Unit-1

Chapter Outline
• Why Study Business Ethics?
• The Development of Business Ethics
• Developing an Organizational and Global Ethical
Culture
• The Benefits of Business Ethics
• Our Framework for Studying Business Ethics
Introduction

• Ethics is the study of our web relationships

with others.

• Companies do not operate in a vacuum but

rather are plunged in a universe of
relationships with multiple stakeholders.

• With the globalization the scenario in which

companies operate has become even more
complex, given the emergence of global
groups of stakeholders.
 Business Ethics

• Comprises principles and standards that guide behavior

in the world of business

• Right or wrong, acceptable or unacceptable behavior

within the organization

• Determined by you and key stakeholders

Introduction

The need for a company to behave

“ethically” is described in terms of a
company’s need to interact productively
with its stakeholders.
Business Ethics

Business Ethics means conducting all

aspects of business and dealing with all
stakeholders in an ethical manner…
Sources of Ethical Norms

Fellow Fellow Regions of

Workers Workers Country

Family Profession
The
Individual
Friends Employer
Conscience

The Law Religious Society at

Beliefs Large

6
Objectives of Business Ethics
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situations ng about
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Objectives
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Stakeholde
Ethics
r approach Ensuring
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organizatio r
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ethics
copyright© Sandeep Singh, SMS,
Varanasi
• “Business ethics is rules, standards, codes, or
principles which provide guidelines for morally
right behavior and truthfulness in specific
situations.”
• “Business ethics is the study of business
situation, activities, and decisions where issues
of right and wrong are addressed.”
• “Business ethics refers to clear standards and
norms that help employees to distinguish right
from wrong behaviour atSingh,
copyright© Sandeep work.”
SMS,
Varanasi
“Business ethics is a study of moral standards
and how these apply to the systems and
organizations through which modern
societies produce and distribute goods and
services, and to the people who work within
these organizations. Business ethics, in
other words, is a form of applied ethics. It
includes not only the analysis of moral
norms and moral values, but also attempts
to apply the conclusions of this analysis to
that assortment of institutions, technologies,
transactions, activities, and pursuits that we
call business.” (Manuel
copyright© Velasquez)
Sandeep Singh,
Varanasi
SMS,
The concept of business ethics
actually contains four interconnected
elements

• Framework- Set of rules, standards,

codes, principles, philosophy etc. to be
followed for ethical decision making in
business.
• Internal development of ethical traits-
Development of virtues, values, morality
and inner conscience.
• Situation- copyright©
Business situations
Sandeep Singh, SMS,

demanding ethical judgements.

Varanasi
Nature of Business Ethics

Complex Dynamic

Interdependent Subjective

copyright© Sandeep Singh, SMS,

Varanasi
• Complex because of no common
consensus
• Dynamic because of dynamic nature of
business decision making
• Interdependent because ethical decision
making is dependent on many factors and
one’s decision affect others.
• Subjective copyright©
because Sandeep Singh, the
SMS, frameworks
Varanasi
 Benefits of Business Ethics

• Better ethical climate

• Employee commitment and trust
• Investor loyalty and trust
• Customer satisfaction and trust
• Long term profits
Values

• Abstract ideals that shape an individual’s

thinking and behavior – a moral compass

• Instrumental values – certain way of

behaving is appropriate in all situations –
“means”.

• Terminal values – enduring belief in the

attainment of a certain end state –
“ends”.
Ethics
• The study of moral obligation
involving the distinction
between right and wrong.

• Business Ethics: right or

wrong in the workplace –
value management.
 Morality and Ethics

Morality is concerned with understanding of

what is right and wrong behaviour. In the study
of business ethics many people treat the
concept of ethics and morality as same. There
is no harm in it. However treating them as
different but strongly inter-related is a better
approach in enriching the field of business
ethics. Morality could be considered as one of
the subject matter of study in business ethics.
Copyright©
 Difference between Morality and Ethics

Ethics
Morality
1. Ethics is the study of framework such as standards, Morality is right action, conduct or
behaviour
principles, rules or codes and traits for ensuring
right action, behaviour or conduct.

