethics, the study of moral values and judgments as they apply to accountancy. These
collapses have resulted in a widespread disregard for the reputation of the accounting profession.
Ethics in accounting are concerned with how to make good and moral choices in regard to the
preparation, presentation and disclosure of financial information. During the 1990s and 2000s, a
series of financial reporting scandals brought this issue into the forefront. Knowing some of the
issues presented in accounting ethics can help you ensure that you are considering some of the
implications for the actions that you take with your own business.
Fraudulent Financial Reporting
Most accounting scandals over the last two decades have centered on fraudulent financial
reporting. Fraudulent financial reporting is the misstatement of the financial statements by
company management. Usually, this is carried out with the intent of misleading investors and
maintaining the company's share price. While the effects of misleading financial reporting may
boost the company's stock price in the short-term, there are almost always ill effects in the long
run. This short-term focus on company finances is sometimes known as "myopic management."
Misappropriation of Assets
On an individual employee level, the most common ethical issue in accounting is the
misappropriation of assets. Misappropriation of assets is the use of company assets for any other
purpose than company interests. Otherwise known as stealing or embezzlement, misappropriation
of assets can occur at nearly any level of the company and to nearly any degree. For example, a
senior level executive may charge a family dinner to the company as a business expense. At the
same time, a line-level production employee may take home office supplies for personal use. In
both cases, misappropriation of assets has occurred.
Disclosure
As a subtopic of fraudulent financial reporting, disclosure violations are errors of ethical omission.
While intentionally recording transactions in a manner that is not in accordance with generally
accepted accounting principles is considered fraudulent financial reporting, the failure to disclose
information to investors that could change their decisions about investing in the company could be
considered fraudulent financial reporting, as well. Company executives must walk a fine line; it is
important for management to protect the company's proprietary information. However, if this

11. information relates to a significant event, it may not be ethical to keep this information from the
investors.
Penalties
Penalties for violations of accounting ethics laws have increased greatly since the passage of the
Sarbanes-Oxley Act of 2002. This legislation allows for harsh penalties for manipulating financial
records, destroying information, interfering with an investigation and provides legal protection for
whistle-blowers. In addition, chief executives can be held criminally liable for the misreporting of
their company. If accounting ethics wasn't an important consideration before, the higher stakes
provided by the Sarbanes-Oxley Act have definitely upped the ante.
Since the accounting profession involves various functions of accounting, such as, recording of all
business events that are of financial character, classifying and summarizing them and present
them in the form of profit and loss statement, balance sheet and cash flow statement, the way
these activities are performed is very important and it has a lot do with maintaining accounting
ethics of accountants.
One of the most important things that shows ethical behavior of an accountant is that he needs to
remain impartial and loyal to the business organization while performing the related activities
sincerely and in all honesty. Since the accounting information drawn from the financial statements
is of great value and significance to be relied upon and upon which the success or failure of a
business immensely depends, an accountant should not manipulate the accounting figures in order
to hide any information. In terms of balance sheets, the information concerning, cash, receivables,
inventory, prepaid expense, long term receivables etc must be presented accurately.
Similarly, the activities pertinent to the components of income statements, such as, revenues and
expense are to be carried out efficiently. An accountant should not change the accounting figures
to make profits look better on income statement. In this way, accounting professionals are
supposed to provide the accurate information to the top management without changing the figures
showing less expenses or greater revenues.
Hence, the accounting ethics should be applied to each and every activity of the process of
accounting, so that the complete, accurate and reliable information can be presented to the desired
users of financial statements in a business organization.
Ethical Issues in Accounting: Accounting is the process through which any business keeps track
of its financial activities by recording its Debits and Credits and balancing its accounts.
Accounting is a system to present the financial position of a business and the results of its
operations and cash flow. Accounting ethics has been deemed difficult to control as accountants

