Business Ethics

Introduction
• Ethics is relating to what is good or bad & having to do with
moral duty & obligation
• Ethics is enquiry into the nature & grounds of morality where
the term morality is taken to mean moral judgments, standards
& rules of conduct
• Ethics is our code of conduct
• Ethics area a set of rules & standards that guide our behavior.
• Personnel ethics ,Professional ethics,Managerial
• Personnel ethics
• Professional ethics
• -Honesty
• -Fairness
• -Respect
• -Compassion
• -Integrity
• -Self discipline
• Professional ethics may be integrated with corporate &
organizational values
• Managerial ethics- What is good or bad in conduct & decision making.
Ethics & social responsibility are more widely recognized & companies can
use code of ethics & their corporate culture to govern behavior, thereby
eliminating the need for additional laws
• Immoral Management-Managerial behaviors devoid of any ethical principles
represent immoral management
• Moral management-Managerial behaviors focus on & follow the ethical
norms, professional standards of conduct& compliance with applicable rules
& laws. Moral managements does not pursue profits outside the boundaries
of the law & sound ethical principles.
• Amoral Management-Managerial behavior that are indifferent to ethical
considerations as thought different standards of conduct applying to business
than to other aspect of life characterize amoral management. This seems to
lack awareness of ethical or moral issues.
Business ethics
• Business ethics are rules of business conduct. Ethical
principles are dictated by the society & social policies.
• Business ethics also relates to the managers/employees. It is to
ascertain the responsibilities & ethical obligations of business
professionals. Here the focus is in people, how individuals
should conduct themselves in fulfilling the ethical requirement
of business .
• Oxford dictionary defines it as the science of morals in human
conduct, a moral principle or code
• Business ethics encompass how a person in business deals with
his or her
• -Colleagues
• -Staff & workers
• -Shareholders
• -Customers
• -The community
• -The government
• -The environment
• -The nation & its interest
Scope of business ethics
• Social Level
• -Concern for poor
• -No discrimination
• -Concern for clean environment
• -Prevention of scare resources
• -Contribution for better quality life
• Stakeholders Level
• -Employees- Job Security, Better working conditions,
Participative management, Welfare
Cont..
• Customers- Better quality goods, reasonable prices, Not to
make false claims in ad’s.
• Shareholders- Ensure capital appreciation, Ensure steady &
regular dividends, Disclose all relevant information, Protect
interest at the time of mergers & acquisitions.
• Banks- Safety & Volumes of borrowed funds, Prompt
repayments of loans.
Cont..
• Government- Complying with rules & regulations, Honesty in
paying taxes & other dues,
• Internal policy level- Fair practices relating to recruitment,
compensation, perks , promotions. Better communication .
• Personnel policy level- Mutual help, respect others, good team
member, work for company objectives/goals
• Moral implies conformity with the generally accepted
standards of goodness or rightness in conduct of character
Three C’S of Business Ethics
• Compliance of rules including
• -Laws
• -Morality
• -Policy of company & fairness
• Contribution to society through
• -Core values
• -Quality products & services
• - Employment
• -Usefulness of activities to community
• Consequences of business activity
• -Towards environment
• -Social responsibility
• -Good public image
Benefits of managing ethics in
organization
• -Substantially improved society
• -Maintain a moral in turbulent time
• - Cultivate strong team work & productivity
• -Supports employees growth
• -Help avoid criminal acts
• -Help manage values associated with quality management,
Strategic planning
• -Promote strong public image
Why fostering good business ethics
• -To protect organization & its employees from legal action
• -To create organization that operates consistently
• -To produce good business
• -To avoid unfavorable publicity
• -To gain goodwill of the community
Values
• Value is enduring belief that a specific mode of the conduct or
end- state of existence in personality or socially preferable to
an opposite or converse mode of conduct or endstate of
existence.
• An individual value system is defined as an enduring
organization of beliefs concerning preferable modes of conduct
or endstates of existence
• Different value systems go a long way towards explaining
individual differences in behaviors
Cont.
• Values sometimes are also classified as moral values &
competence values
• Moral values are concerned with modes of behavior
• Competence values are concerned with self actualization &
such values reflect a personal rather than an impersonal focus
• Values shapes-Beliefs-Perceptions-Attitudes-Behavior,
Interests, Personality
Cont.
• Following aspects help in understanding values
• -Giving due value money for customers in terms of quality,
quantity & service
• -Defining corporate mission & strategies
• -Concern for efficiency of work
• -Reasonable profit margins-pricing
• Feeling for society, nation & poor
• -Fair & proper decision making
Cont.
• Characteristics of values
• -Values are at core of personality & are powerful force
affecting behavior
• -Values have both content & intensity attributes
• -Values are not fixed, but they change over time
Cont.
• Importance of values
• -Values influences managerial & organizational behavior
• -Managers values go hand in hand in performing management
functions
• -Problem solving approach
• -Human values help in self development
• -Human values helps in good inter personal relations
• -Human value enhance reputation, goodwill & image of the
organization
Cont.
