Business Ethics

Ethicists use the term ethics to refer primarily to the study of morality. Ethics deals with morality but it is not quite same as morality.

y Ethics is a kind of investigation which includes both: the activity of investigating and the result of that investigation. y Where as morality is the subject matter that ethics investigates.

What is Moralityy Morality is concerned with developing moral standards which include the norms we have about the kind of actions we believe are morally good or bad, as well as the values we place on the kind of objects we believe are morally good or morally bad. y Moral norms are expressed as general rules or statements. In giving judgments we decide what things are good or bad. Our judgments are based on standards of some kind.

Characteristics of Moral Standardsy Moral standards deal with matters we think can seriously injure or benefit human beings. y Moral standards are not changed or established by the decision of particular authoritative bodies. Their validity rests on the adequacy of the reasons that are taken to support and justify them, so long as these reasons are adequate, the standards remain valid.

y Moral standards should be preferred against other values like self interest. It is wrong to choose self interest over morality. y Moral standards are based on impartial consideration. y Moral standards are associated with special emotions and special vocabulary.

KEY ETHICS THEORIESThere are basically four ethics theories which needs to be discussed:y Teleological Ethics Theoryy Deontological Ethics Theory y Virtue Ethics Theory y System Development Ethics Theory

Teleological Ethics TheoryEnd Justifies means or the ethical value of actions. Types of Teleological Ethics Theory(A) Ethical Egoism An action is good if it produces results that maximize a persons self interest even at the cost of others.

There are two types of ethical egoism, these are:Psychological Egoism and Enlightened Egoism

y Psychological Egoism-People always and only want some

thing for themselves whenever they act(that goes against genuine altruism). y Enlightened Egoism- It fulfills the long range self interest of the actors, also exercises altruistic concern for others. (B)Utilitarianism An action is good if it produces greatest amount of happiness for greatest number of stake holders. Eudaimonism An action is good if it promotes the fulfillment of objectives having human nature and for human happiness.

Deontological Ethics TheoryAn action is morally right irrespective of its consequences. Means justifies the ends. Types of Deontological Ethics Theory (A) Negative and Positive Rights Theories An action is right if it protects people from the illegal interference by other people or government in exercising that right(negative).An action is right if it facilitates any individual in whatever way he wants to survive.

(B) Social Contract Theories An action is good if it conforms to the agreed upon terms and conditions meant for social welfare which has been negotiated by the competent parties. Social Justice Theories An action is good if it facilitates the duty of fairness in the distributive, retributive and compensatory dimensions of social benefits and burdens.

Virtue Ethics TheoryTo educate human beings and inculcate virtue in him so that he becomes an inseparable part of the society. Aristotle s Notion of Virtue y The foundation of morality lies in the development of good virtues with in individuals.y Moral virtues are desire regulating mechanisms which remain as a mean between two extreme vices.

Types Virtue Ethics Theory (A) Individual Character Ethics It deals with identification and development of human traits of nobility. (B) Work Character Ethics It deals with identification and responsible development of noble,thoughtful and practitioner traits at the work place. (C) Professional Character Ethics Managerial moral development shapes work units moral development.

System Development Ethics TheoryIt deals with studying the nature and scope of providing supportive framework by which continuous improvement of ethical conduct will be made and subsequently influence the ethical value of action. Types of System Development Ethics Theories (A) Personal Improvement Ethics An action is good if it promotes personal responsibility for continuous learning, system holistic development improvement, and moral excellence.

(B) Organizational Ethics An action is good if it promotes both formal and informal organizational processes which increases procedural, positive out come, respectful caring and innovation in the ethical work culture of the organization. Extra organizational Ethics An action is good if it promotes the enhancement of collaborative partnership, collective innovative spirit and global justice in the human and natural environment.

CONFLICT BETWEEN MORAL DEMAND AND INTERESTy Business always face the problem of developing well informed ideas on how to mediate between moral demands and strategic concerns. y The reason behind strategic concerns(interest)in business ethics is to know how business can survive in the long run without sacrificing justified moral demands against inflated economic concerns.