12. and auditors must consider the interest of the public (which relies on the information gathered in
audits) while ensuring that they remained employed by the company they are auditing. They must
consider how to best apply accounting standards even when faced with issues that could cause a
company to face a significant loss or even be discontinued. Due to several accounting scandals
within the profession, critics of accountants have stated that when asked by a client “what does
two plus two equal?” the accountant would be likely to respond “what would you like it to be?”
This thought process along with other criticisms of the profession’s issues with conflict of interest,
have led to various increased standards of professionalism while stressing ethics in the work
environment. The role of accountants is critical to society. Accountants serve as financial
reporters and intermediaries in the capital markets and owe their primary obligation to the public
interest. The information they provide is crucial in aiding managers, investors and others in
making critical economic decisions. Accordingly, ethical improprieties by accountants can be
detrimental to society, resulting in distrust by the public and disruption of efficient capital market
operations.
Ethical Issues in Accounting
1 Underreporting Income: Under-reporting income in order to avoid taxes is an illegal practice.
When people under report their incomes, the federal government loses tax revenue that could go
towards social security, Medicare and other federal projects. Corporations are especially watched
by auditors because of the large tax bills at stake each tax year. If caught under reporting,
individuals and companies will be subject to penalties and, in extreme cases, criminal charges.
Sometimes applies to public companies reporting lower revenues in a fiscal quarter than were
actually recorded. If the company has already been reporting bad news and the stock is down,
executives may try to take some revenue from the current quarter and push it into the next quarter.
This way, the bad news can be “flushed out”, and the company canreport an upside surprise in the
coming quarter, potentially boosting the stock price. This practice is also illegal! The burden for
public companies to succeed at high levels may place undue stress and pressure on accountants
creating balance sheets and financial statements. The ethical issue for these accountants becomes
maintaining true reporting of company assets, liabilities and profits without giving in to the
pressure placed on them by management or corporate officers. Unethical accountants could easily
alter company financial records and maneuver numbers to paint false pictures of company
successes. This may lead to short-term prosperity, but altered financial records will ultimately
spell the downfall of companies when the Securities and Exchange Commission discovers the
fraud.
1. Falsifying Document: Falsification of Documents is to change details on the original
document and try to pass them off as real. ―Falsifying Documents‖ is a type of white collar
crime. It involves altering, changing, or modifying a document for the purpose of deceiving

13. another person. It can also involve the passing along of copies of documents that are known to be
false. In many states, falsifying a document is a crime punishable as a felony.
Some types of documents that are commonly falsified may include:
• Tax returns and income statements
• Personal checks
• Bank account records
• Business record keeping books
• Immigration documents (such as visas, passports, etc.)
• Identification cards and birth certificates Basically, any type of official form or document can be
illegally modified. Falsifying documents is usually done in connection with broader criminal
aims, such as tax evasion.
Many different types of acts can be considered as falsifying a document, including:
• Altering or misrepresenting factual information such as prices or monetary amounts • Stating
false information when requested to provide truthful statements
• Forging a signature
• Using official letterheads without authorization
• Concealing assets or property (especially in bankruptcy proceedings)
• Knowingly using or distributing a fake document Again, a person can only be held criminally
liable if they are acting with the intention of deceiving or defrauding another party. So, if a person
was using a document but did not know that it was fake, they usually cannot be found guilty of
falsifying a document. Falsifying documents is a very serious offense and is generally classified as
a felony.
This means that a person charged with falsifying documents may be subject to the following legal
penalties:
• Having to pay a monetary fine
• Incarceration in a prison facility
Depending on the nature of the offense, as well as individual state laws, falsifying documents can
result in a prison sentence of 5-10 years. Also, if government documents or authorities were
involved, the legal penalties may be more severe. Finally, legal penalties may increase with repeat
offenses. Illegally evading income taxes and Allowing or taking questionable deductions When a
person, organization or corporation intentionally avoids paying his/her/its true tax liability it is an
illegal practice. Those caught evading taxes are generally subject to criminal charges and
substantial penalties. There is a difference between tax minimization/avoidance and tax evasion.
All citizens have the right to reduce the amount of taxes they pay as long as it is by legal means.