2. Ethics is the philosophical study of morality Morality is the subject

matter of ethics
3. Ethics encompasses morality Morality is the sub-field
of ethics
4. Ethics attempts to bring rationalization to morality Morality gets rationalization
through ethics
5. Ethics tries to systemize morality Morality becomes systematic
through ethics
6. Ethics legitimizes morality Morality gets legitimized
through ethics copyright© Sandeep Singh, SMS,
7. Ethics is covert as well as overt Varanasi Morality is overt
 Rest Model of Moral Behaviour

Make Engage
Recogniz Establish
moral in moral
e moral moral
Judgeme behaviou
issue intent
nt r

copyright© Sandeep Singh, SMS,

Varanasi
Common Misconduct
in Organizations
• Misrepresenting hours worked
• Employees lying to supervisors
• Management lying to employees,
customers, vendors or the public
• Misuse of organizational assets
• Lying on reports/falsifying records
• Sexual harassment
• Stealing/theft
• Accepting or giving bribes or kickbacks
• Withholding needed information from
employees, customers, vendors or public
Common Causes of Unethical
Behavior

• Pressure
• Fear
• Greed
• Convenience
Causes of Unethical Behavior (cont’d)

• Following boss’s directives

• Meeting overly aggressive business/financial
objectives
• Helping the organization survive
• Meeting schedule pressures
• Be a team player (group think)
• Rationalizing that others do it
• Resisting competitive threats
• Advancing own career
Ethical Dilemmas

Making decisions under stress

or dealing with complex issues
that have no clear indication of
what is right or wrong.

There are NO simple ethical dilemmas…

all have layers of meaning and effect.
Business Ethics Myths

• Business ethics is a new fad.

• Business ethics – religion vs.
management.
• Business ethics is obvious –
“do good!”
• Business ethics is good guys
preaching to bad guys.
“Whistleblower’s” Reluctance

• Didn’t believe action would be

taken.
• Feared retaliation from mgmt.
• Didn’t trust confidentiality.
• Feared not being a team
player.
• Feared retaliation from co-
workers.
• Didn’t know who to contact.
Business Ethics Myths (cont’d)

• Ethics can’t be managed.

• Being legal = being ethical.
• Managing ethics has little
practical relevance.
Ethical Tips for Organizations

• Develop a code of ethics.

• Communicate code and bake
it into culture top-down.
• Treat ethics as a process.
• Create open lines of
communication.
• Set good examples.
• Educate employees – frame
issues through storytelling.
• Value forgiveness.
Benefits of Managing Ethics in the
Workplace
• Improves society.
• Maintains a moral course in
turbulent times.
• Cultivates employee
teamwork, productivity, morale
and development.
• Acts as an insurance policy.
Benefits of Managing Ethics in the
Workplace (cont’d)

• Establishes values for quality

management, strategic
planning and diversity
management.
• Promotes strong public image.
• It is the RIGHT thing to do!
Ethical Tips for Individuals

• Establish personal values.

