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    2 Why Ethics in Business

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    Anshul Jain
    This document discusses arguments for and against ethics in business. It summarizes three common objections to business ethics: 1) that profit maximization benefits society, 2) that employees' sole duty is to their employer, and 3) that obeying the law is sufficient. However, the document argues these objections are not compelling. There are stronger arguments that ethics should govern all human activities, including business. Ethical companies may also be more profitable. The Prisoner's Dilemma demonstrates how cooperation is more advantageous than acting alone. The document then discusses various unethical business practices and how ethics can save companies billions each year.

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    2 Why Ethics in Business

    Uploaded by

    Anshul Jain
    51 views24 pages
    This document discusses arguments for and against ethics in business. It summarizes three common objections to business ethics: 1) that profit maximization benefits society, 2) that employees' sole duty is to their employer, and 3) that obeying the law is sufficient. However, the document argues these objections are not compelling. There are stronger arguments that ethics should govern all human activities, including business. Ethical companies may also be more profitable. The Prisoner's Dilemma demonstrates how cooperation is more advantageous than acting alone. The document then discusses various unethical business practices and how ethics can save companies billions each year.

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    This document discusses arguments for and against ethics in business. It summarizes three common objections to business ethics: 1) that profit maximization benefits society, 2) that employees' sole duty is to their employer, and 3) that obeying the law is sufficient. However, the document argues these objections are not compelling. There are stronger arguments that ethics should govern all human activities, including business. Ethical companies may also be more profitable. The Prisoner's Dilemma demonstrates how cooperation is more advantageous than acting alone. The document then discusses various unethical business practices and how ethics can save companies billions each year.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    51 views24 pages

    2 Why Ethics in Business

    Uploaded by

    Anshul Jain
    This document discusses arguments for and against ethics in business. It summarizes three common objections to business ethics: 1) that profit maximization benefits society, 2) that employees' sole duty is to their employer, and 3) that obeying the law is sufficient. However, the document argues these objections are not compelling. There are stronger arguments that ethics should govern all human activities, including business. Ethical companies may also be more profitable. The Prisoner's Dilemma demonstrates how cooperation is more advantageous than acting alone. The document then discusses various unethical business practices and how ethics can save companies billions each year.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 24

    Why Ethics in Business?

    Dr. Raghavendra Rao


    Objections
    • Some people object to the entire notion. They make three general objections:

    • First, they argue that the pursuit of profit in perfectly competitive free markets will, benefit the
    society
    (Producing what the buying public wants may not be the same as producing what the entirety of
    society needs.)

    • Second, they claim that employees, as "loyal agents," are obligated to serve their employers
    single-mindedly
    (But this argument itself rests on an unproven moral standard that the employee has a duty to
    serve his or her employer and there is no reason to assume that this standard is acceptable)

    • Third, they say that obeying the law is sufficient for businesses and that business
    ethics is, essentially, nothing more than obeying the law
    (However, the law and morality do not always coincide again, slavery and Nazi Germany are
    relevant examples).
    Thus, none of the arguments for keeping ethics
    out of business seems forceful.
    In contrast, there are fairly strong arguments
    for bringing ethics into business.
    Arguments for ethics
    • One argument points out that since ethics should govern
    all human activity, there is no reason to exempt business
    activity from ethical scrutiny.
    • Another more developed argument points out that no
    activity, business included, could be carried out in an
    ethical vacuum.
    • One interesting argument actually claims that ethical
    considerations are consistent with business activities such
    as the pursuit of profit. Indeed, the argument claims that
    ethical companies are more profitable than other
    companies.
    • Most interesting is the “Prisoners Dilemma”
    Prisoners Dilemma
    • Is a situation in which two parties are each faced with a
    choice between two options: Either cooperate with the
    other party or do not cooperate.
    • If both parties cooperate, they will both gain some
    benefit.
    • If both choose not to cooperate, neither gets the benefit.
    • If one cooperates while the other chooses not to
    cooperate, the one who cooperates suffers a loss while
    the one who chooses not to cooperate gains a benefit.
    • The prisoner's dilemma demonstrates that cooperation is
    more advantageous
    Unethical practices (Internal)
    • Managers lying to employees
    • Nepotism and favoritism
    • Taking credit for others work
    • Receiving or offering kick backs
    • Stealing from the company
    • Firing an employee for whistle blowing
    • Padding expense accounts
    • Divulging confidential information/trade secrets
    • Terminating employment without giving sufficient notice
    • Using company’s property and material for personal use
    Unethical practices (External)
    • No transparency in dealings
    • No accountability to stakeholders
    • Not honoring the contracts
    • Supplying faulty/outdated technology and
    services at a very high cost
    Unethical practices (Environmental)
    • Buying natural resources and goods from
    developing economies at a cheaper price
    • Exploiting services and labour of developing
    countries.
    • Exploit natural resources of developing
    countries (hamburgerization of Amazonian
    forests)
    Ethics means money!
    • Acting legally and ethically means saving billions of
    dollars each year from law suits, settlements and
    theft
    • Work place theft in US costs 40 billion $ each year
    • Costs to business also include:
    – Deterioration of relationships
    – Declining productivity, creativity, loyalty, absenteeism
    – Difficulty recruiting and retaining valued professionals
    Morality and Ethics in international context