14. 2. Creative accounting: Accounting practices that follow required laws and regulations, but
deviate from what those standards intend to accomplish. Creative accounting capitalizes
on loopholes in theaccounting standards to falsely portray a better image of the company.
Although creative accounting practices are legal, the loopholes they exploit are often
reformed to prevent such behaviours. A primary benefit of public accounting statements is
that they allow investors to compare the financial health of competing companies.
However, when firms indulge in creative accounting they often distort the value of the
information that their financials provide. Creative accounting can be used to manage
earnings and to keep debt off the balance sheet.
Ethical Issues in Finance
When we put our hard- earned saving in the care of financial firms- asset managers, banks,
insurance and all kinds of funds- and we trust them to look after the money. We want the best
return, but there is a balance between the risk and reward. We need to feel confident that we can
trust the finance professionals to act with integrity, in our interest. Ethical Issues in Finance are:
1. Insider trading “Insider trading” is a term that most investors have heard and usually associate
with illegal conduct. But the term actually includes both legal and illegal conduct. The legal
version is when corporate insiders—officers, directors, and employees— buy and sell stock in
their own companies. Illegal insider trading refers generally to buying or selling a security, in
breach of a fiduciary duty or other relationship of trust and confidence, while in possession of
material, nonpublic information about the security. Insider trading violations may also include
“tipping” such information, securities trading by the person “tipped,” and securities trading by
those who misappropriate such information.
2. Campaign financing Campaign finance refers to all funds raised in order to promote
candidates, political parties, or policies in elections, referendums, initiatives, party activities, and
party organizations. Thefunds could also detract from the opponents of the above. Campaign
funds are the subject heading under which all books dealing with money in politics are catalogued
by the Library of Congress.
The above Issues can be prevented through:
GAAP (generally accepted accounting principles) GAAP for short of Generally accepted
accounting principles, are the accounting rules used to prepare and standardize the reporting of
financial statements, such as balance sheets, income statements and cash flow statements, for
publicly traded companies and many private companies in the United States. GAAPbased income

15. is measured so that the information provided on financial statements is useful to those making
economic decisions about a company, such as potential investors and creditors and other
stakeholders. Financial statements prepared under GAAP are intended to reflect an economic
reality; GAAP makes a company’s financials comparable and understandable so that investors,
creditors and others can make rational investment, credit and other financial decisions. In order to
be useful and helpful to users, GAAP requires information on financial statements to be relevant,
reliable, comparable and consistent. GAAP is implemented through measurement principles and
disclosure principles. Measurement principles recognize and determine the timing and basis of
items that enter the accounting cycle and impact the financial statements, such as the period in
which transactions will be recorded. Disclosure principles determine what specific numbers and
other information are essential to be presented in financial statements. Basically, GAAP is
concerned with:
• The measurement of economic activity;
• The time when such measurements are to be made and recorded;
• The disclosures surrounding this activity; and
• The preparation and presentation of summarized economic information in financial statements.
Without GAAP, companies would be free to decide for themselves what financial information to
report and how to report it, making things quite difficult for investors and creditors who have a
stake in that company.
Indian Accounting Standards: Accounting standards may be defined as uniform rules for
external financial reporting, which may be applicable either to all or a certain class of entity.‖
(Accounting Theory – Lele and Jawahar Lal) The ethical issues can be prevented through the
implementation of accounting standards. The accounting standards are originally framed for
informality in the presentation of accounting statements. Through accounting standard the account
are become uniform and comparable. The accounting standards provides the guidance for making
the financial statements in the true and fair manner, it helps the accounting professionals to
increase the credibility of financial statements as well as useful in determining the efficiency of
management.

16. Steps to be taken by the management for true, fair and reliable management accounts: The
management should frames the rules and policies in such a way that have positive effect on
business activities; determining the key elements of the business like objectives and see how they
are defined and measured, and make sure that the funds are allocated in different activities on the
basis of their importance.
The Ethical Audit- Main purpose is to check the actions of a firm
Objectives
Helps the shareholders to evaluate the performance of the directors and vice versa
Establish code of conduct Establishing ethical conduct of business to attract valuable investments
To identify the training necessary for the employees
To help busi. undergo major alterations like restructuring
Frame rules that have a positive effect on business activities
Making sure that the funds are allocated to different activities on the basis of their importance
Determining the key elements of the business like the objectives and see how they are defined and
measured