• Be aware of ethical events.
• Develop critical thinking
techniques.
• Be reflective.
• Make it a priority every day.
Spirituality and Business Ethics
• Spirituality is integral and holistic, incorporating within
itself the material, moral and cultural values.
• There is a misconception regarding spirituality that
spiritual value is opposed to the material one.
• The term ‘spiritual’ as also the Sanskrit substitute
“Atmika” or “Adhyatmik” literally meaning any thing
that pertains to the spirit (the Self or soul or atman).
• There are virtues and values associated with spirit
(Atman) as its very nature, provided the Atman (spirit)
is in natural state, freed from impurities.
• The Budhist and the Jaina way of life is highly
spiritual and yet there is no belief in God there.
• In the Brahmana (Vedic) tradition too, half of the
philosophical schools (Vaisesika, Samkhya and
Mimamsa) do not believe in God and yet they present
a moral and spiritual way of life to follow, although the
definition of morality and spirituality differs from
school to school.
• However, faith in God or the Higher Self strengthens
the moral and spiritual attitude, and facilitates the
ethico-spiritual living. So, faith in the metaphysical
spiritual reality is also a value – a supplementary
value.
Two Aspects of Spirituality
• While defining spirituality, we have to understand that
there are two aspects of spirituality – a negative
aspect and a positive aspect, and the two aspects
are complementary to each other. Negatively,
spirituality means melting or effacing the ego, and
positively it means realizing one’s unity with others
(or in other words, having universal love).
• Ego is the principle of differentiation of oneself from
others; ego rests on the feeling of otherness (what in
the spiritual philosophy is technically called
‘dvaitabhava’ or ‘bheda-bhava’).
• Ego takes place when I do not consider the so-called
others as ‘me’ or ‘my own’ and cut myself off from
them and confine myself to my own individuality.
• In the ego-state we wish only the good of ourselves
and not the good of others, we impose ourselves on
others and even exploit others for our own end.
Selfishness and ego are like the two sides of one and
the same coin.
• Ego is the foundation and the root cause of all evil, of
all immorality.
• If spirituality negatively means effacement of the ego,
and if the ego means separating oneself from the
others and confining oneself to one's own
individuality and taking into consideration only
oneself and the others, then it becomes easy to
understand the positive meaning of spirituality as
what in the spiritual philosophy is technically called
'Advaita-bhava' or 'Abheda-bhava' which means
feeling of one'scopyright©
unity Sandeep
with all.
Singh, SMS,
Varanasi
• Spirituality is the state of consciousness in which the
feeling of otherness is gone and the feeling of affinity
and unity with the so-called others is established.
• The feeling of unity can be explained with the help of
examples. One such example is that of the loving
mother. The mother feels that the children are her
own or herself; the happiness and suffering of the
children are the happiness and suffering of the
mother. The bodies of the children are separated
from the mother, and in that sense the children are
'others' to her, but in her consciousness or in her
feeling they are not others. What she does good for
the children, she thinks she is doing for her own self,
as she feels that the children are herself or her own.
This is what is called love. Thus love is the meaning
of spirituality; love is 'the' spiritual value.
Difference Between Spirituality and Morality

• In the moral consciousness, the imperative

and the direction for performing a
particular action come from the ethical
sense; that is, we perform an action
Morality
because we think it is ethically right or
good, and we refrain from doing an action
because we think it is ethically wrong or
sinful.
• In the spiritual consciousness, the incentive to
perform a particular action comes not from
moral consideration but from compassion or
love, and morality is naturally present there, as
Spirituality love (true love and not the so-called love) is the
natural matrix of all morality. The saints and
sages are in the spiritual consciousness; the
acts of a Krishna or a Buddha or a Christ are of
this very type.
 • Secondly, in the moral act we have
to exert our will, the act is
Morality
deliberate and effortful and not
automatic. In the moral act there is
the 'sense of doership'
(Kartrtvabhimana)

• Spiritual act is spontaneous or

Spirituality
effortless or automatic. There is no
Kartrtvabhimana in the spiritual act,
as it is spontaneous and natural.

copyright© Sandeep Singh, SMS,

Varanasi
 • Thirdly, in the purely moral state of
consciousness there may be
Morality
dichotomy or opposition between
the good (Sreya) and the pleasant
(Preya) or between the good of
oneself and the good of others.

• In the spiritual consciousness this

dichotomy ceases to exist – there
Spirituality
the good (Sreya) and the pleasant
(Preya) are naturally one, the good
of oneself and the good of others
become one.

copyright© Sandeep Singh, SMS,

Varanasi
 “The simple step of a
simple courageous man
is to not take part in the
lie, not to support
deceit. Let the lie come
into the world, even
dominate the world, but
not through me.”
 Puzzling things out….
As we watch the video keep these
questions in mind:

1) What is the ethical dilemma?

2) What is the apparent cause of the
unethical behavior?
3) Is there an ethical resolution to the
problem portrayed?
4) If so, who should do what?
Four Important Ethical Questions

• What is?
• What ought to be?
• How to we get from what is to what
ought to be?
• What is our motivation for acting
ethically?