• Types of values
• -Instrumental values- are those values concerning the way we
approach. These relates to means for achieving desired results.
• -Terminal values are those end state goals that we praise such
as comfortable life, sense of accomplishment , equality among
people.
Cont.
• Instrumental values
• -Being helpful or caring towards others
• -Education
• -Hard work & achievements
• -Truthfulness & Honesty
Cont.
• Terminal values
• -Knowledge & wisdom
• -Peace & harmony
• -Pride in accomplishment
• -Lasting friendships
• -Security & freedom
Five key Forces- Determinants of
Individual’s Ethics
• -Family Influences
• -Peer Influences
• -Experiences
• -Values & Morals
• -Situation Factors
Cont..
• - Moral Development Pyramid
• - Beliefs
• - Religiousness
• - Law
Ethics in Business- Myth & Reality
• Business ethics at workplace is about prioritizing moral
values for the workplace & ensuring that behaviors are aligned
with those values- its value management
• Myths- Business ethics is matter of religion than management
• Myth- Our employees are ethical so we do not need attention
to business ethics
• Myths- Business Ethics is a discipline best led by philosophers,
academics & theologians who treat it as a philosophical debate
or a religion
Cont.
• Myth- Ethics is a matter of the good persons preaching to bad
persons
• Myth- Business ethics is the new police person in organizations
& it is a recent phenomenon.
• Myth- Ethics cannot be managed.
• Myth- Business ethics & social responsibility are same thing
• Myth- Our organization is not in trouble with the law, so we
are ethical
• Myth- Managing ethics in the work place has little practical
relevance
Normative theories of Business Ethics
• -Confusion in defining business ethics as a field of study
between the ethical theorists & those engaged in business.
• The search for a down to earth theory has lead to the evolution
of normative theories that suit specific business environment
• A normative theory of business ethics is an attempt to focus
this general theory exclusively upon those aspects of business
life that involve business relationships
• Normative theory is specifically meant to provide people with
ethical guidance when they carry out their day to day business.
Normative Theories
• Stockholder Theory
• Stakeholder Theory
• Social Contract Theory
Stockholder/Shareholder Theory
• -Express the business relationship between the owners & their
agents who are the managers running day to day business of
the company.
• Owners advance capital to realize certain ends beneficial to
them
• This binds managers not to spend any resources for social
cause.Thus business can have no social responsibilities
• Managers have no options but to follow orders of their masters
• Company to maximize returns on investments
Cont..
• Criticism
• - Cruel & dangerous in practice
• - Impractical
• - Discredited because of its failure
• - The contemporary economic conditions are so far removed
from those of a true, free market
Stakeholders Theory
• Stakeholders of a firm
• Primary Secondary
• Survival of firm Affect/Affected by fir
• Stockholders Media, Consumers
• Employees Govt., Competitors
• Suppliers Society, Political gro
• Creditors Trade associations
• Customers Environment
Cont..
• Criticism
• - It is not applicable in practice by corporation
• - Difficulty of defining concept.
• - Accused of opening up a path to corruption
• - Criticized on the ground that it extends the rights of
stakeholders far too much
Social Contract Theory
• It stresses that all business are ethically duty bond to increase the
welfare of the society by catering to the needs of consumers &
employees
• Based on the principles of social contract wherein it is assumed
that there is an implicit agreement between the society &
business unit & interest of the society to be served in specified
way.
• Based on a assumed contract between the businesses & members
of the society who grant them the rights to exist in return for
certain specified benefits
• These benefits are the result of functioning of these businesses ,
both for their own sake & that of larger society
Cont..
• Criticism
• Social Contract is legally speaking no contract
• To serve the interest of the society are not specified in law &
can have substantial impact on the profitability of the firm
The Indian Business Scene
• Ethics inHR
• - Recruitment, Selection & Promotion
• - As per company guidelines follow selection process
• - Wages/ Worker’s Unions
• -Discrimination/ Harassment/Discipline
• - Human Rights/ Labor Laws
Cont.
• Ethics in Marketing
• -Buyer Seller relationship(contract, liability views)
• -Product-safety,quality,duplication,trademark,labeling
• -Pricing- Situational advantage, fixing,price control, channel
members margins
• -Distribution- Channel members appointments, Reverse
logistics
• Promotion- False deceptive & unfair advrtising
• Market Research- False information
• Values of Indian Culture
• -Individuals must be respected,Cooperation
• -Jealousy is harmful for mental health
• -Top quality product/service
• -Work is worship, creativity, self discipline
The Indian Business Scene
• Ethics, Morals & values are followed in limited way
• Management operations (various departments like HR,
Marketing,Finance,operations etc.)
• Commitment levels are low
• Corporate social responsibility on lower side
• Law & order situation(corruption & bribery, fraud, theft)
• Patents/ Intellectual property
Global Trends in Business Ethics
• Companies in developed countries, moving operations to third
world countries, requiring heavy manual labor, hazardous
chemicals production.
• Discrimination of employees in various countries
• Violation of accounting standards(failure to disclose substantial
changes in business conditions to investors
• Environmental
• Free movement of people along with globalization
• Terrorism