The Autonomy of Business MoralitySocial philosophy of business means the philosophical reflection on the actual role and functions of business in our society Role and functions of business in modern society Characteristics of Modernity (A) Fragmentation of Society in to different social spheres Modern society fragmented the sense unity of traditional society and created distinct social spheres like:y The sphere of family and friendship(private life) y The sphere of the market(economic life) y The sphere of the state (political life)

(B) Fundamental division between two realms in modern civilization. There are:y Moral Community The values (warmth, recognition, support) of each moral community drawn from the premodern local traditions. y Specialized Functional spheres Modern social experience consists of specialized functional spheres(health care, tourism etc) where each sphere performs their specific task through formal procedures and rules.

Two functional spheres play a dominant role in modern society. They are:y The Market System Organizations operating through this system have to reduce costs in order to maximize profits.y The Bureaucratic sphere It constitutes of standardized procedures and impose a system control to achieve organizational goal.

The rationality of the market system and the bureaucratic sphere colonize and dehumanize the warmth of the greater moral community. But how can these two different principles get united? The answer to this question could be given through the analysis of three different views . y The Unitarian View y The Separatist View y The Integration View

The Unitarian Viewy The pre-modern view applies the general values and standards of the overall culture to evaluate activities in a changing environment. y It rejects the large segment of modern society and project the Carl Marx s and Catholic churches values of unity in a classless society. y It projects society as a family(like moral community) based upon feelings of unity and love among its members.

y Some moral principles (rights and justice) of this view have universal validity but it can not tell business about the internal logic of the economy (how much to invest in environmental protection).

The Separatist ViewChief Exponent-Adam Smith y He rejected the idea based on one unifying moral community. He was in favor of creating an open market system where business becomes indirectly beneficial towards society. y Maximization of private property, cost reduction, goes far beyond direct moral claims.

Two non-moral means of the larger community, for examplethe law and the market also controls business. The Law y These two act as transformers between the moral community and the business system and modify values of moral community into non-moral guidelines that fit well into the language of business. y Law compels corporations who have strong strategic motivations for respecting it. Law needs to be enforced on business when human rights and national security are at stake.

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The Market Demand Both sellers and buyers strategically determine the prices and quantities by supply and demand. Consumers translate their moral demands and preferences into a language that business understands and fulfills. But there are numerous moral expectations in society that neither market demand nor legal rules fulfills. Many organizations exercise morality in the following manner:They design, develop and practice moral codes, open ethics cell, organize ethical training programs, set ethics board, charitable donations and highly sensitive stake holder policies.

The integration ViewTo brought integration between the following:y The economic activities of business are based upon an inner logic that is profit maximization.y The economic activities of business are also part of the society and are controlled by moral demands of the society.

y This view has been influenced by the classical theory of modernity developed by Max Weber and Talcot Parsons. y Cultural foundation of modern capitalism has also an ethical base which has been drawn from the Christian Protestant Culture (like honesty and fair dealing). y Moral claims may often be applied directly to business, provided they mediated with strategic interests.

ARGUMENTS FOR AND AGAINST BUSINESS ETHICSy Business ethics can be defined as the process of rationally evaluating our moral standards and applying them to business situations. But many have objections against applying moral standards in business situations. y People involved in business activities should single mindedly fulfill the economic interest of their organization. And should not use their potentialities for public welfare. y Three arguments have been framed in support of this view. These are :-

Argument-1y The very purpose of profit in perfectly competitive free market is to serve the greater society in the most socially beneficial ways. y Each business firm has to produce only what the members of the society demands, using the most efficient means available. y The members of the society will benefited most, if managers do not impose their own values on business.

y On the contrary managers should concentrate more on profit with a single mind and devote to produce something effectively and efficiently what the members of society value. y But the arguments generate some questionable assumptions:-

Assumptionsy There are firms despite inefficient production maximizes profit where markets are not perfectly competitive. y Any steps taken to enhance profit will be socially beneficial-is not correct always. Because in the name of profit business used to affect the societal interest like: uncontrolled pollution, unethical advertising, fraud, bribery, tax evasion etc.

y Firms are producing what ever buying public demands is also not true always, because the poor and disadvantaged are not taken care of due to least scope of their participation in the market place. y Managers should single mindedly pursue profit on the ground of some assumed but unproved moral standards.