17. Ethics in production
Ethics in production is a subset of business ethic that is meant to ensure that the production
function or activities are not damaging to the consumer or the society. Like other ethics there is a
certain code of conduct or standards to be followed, however ensuring that the ethics are complied with is
often difficult.
One of the most important characteristic of the business today is that there is a great degree of
interdependence between various business functions. Production cannot happen without marketing and
sales and vice versa. In order to survive in the competitive sphere organizations try to reduce the costs
involved in production processes. This cost efficiency is sometimes achieved at the cost of quality. Poor
processes and technology is used to keep the cost down, this is especially true for small players who
cannot afford economies of scale. Having said this there are also examples of industry giants that
compromised on certain production processes, cola companies make up for a good example.
All the production functions are governed by production ethics but there are certain that are severely
harmful or deleterious which need to be monitored continuously. The following are worth mentioning:
1. There are ethical problems arising out of use of new technologies that are deleterious to health,
safety and environment. Technological advancements like genetically modified food, radiations
from mobile phones, medical equipment etc are less problems are more of dilemmas.
2. Defective services and products or products those are innately deleterious like alcohol, tobacco,
fast motor vehicles, warfare, chemical manufacturing etc.
3. Animal testing and their rights or use of economically or socially deprived people for testing or
experimentation is another area of production ethics.
4. Ethics of transactions between the organization and the environment that lead to pollution, global
warming, increase in water toxicity and diminishing natural resources.
Dilemma of Ethics in Production
There are certain processes involved in the production of goods and a slight error in the same can degrade
the quality severely. In certain products the danger is greater i.e. a slight error can reduce the quality and
increase the danger associated with consumption or usage of the same exponentially. The dilemma
therefore lies in defining the degree of permissibility, which in turn depends on a number of factors. Bhopal
gas tragedy is one example where the poisonous gas got leaked out due to negligence on the part of the
management.
Usually many manufactures are involved in the production of same good. They may use similar or
dissimilar technologies for the same. Setting a standard in case of dissimilar technologies is often very
difficult. There are many other factors that contribute to the dilemma, for example, the involvement of the
manpower, the working conditions, the raw material used etc.
Social perceptions also create an impasse sometimes. For example the use of some fertilizer by cola
companies in India recently created a national debate. The same cold drinks which were consumed till
yesterday became noxious today because of a change in the social perception that the drinks are not fit for
consumption.

18. Ethics in BPO
Outsourcing is contracting with another company or person to do a particular function. That external party is
responsible for the administration, management and execution of the work. External party has to perform assigned
work by using its own resources within predefined time and standard.
Introduction
In recent years, the term Business Process Outsourcing or BPO has gained prominence and the trend of
outsourcing back office operations to centers in India and Philippines along with other countries in Asia has
taken center stage. Often, we come across projections that show a greater growth in BPO with more
western firms outsourcing to the Asian and other countries.
This module is intended to cover the BPO phenomenon in depth and provide the readers with a
clear understanding of the dynamics involved as far as this phenomenon is concerned. The various
articles in this module would help the readers form a perspective of how the BPO sector works and the
business drivers and imperatives behind the outsourcing phenomenon.
First, why should any company in the west outsource its back office operations? There are several reasons
for this and the primary driver is the cost factor. Since wages in India and other Asian countries are cheap
in Dollar terms which mean that for the same amount of money that the firms are paying their employees in
the west, they can get a highly leveraged amount of work when they outsource to India and other Asian
countries.
Next, because of the fact that the time zones of the West and Asia complement each other to ensure that
work gets done in a 24/7 cycle. What we mean is that since the US and Asia are separated by almost a
half day time zone differential, whenever it is nighttime in the US, it is daytime in Asia and vice versa
meaning that the work can be done round the clock.
Challenges faced by BPO
It is a fact that India has been at the forefront of the BPO/Services revolution and its firms have garnered a
huge chunk of the BPO/Services market. However, the firms that operate in the BPO space in India face
their own challenges as far as the conduct of business is concerned. For instance, one of the foremost
challenges that are faced by the BPO firms in India is the instability and the chaotic way in which
infrastructure and logistics management is concerned.
The frequent power outages, poor traffic management, political instability in the form of strikes and
shutdowns all take a toll on the operations of the BPO firms. Because the sector needs to work 24/7, it
cannot afford any disruption to its service. Hence, the move by the BPO firms to lobby with the government
on granting them the essential services tag so that they are not subject to the instability and can carry on
their operations.
The next set of challenges deal with the increasing un-employability of the workforce. In previous articles
we discussed how the ready availability of highly skilled resources is an advantage that India has.
However, it is also the case that a majority of this resource pool does not pass the criteria for employment.
The point here is that it is not enough to have a million graduates graduating each year. Rather, the real
test should be as to how many of them actually qualify for employment. Towards this end, the BPO sector