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3 Models of Management Ethics

1. Immoral Management—A style devoid of

ethical principles and active opposition to
what is ethical.
2. Moral Management—Conforms to high
standards of ethical behavior.
3. Amoral Management
– Intentional - does not consider ethical factors
– Unintentional - casual or careless about ethical
considerations in business
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3 Models of Management Ethics

Three Types Of Management Ethics

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Three Approaches to Management
Ethics

6-18
Three Models of Management Morality
and Emphasis on CSR

6-19
Making Moral Management Actionable

Important Factors
• Senior management
• Ethics training
• Self-analysis

46
Developing Moral Judgment

6-23
Developing Moral Judgment

External Sources of a
Manager’s Values
• Religious values
• Philosophical values
• Cultural values
• Legal values
• Professional values
48
Developing Moral Judgment

Internal Sources of a Manager’s

Values
• Respect for the authority structure
• Loyalty
• Conformity
• Performance
• Results
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 A Crisis in Business Ethics

• Consumer trust of businesses is declining

• No sector is exempt from ethical misconduct
• Stakeholders determine what is ethical/unethical
– Investors
– Employees
– Customers
– Interest groups
– Legal system
– Community
Libertarianism

• Theory of Rights
• Individuals Matter, not just as instruments
to be used for larger social purpose.
• Individuals are separate beings with
separate beings with separate lives which
you respect and therefore it is a mistake to
think about justice/law by adding
pleasures.
• Robert Nozick- All persons have a right to
be left free to do as they choose.
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 NORMATIVE ETHICAL THEORIES

UTILITARIAN APPROACH
• What is most important and universally valued is satisfaction
of desires/interests, human pleasure or happiness, or
reduction of human suffering.
• Whatever one’s motives or intentions are, we judge human
action in terms of its consequences/outcomes.
• The best decision maximises human interests(include life,
health, wealth, human dignity, autonomy, or mere pleasure)
or minimises harm.
• The best outcome either maximises interests(or contributes to
happiness) of greatest number, leading to more benefits than
harms for most people, or at a minimum, reduces harm, all
things considered.
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WHAT SHOULD BE DONE IN A GIVEN SITUATION –
UTILITARIAN APPROACH

A Utilitarian asks whether this action produces a balance

of benefits and/or a reduction of harms.
Therefore,First, determine what alternative actions or
policies are available to me.

Second, for each alternative action, estimate direct and

indirect benefits and costs that the action would produce for
every person affected by the action in foreseeable future.

Third, choose the alternative that produces greatest sum

total of utility.

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UTILITARIANISM – AN ATTRACTIVE THEORY

Useful while discussing choice of government

policies and public goods.
Able to explain why we hold certain types of
activities generally morally wrong, while others as
generally morally right.
Utilitarianism views highly influential in
economics.
Utilitarianism also the basis of economic cost-
benefit analysis.
It fits in with a value that many people price :
Efficiency.

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Utilitarianism

• Utilitarianism is an approach to establishing

ethical standards based on the
consequences of an action. In an ethical
dilemma, a person selects the action that
brings about the greatest amount of good for
the greatest number of people. The model
determines correctness in terms of social
benefit. Many business people favor the
“cost/benefit” approach of utilitarianism.
Applying the Rights Model
• Identify the facts.
• Identify the ethical issues.
• Identify the alternative courses of action.
• Identify the stakeholders.
• Determine to which extent each alternative
respects the dignity and fundamental rights of
stakeholders or violates their rights.
• Choose the alternative that maximizes the
dignity of stakeholders and minimizes the
violation of their rights.
 RIGHTS APPROACH

• Human beings have certain moral rights.

• Human Rights are basic moral claims.(in

particular right to life, freedom,, and equal
opportunity, and the right not to be harmed-are
necessary for human dignity) .
•Positive Rights
--Right to Decent Minimum Standard of Living,
Food, Housing, Education, Employment.

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 Robert Nozick – Ethical Theory should be
“Right based”.
– All persons have a right to be left free to do as
they choose.
– The moral obligation not to interfere with a
person follows from this right.

A person can legitimately exercise a right to

something only if sufficient justification exists.