    • how they are to be applied in foreign


    countries is more complex.
    • Petty bribery, which is considered unethical in
    the U.S., is a standard practice in Mexico and
    other countries
    • Nepotism and sexism occur as a matter of
    course in some Arabic business environments.
    Ethical Dilemmas
    • Should multinationals follow the laws of the
    less developed countries in which they
    operate?
    • Should they try to introduce their own
    standards?
    • How do they treat their own employees doing
    the same job in two very different countries?
    • Do they pay them the same wage?
    Issues
    • 1. What does the action really mean in the local
    culture's context?
    • 2. Does the action produce consequences that
    are ethically acceptable from the point of view of
    at least one of the four ethical theories?
    • 3. Does the local government truly represent the
    will of all its people?
    • 4. If the morally questionable action is a
    common local practice, is it possible to conduct
    business there without engaging in it?
    Systemic issues
    • Systemic issues─questions raised about the
    economic, political, legal, or other social
    systems within which businesses operate.
    • These include questions about the morality
    of capitalism or of the laws, regulations,
    industrial structures, and social practices
    within which businesses operate.
    Corporate issues
    • Corporate issues─questions raised about a
    particular company.
    • These include questions about the morality of
    the
    – activities,
    – policies,
    – practices, or
    – organizational structure of an individual company
    taken as a whole
    Individual issues
    • Individual issues─ questions about a
    particular individual within an organization
    and their behaviors and decisions.
    • These include questions about the morality
    of the
    – decisions,
    – actions, or
    – character of an individual
    Globalization and Business Ethics
    • Virtually all of the 500 largest U.S. industrial corporations today are
    multinationals.
    • Operating in more than one country at once produces a new set of ethical
    dilemmas.
    • Multinationals can escape environmental regulations and labor laws by
    shifting to another country, for example.
    • They can shift raw materials, goods, and capital so that they escape taxes.
    • In addition, because they have new technologies and products that less
    developed countries do not, multinationals must decide when a particular
    country is ready to assimilate these new things.
    • They are also faced with the different moral codes and laws of different
    countries. Even if a particular norm is not unethical, they must still decide
    between competing standards in their many operations.
    Ethical relativism
    • Ethical relativism is the theory that, because
    different societies have different ethical
    beliefs, there is no rational way of determining
    whether an action is morally right or wrong
    other than by asking whether the people of
    this or that society believe it to be right or
    wrong
    Finally, new technologies developed in the closing decades of the 20th century and
    the opening years of the 21st century are again transforming society and business
    and creating the potential for new ethical problems.

    They bring with them questions of risks, which may be unpredictable and/or
    irreversible.

    Who should decide whether the benefits of a particular technology are worth the
    risks?

    How will victims of bad technology be compensated for their loss?

    How will risk be distributed?

    How will privacy be maintained?

    How will property rights be protected?


    Moral blame
    • A person is NOT morally responsible for an
    injury or a wrong if:

    • 1. The person did not cause and could not


    prevent the injury or wrong;
    • 2. The person did not know he was inflicting
    the injury or the wrong;
    • 3. The person did not inflict the injury or
    the wrong of his own free will
    Some theorists maintain that moral notions apply only to individuals, not to
    corporations themselves.

    Others counter that corporations do act like individuals, having objectives


    and actions, which can be moral or immoral just as an individual's action
    might be.

    In 2002, for example, the Justice Department charged the accounting firm of
    Arthur Andersen for obstruction of justice.

    Arthur Andersen was caught shredding documents showing how they


    helped Enron hide its debt through the use of several accounting tricks.

    Critics afterward claimed that the Justice Department should have charged
    the individual employees of Arthur Andersen, not the company, because
    "Companies don't commit crimes, people do."
    Perhaps neither extreme view is correct.

    Corporate actions do depend on human


    individuals who should be held accountable
    for their actions.

    However, they also have policies and culture


    that direct individuals, and should therefore
    be held accountable for the effects of these
    corporate artifacts.
    Mitigating factors
    • there are also three mitigating factors that
    diminish moral responsibility. They are:

    • 1. Circumstances that leave a person uncertain


    (but not unsure) about what he or she is doing;
    • 2. Circumstances that make it difficult (but not
    impossible) for the person to avoid doing it;
    • 3. Circumstances that minimize (but do not
    remove) a person's involvement in an act.
    KFC in India
    Exxon valdez,
    Coca cola in India,
    Boeings unethical practices
    The Tata Tea/ULFA story
    The Bhopal gas tragedy
    The T-Series story
    The McDonald's 'Beef Fries' Controversy
    The Recall of Vioxx
    Johnson & Johnson Tylenol controversy
    Childhood Obesity: Should Junk Food be
    Regulated?
    Rio Tinto: The Mining Giant Pollutes
    Indonesia's Environment
    Fall of Arthur Andersen, the accounting firm
    Reebok - Managing Human Rights Issues 'Ethically?'
    Kmart - Forced Towards Bankruptcy?
    Nestle’s infant formula controversy
    Microsoft playing monopoly
    GlaxoSmithKline, Bristol-Myers Squibb and AIDS in Africa
    Ford/Firestone controversy
    Ethical issues in BPOs in India
    The bribery scandal in Siemens AG
    De-nocil’s bribery case
    BT cotton controversy
    Foreign patenting of domestic products
    Retail chains in fruits and vegetables
    Child labour in the sandstone industry
    Harshad Mehta and Indian financial scam
    Marketing of Fairness Creams and the Question of Ethics

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