ARGUMENT-IIAlex C Michael says managers as loyal agents of his employer should single mindedly pursue the interest of the firm and should reject ethical consideration. Loyal agents argument categorized into two parts:Manager as a loyal agent should serve his employer, the way the employer want to be served. 2. An employer want to be served in a way that will advance his self interests.1.

Assumptions Against Loyal Agents Argumenty The manager should serve his employer in whatever way the employer want to be served, is an unproved moral standard. y The loyal agents argument says that there are no limits to the managers duties to serve the employer but an agent can not perform his duty that is unethical. y The argument assumes that if a manager agrees to serve the firm, whatever manager does on behalf of the firm is correct. But the assumption is wrong, because agreements do not change the moral character of wrongful acts.

Argument-3To be ethical it is enough for business to obey the law. Business ethics means to obey the law.

Assumptions Against Argument-3y It is wrong to equalize both law and ethics. In some cases law and ethics coincide like-both prohibits theft, murder, rape etc. But some laws even violate our moral standards like : at Saudi Arabia business discriminate against women are blatantly immoral. y Many of us feel that moral standards should be implemented through the legal system. But sometimes laws are criticized if they violates our moral standards. Therefore morality has shaped and influenced many of our laws.

Arguments In Favor of Ethics in Businessy In general, ethics should govern all voluntary human activities. Likewise ethics should also govern business operation, because business is a voluntary human activity. y Any human activity can t exist unless people and the surrounding society adhere to minimal standards of ethics. Business as a cooperative activity need ethical behavior. y A minimal adherence to ethics is required on the part of those who involved in business.

y All businesses need a stable society where societal members practice the minimal standards of ethics. A society where lying, theft, cheating become rampant business activities breakdown. y Several studies have found a positive relationship between socially responsible behavior and profitability, some studies found no relationship. But no studies have at least found a negative correlation that indicates ethics has an impact on business.

y Though by being unethical other party sometimes becomes gainer. But unethical behavior undermines the long-term harmonious relationships with customers, employees, and community members upon whom business success ultimately depends. y Business becomes short sighted when they fail to implement ethical values in the organization.

ANATOMY OF ETHICO-MORAL MANAGEMENT AND GLIMPSES OF INDIAN BUSINESS WORLDy The present day global scenario is overshadowed with rationalist and positive management thinking like: target centric approach, performance management and excellence. y Number of questions have been raised about the authenticity, validity and long-term result of this thinking. y On the other hand few practitioners in business and academics laid stress on the role of shared culture, ethics and values, organizational health, quality of work life and so on in managing business.

y This new enthusiasm helps to study and practice ethics in business is gradually getting momentum in India and other countries of the world. y Question is, whether the end result (the final resultant value) be attained through the use of fair means and honesty or not. y In this context it would be wise to examine the relationship that exists between science and technology on one side, and ethics and moral values on the other in the context of work to be performed.

y Is it exclusively the products of science and technology to be utilized for achieving the dominant tenets of modern era like: high performance, target orientation and excellence in work or some other options are left to be considered for improved and healthy work performance in the long run.

Work-Ethic Vs Ethics -in -Worky Here the subjective art of work has been explained in the modern business management context. y Different sections have been designed to understand and focus upon the essence of the chapter.

SECTION -1 Characteristics of work in the Present Business scenario y Characteristics of work has been broadly categorized into two parts. One is Work-ethic and another is Ethics in- work.

y Work-ethic (karma sadhana) is dominated with characteristics like: success, efficiency etc. y The present domestic and institutional pattern of educational system largely contributes to work ethic or work holism (carrier centric, skill prone and amoral in nature). y Work-ethic is generally accepted as values free. On the other hand ethics-in work(dharma sadhana) is value based and characterized with such noble attributes like: perfection effectiveness etc.

y Neither of the two when operate as separate water tight

compartments are good and healthy. y They should operate together where ethics in- work should slightly dominate over work-ethic and not the viceversa. y Work holism when deprived of noble qualities like compassion, humility and large-heartedness at the work place can t give a complete shape to the very essence of work. y So attempt needs to be made to integrate and blend the both in the Indian business world to make it more healthy and productive.