19. is making efforts by roping in management institutes and technology colleges to partner with the apex
IT/ITES body, NASSCOM to improve the skill set of the graduates and make them better suited for the kind
of work that the BPO firms do.
Third, the way in which the BPO sector has evolved in India is mainly by doing low end work which is
rapidly being threatened by new entrants like Philippines and other countries. This means that either the
BPO firms cut their costs of resources or migrate to higher end work like the KPO or Knowledge Process
Outsourcing. Again, the task here is cut out for the BPO sector and for NASSCOM i.e. to market the Indian
BPO sector as being worthy of doing high end work and capable of innovation and other higher value chain
activities. In short, these are some of the challenges that the BPO sector in India faces as far as its
operations are concerned.
On the external front, there has been a hue and cry over outsourcing to India in the ongoing presidential
campaign in the United States. This means that the BPO sector in India has to be extra vigilant to rebut the
charges made by the politicians in the US and the UK. The point here is that the BPO sector must not
become a scapegoat in times when the US and the UK are in recession and so there needs to be
aggressive lobbying taken up externally to counter these perceptions. In conclusion, as in life and so in
business, nothing is permanent and hence the BPO sector in India should not be complacent and let
events and circumstances pass them by.
Outsourcing non-core activities helps companies save considerably on costs and improve profitability.
Outsourcing work is recognized as a competitive strategy for success. However, companies have
concerns about the ethics of outsourcing practices at the vendor location.
By choosing Flatworld Solutions you are dealing with a company that addresses your concerns.
Concerns regarding ethics in outsourcing practices
 Security Concerns: The core concern of outsourcing ethics is confidential information security. Companies
need to be concerned about the security systems in place and about the safety of electronic data storage. If your
outsourcing partner does not have adequate information about security measures, it might be a good idea to
stay clear of them
 Fall in Service Quality: There is concern that services delivered from half-way across the globe might not
meet quality expectations. Companies looking to outsource should check the track record of the vendor and
their technical competencies
 Environmental Issues: Companies are concerned that vendor companies may practice environmentally
damaging processes. They may need to conduct periodic audits to ensure compliance
 Poor Work Environment at Vendor Location: Companies have to impose stringent standards on the work
conditions at offshore locations. They need to conduct intermittent audits on the work conditions and review
the HR policies of offshore vendors
 Privacy

20. Marketing Ethics
Marketing Ethics
Ethics Is the art and science of determining good and bad or right or wrong moral behavior.
Marketing • Is the process of communicating the value of a product or service to customers, for
the purpose of selling the product or service.
Marketing Ethics • is the area of applied ethics which deals with the moral principles behind the
operation and regulation of marketing.
why • When an organization behaves ethically, customers develop more positive attitudes about
the firm, its products, and its services.
why • To create values or trust with the company.
why • To build good image about the organization in the minds of costumer, employee, companies
and the society .
Marketing Mix
Product
 Consumer safety
 Product liability and reliability
 Designing for special needs
Price
 Bid rigging
 Predatory pricing
 Price fixing
Place • Performance pressure exist that may lead to ethical dilemmas.
Place • Many vendors sell products that have crossed expiry date is unethical.
Place • Promising shipment when knowing delivery is not possible by the promised date.
Place • Most drug stores would give too many drugs without perception from a qualified doctor.
Place • Products are moved in unsafe vehicles.
Promotion Promote unhealthy products. Deceptive advertising. Subliminal advertising.
recap •

