2 Why Ethics in Business

8/7/2019 2 Why Ethics in Business

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Why Ethics in Business?

Dr. Raghavendra Rao


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Thus, none of the arguments for keeping ethicsout ofbusiness seems forceful.

In contrast, there are fairly strong arguments

for bringing ethics into business.


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Arguments for ethics

One argument points out that since ethics shouldgovern all human activity, there is no reason to exemptbusiness activity from ethical scrutiny.

Another more developed argument points out that noactivity, business included, could be carried out in anethical vacuum.

One interesting argument actually claims that ethicalconsiderations are consistent with business activitiessuch as the pursuit of profit. Indeed, the argumentclaims that ethical companies are more profitable thanother companies.

Most interesting is the Prisoners Dilemma


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Prisoners Dilemma

Is a situation in which two parties are each faced with achoice between two options: Either cooperate with theother party or do not cooperate.

Ifboth parties cooperate, they will both gain somebenefit.

Ifboth choose not to cooperate, neither gets thebenefit.

If one cooperates while the other chooses not to

cooperate, the one who cooperates suffers a loss whilethe one who chooses not to cooperate gains a benefit.

The prisoner's dilemma demonstrates that cooperationis more advantageous


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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 sufficientnotice Using companys property and material for personal

use


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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Not honoring the contracts Supplying faulty/outdated technology and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


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Unethical practices (Environmental)

Buying natural resources and goods fromdeveloping economies at a cheaper price

Exploiting services and labour of developingcountries.

Exploit natural resources of developingcountries (hamburgerization ofAmazonian

forests)


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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


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Morality and Ethics in international

context

how they are to be applied in foreign

countries is more complex.

Petty bribery, which is considered unethical inthe 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.


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Ethical Dilemmas

Should multinationals follow the laws of theless developed countries in which theyoperate?

Should they try to introduce their ownstandards?

How do they treat their own employees doing

the same job in two very different countries? Do they pay them the same wage?


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Issues

1. What does the action really mean in the localculture's context?

2. Does the action produce consequences that

are ethically acceptable from the point of view ofat least one of the four ethical theories?

3. Does the local government truly representthe will of all its people?

4. If the morally questionable action is acommon local practice, is it possible to conductbusiness there without engaging in it?


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Systemic issues

Systemic issuesquestions raised about theeconomic, political, legal, or other socialsystems within which businesses operate.

These include questions about the moralityof capitalism or of the laws, regulations,industrial structures, and social practiceswithin which businesses operate.


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Corporate issues

Corporate issuesquestions raised about aparticular company.

These include questions about the morality ofthe activities,

policies,

practices, or organizational structure of an individual company

taken as a whole


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Individual issues

Individual issuesquestions about aparticular individual within an organizationand their behaviors and decisions.

These include questions about the moralityof the

decisions,

actions, or character of an individual


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Globalization and Business Ethics

Virtually all of the 500 largest U.S. industrial corporations today aremultinationals.

Operating in more than one country at once produces a new set ofethical dilemmas.

Multinationals can escape environmental regulations and labor lawsby shifting to another country, for example.

They can shift raw materials, goods, and capital so that they escapetaxes.

In addition, because they have new technologies and products thatless 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, theymust still decide between competing standards in their manyoperations.


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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


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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 ofbad technology be compensated for their loss?

How will risk be distributed?

How will privacy be maintained?

How will property rights be protected?


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Moral blame

A person is NOT morally responsible for aninjury or a wrong if:

1. The person did not cause and could notprevent 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


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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 ofjustice.

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 chargedthe individual employees ofArthur Andersen, not the company, because

"Companies don't commit crimes, people do."


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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 thesecorporate artifacts.


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Mitigating factors

there are also three mitigating factors thatdiminish 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 notimpossible) for the person to avoid doing it;

3. Circumstances that minimize (but do notremove) a person's involvement in an act.


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KFC in IndiaExxon valdez,

Coca cola in India,

Boeings unethical practices

The Tata Tea/ULFA story

The Bhopal gas tragedy

The T-Series storyThe 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 PollutesIndonesia's Environment

Fall ofArthur Andersen, the accounting firm


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Reebok - Managing Human Rights Issues 'Ethically?'

Kmart - Forced Towards Bankruptcy?Nestles 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-nocils 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

2 Why Ethics in Business

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