However, Right theorists do not provide a

hierarchy for Rights.

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 JUSTICE AND FAIRNESS APPROACH
Justice means giving each person his due.
When decisions have to be made about how benefits and
burdens should be distributed among a group of people,
questions of justice or fairness inevitably arise.
Issues involving questions of justice and fairness are
usually divided into three categories.
(i) DISTRIBUTIVE JUSTICE
- Fair distribution of society’s benefits and burdens.
(ii) RETRIBUTIVE JUSTICE
- Just imposition of punishments on those who do wrong.
(iii) COMPENSATORY JUSTICE
- Just way of compensating people for what they lost when
they were wronged by others.

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PRINCIPLES OF DISTRIBUTIVE JUSTICE

“Equals should be treated equally and

unequals unequally” – Aristotle
Benefits should be distributed
according to value of contribution an
individual makes.
Work burdens should be distributed
according to people’s abilities, and
benefits according to people’s needs.
(socialist view)

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 JOHN RAWLS VIEWS :
- Stability of society depends upon the extent to
which the members of that society feel they are
being treated fairly.
- A principle is morally justified principle of
justice if, and only if, the principle would be
acceptable to a group of rational self-
interested persons who know they will live in a
society governed by the principles they accept
but who do not know what sex, race, abilities,
religion, social position, income or other
particular characteristics each of them will
possess in that future society.

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 VIRTUE APPROACH

Moral life is not simply a matter of following

moral rules. Moral life is also a matter of trying
to determine the kind of people we should be
and of attending to the development of
character.

The fundamental question of ethics is not “What

Should I Do?” but “What Kind of Person Should
I Be?”

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 According to “virtue ethics”, there are certain
ideals toward which we should strive that allow
the full development of our humanity.
“Virtues” are attitudes, dispositions, or
character traits that enable us to be and to act in
ways that develop this potential.
Virtues that have received considerable
discussion are Integrity, Courage and
Compassion.
A morally good person with the right
motivation is more likely to understand what
should be done and act on moral ideals.

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 FEMINIST THEORIES AND THE ETHICS OF CARE

Kantian and Utilitarian theories have been

criticised by feminist philosophers for
advocating concept of morality that leaves little
room for virtues such as Empathy, Fidelity,
Love, and Friendship.
An understanding of the context of a situation is
particularly important when taking into account
the distinctive “voice” that many have
associated with women.
The Voice is of care and compassion.

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 INDIAN WISDOM TO ETHICAL
DECISION MAKING

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 Personal values of a decision maker plays an important
role in decision making.

These personal values evolve from one’s social environment,

religious beliefs and deeply rooted spiritual principles.

In Indian traditions, ethical behaviour is not considered a

condition of law or codes but a natural condition of enlightened
mind.

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 Business Ethics, Moral
and Environmental Issues
 Social responsibility
• The business philosophy that emphasises
that business should behave as good
citizens

• They should consider the effects of their

activities on society as a whole on the
stakeholders
Who are stakeholders?
Share
Management holders Customers

The Local
Employees Business Community

Government Environment
Suppliers
 Stakeholders
• A business social Responsibilities to stakeholder groups:

• Shareholders
Generate profits and pay dividends

• Customers
provide good quality products at reasonable prices.
Safety, honesty, decency and truthfulness

• Employees
health and safety at work, security, fair pay

• Suppliers
pay on time, pay fair rates
for the work done, provide element of security
Local Community
provide employment, safe working environment, minimise pollution and
negative externalities – provide external benefits?

Government
abide by the law, pay taxes, abide by regulations

Management
their aims versus those of the organisation as a whole

Environment
limit pollution, congestion, environmental degradation, development, etc.
 Business Ethics

The moral guidelines for decision making

by organisations.

• Adopting a moral code – identifying

what is ‘right’ and what is ‘wrong’ and
act accordingly
• Highly subjective nature
• Tension between different stakeholders
 Business Ethics
Tensions:
Profits versus higher wages
Expansion versus development
Production versus pollution
Supplier benefits versus consumer prices/lower
costs
Survival of the business versus needs of
stakeholders