21. Ethics in Technology
Businesses today are technology and innovation driven. There is huge competition in the sphere and
therefore like other industry or business function ethics is essential here also. Specially because ethics by
itself is only a tool to create and doesn’t know ethics or morals!
Every day we have innovative products and services that announce their arrival in the market place and
others that go obsolete. It is this technology and innovation that leads to ethical issues, considering the
competition to stay ahead by innovating is immense. Issues like data mining, invasion to privacy, data theft
and workplace monitoring are common and critical.
In technology we speak of ethics in two contexts; one is whether the pace of technological
innovation is benefiting the humankind or not, the other is either severely empowering people
while choking others for the same. Technology, for example, has drastically replaced people at work.
In the first case we are compelled to think about the pace at which technology is progressing. There are
manifold implications here, be it things like computer security or viruses, Trojans, spam’s that invade the
privacy of people or the fact the technology is promoting consumerism.
Nowadays data storage is primarily on computer systems. With the advent of internet technology the world
has got interconnected and data can be accessed remotely by those who are otherwise unauthorized to do
the same. This is one of the pitfalls of innovation. The other one i.e. the pace of technological change also
raises the question of ethics.
New products make their way and leave the existing ones obsolete. In fact technological change and
innovation is at the heart of consumerism, which is bad for economy and environment in general. The
recent economic downturn makes up for a very good example.
Increasingly technological products are adding up to environmental degradation. Computer screens,
keyboards, the ink used in the printers are some of the ways in which technology is polluting the
environment. All these produce toxins that cannot be decomposed easily.
The other major issue in technology that brings in ethics is interface between technology and the
computers. Many scientists are of the opinion that the world will come to an end with a war between the
humankind and the technology. Technology they say will advance to an extent beyond the control of those
who have made it!
No doubt technology has replaced people at work and made certain others redundant. On the flip side
many people have been raised to power while others have been severely handicapped. The latter is
especially true for third world countries. New manufacturing processes that are outsourced either replace
manpower there or either exploits the latter in the name of employment by engaging them cheaper prices.
Technology has also made inroads into the field of medicine and life care. New cloning techniques, genetic
modifications or other life saving drugs need continuous monitoring and surveillance. Bioethics has thus
emerged as ethics in the field of medical technology.
Whereas we cannot talk of controlling technology and innovation, the better way is to adapt and change.
The role of ethics in technology is of managing rather controlling the same. Continuous monitoring is
required to keep track of latest innovations and technological changes and for ensuring fair practices.
Values and ethics
Values and ethics in simple words mean principle or code of conduct that govern transactions; in
this case business transaction. These ethics are meant to analyse problems that come up in day to day
course of business operations. Apart from this it also applies to individuals who work in organisations, their
conduct and to the organisations as a whole.
We live in an era of cut throat competition and competition breeds enmity. This enmity reflects in business
operations, code of conduct. Business houses with deeper pockets crush small operators and markets are
monopolised. In such a scenario certain standards are required to govern how organizations go about their
business operations, these standards are called ethics.
Business ethics is a wider term that includes many other sub ethics that are relevant to the
respective field. For example there is marketing ethics for marketing, ethics in HR for Human resource

22. department and the like. Business ethics in itself is a part of applied ethics; the latter takes care of ethical
questions in the technical, social, legal and business ethics.
Origin of Business Ethics
When we trace the origin of business ethics we start with a period where profit maximisation was seen as
the only purpose of existence for a business. There was no consideration whatsoever for non-economic
values, be it the people who worked with organisations or the society that allowed the business to flourish.
It was only in late 1980’s and 1990’s that both intelligentsia and the academics as well as the corporate
began to show interest in the same.
Nowadays almost all organisations lay due emphasis on their responsibilities towards the society and the
nature and they call it by different names like corporate social responsibility, corporate governance or
social responsibility charter. In India Maruti Suzuki, for example, owned the responsibility of maintain a
large number of parks and ensuring greenery. Hindustan unilever, similarly started the e-shakti initiative for
women in rural villages.
Globally also many corporations have bred philanthropists who have contributed compassion, love for poor
and unprivileged. Bill gates of Microsoft and Warren Buffet of Berkshire Hathaway are known for their
philanthropic contributions across globe.
Many organisations, for example, IBM as part of their corporate social responsibility have taken up the
initiative of going green, towards contributing to environmental protection. It is not that business did not
function before the advent of business ethics; but there is a regulation of kinds now that ensures business
and organisations contribute to the society and its well being.
Nowadays business ethics determines the fundamental purpose of existence of a company in
many organisations. There is an ensuing battle between various groups, for example between those who
consider profit or share holder wealth maximisation as the main aim of the company and those who
consider value creation as main purpose of the organisation.
The former argue that if an organisations main objective is to increase the shareholders wealth, then
considering the rights or interests of any other group is unethical. The latter, similarly argue that profit
maximisation cannot be at the expense of the environment and other groups in the society that contribute
to the well being of the business.
Nevertheless business ethics continues to a debatable topic. Many argue that lots of organisations use it to
seek competitive advantage and creating a fair image in the eyes of consumers and other stakeholders.
There are advantages also like transparency and accountability.
Importance of ethics
Most of us would agree that it is ethics in practice that makes sense; just having it carefully drafted and
redrafted in books may not serve the purpose. Of course all of us want businesses to be fair, clean and
beneficial to the society. For that to happen, organizations need to abide by ethics or rule of law, engage
themselves in fair practices and competition; all of which will benefit the consumer, the society and
organization.
Primarily it is the individual, the consumer, the employee or the human social unit of the society who
benefits from ethics. In addition ethics is important because of the following:
1. Satisfying Basic Human Needs: Being fair, honest and ethical is one the basic human needs.
Every employee desires to be such himself and to work for an organization that is fair and ethical
in its practices.
2. Creating Credibility: An organization that is believed to be driven by moral values is respected in
the society even by those who may have no information about the working and the businesses or
an organization. Infosys, for example is perceived as an organization for good corporate
governance and social responsibility initiatives. This perception is held far and wide even by those
who do not even know what business the organization is into.
3. Uniting People and Leadership: An organization driven by values is revered by its employees
also. They are the common thread that brings the employees and the decision makers on a
common platform. This goes a long way in aligning behaviors within the organization towards
achievement of one common goal or mission.
4. Improving Decision Making: A man’s destiny is the sum total of all the decisions that he/she
takes in course of his life. The same holds true for organizations. Decisions are driven by values.

23. For example an organization that does not value competition will be fierce in its operations aiming
to wipe out its competitors and establish a monopoly in the market.
5. Long Term Gains: Organizations guided by ethics and values are profitable in the long run,
though in the short run they may seem to lose money. Tata group, one of the largest business
conglomerates in India was seen on the verge of decline at the beginning of 1990’s, which soon
turned out to be otherwise. The same company’s Tata NANO car was predicted as a failure, and
failed to do well but the same is picking up fast now.
6. Securing the Society: Often ethics succeeds law in safeguarding the society. The law machinery
is often found acting as a mute spectator, unable to save the society and the environment.
Technology, for example is growing at such a fast pace that the by the time law comes up with a
regulation we have a newer technology with new threats replacing the older one. Lawyers and
public interest litigations may not help a great deal but ethics can.
Ethics tries to create a sense of right and wrong in the organizations and often when the law fails, it is the
ethics that may stop organizations from harming the society or environment.
Sources of Business Ethics
Ethics in general refers to a system of good and bad, moral and immoral, fair and unfair. It is a code of
conduct that is supposed to align behaviors within an organization and the social framework. But the
question that remains is, where and when did business ethics come into being?
Primarily ethics in business is affected by three sources - culture, religion and laws of the state. It is for this
reason we do not have uniform or completely similar standards across the globe. These three factors exert
influences to varying degrees on humans which ultimately get reflected in the ethics of the organization.
For example, ethics followed by Infosys are different than those followed by Reliance Industries or by Tata
group for that matter. Again ethical procedures vary across geographic boundaries.
Religion
It is one of the oldest foundations of ethical standards. Religion wields varying influences across various
sects of people. It is believed that ethics is a manifestation of the divine and so it draws a line between the
good and the bad in the society. Depending upon the degree of religious influence we have different sects
of people; we have sects, those who are referred to as orthodox or fundamentalists and those who are
called as moderates. Needless to mention, religion exerts itself to a greater degree among the orthodox
and to lesser extent in case of moderates. Fundamentally however all the religions operate on the principle
of reciprocity towards ones fellow beings!
Culture
Culture is a pattern of behaviors and values that are transferred from one generation to another, those that
are considered as ideal or within the acceptable limits. No wonder therefore that it is the culture that
predominantly determines what is wrong and what is right. It is the culture that defines certain behavior as
acceptable and others as unacceptable.
Human civilization in fact has passed through various cultures, wherein the moral code was redrafted
depending upon the epoch that was. What was immoral or unacceptable in certain culture became
acceptable later on and vice versa.
During the early years of human development where ones who were the strongest were the ones who
survived! Violence, hostility and ferocity were thus the acceptable. Approximately 10,000 year ago when

24. human civilization entered the settlement phase, hard work, patience and peace were seen as virtues and
the earlier ones were considered otherwise. These values are still pt in practice by the managers of today!
Still further, when human civilization witnessed the industrial revolution, the ethics of agrarian economy
was replaced by the law pertaining to technology, property rights etc. Ever since a tussle has ensued
between the values of the agrarian and the industrial economy!
Law
Laws are procedures and code of conduct that are laid down by the legal system of the state. They are
meant to guide human behavior within the social fabric. The major problem with the law is that all the
ethical expectations cannot be covered by the law and specially with ever changing outer environment the
law keeps on changing but often fails to keep pace. In business, complying with the rule of law is taken as
ethical behavior, but organizations often break laws by evading taxes, compromising on quality, service
norms etc.