Moksha Nihsreyasa Vanaprastha Sanyasa Super thical At the Intuitional evel

Abhyudaya thical At the mpirical evel

Brahma Charya Artha Dharma

Grahasthya Kama

Section -iiy y

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Purusharthas or Life Goals In Indian culture human life goals has been categorized into two orders. First order life goals constitutes of two pairs: One is abhyudaya (prosperity) and the other one is nishreyasha (supreme or ultimate fulfillment). The majority moves from the level of abhyudaya to nihsreyasha. But in case of second order life goals, only few reach nihsreyasha directly without abhyudaya.

y Abhyudaya itself constitutes of three purusharthas like:dharma,artha and kama (triverga). y This triverga open avenues for the establishment of first two ashramas (phases of human life) like:brahmacharya (ideal studentship) and grahasthya (house holder ship). y Dharma or ethical conduct is the cause, artha (the economic means) is the effect and helps to fulfill kama (the legitimate socially sanctioned pleasures).

y Besides, the second order life goal constitutes of

nihshreyasa (the supreme and highest fulfillment of human life) leads to moksha the fourth and the last subsidiary of purusharthas. y Moksha predicts experiencing the supreme charm of life that goes beyond all superficial and materialistic enjoyments of life. The vanaprastha and sanyasa ashramas (the last two phases of human life) helps people to achieve this highest goal of moksha.

y In Indian culture dharma kept at the bottom and moksha at the top to strategically manage the total life span. y A ashrama means a place where one has to use labor for the fulfillment of a solemn promise or a vow. y The degree of the intrinsic quality of a vow determines everything in life. y This system framework of first two ashramas project the outer, mundane and material aspects of life. These are artha and kama.

y The use of both of these aspects of life are justified because

they are considered as means to unravel the spiritual or sacred (the end result) in life. y So both brahmacharya and grahasthya ashramas need to be practiced ethically in pursuit of prosperity (abhyudaya) for future generations. y People need to stand on the strong foundation of ethicalempirical phase of existence and try to soak his consciousness with his supreme-ethical destiny. y As a consequence merging of karma-sadhana with

dharma-sadhana becomes spontaneous and natural.

Section-111 Virtues and Vicesy The virtues and vices has been interpreted as sadgunas and avagunas respectively in Indian philosophy. y In Bhagabat Gita both of these gunas have been described as daivi sampat (demonic qualities).These are:

Sadgunas or Daivi Sampat(divine qualities)y y y y y y y y y y

Telling truth Absence of wrath Self control Habit of giving Purity of temperament Fearlessness(courage) Steadfastness in yoga Study of scriptures Self denial Absence of fault finding tendency with others.

y y y y y y y y y y

Calmness Absence of greed Humility(modesty) Gentleness Freedom from restlessness. Compassion to all Forgiveness Absence of envy and pride Patience Energy

Avagunas or Asuri Sampat(demonic qualities)y Ignorance y Pride y Arrogance y Egoistic y Extreme self-esteem y Harshness y Cruelty y Multiplying needless needs y Hating the supreme in oneself as well as others. y Giving importance to the end than the means.

y Besides the above mentioned list of sadgunas and avagunas ,there are also descriptions about them in Agni Purana, Brahma Purana etc. y In Agni Purana few essential virtues in the name of sadharana dharma has been described. These are:y y y y

Ahimsa (non-violence) Kshama (forgiveness) Kshanti (peace) Indriyagraha (sama-dama)

Daya (sympathy) y Dana (donation) y Saucha (cleanliness) y Satya (truth) y Tapas (austerity) y Jyana (wisdom) Besides the above mentioned sadgunas there are also avagunas that cause several injuries towards others in the professional set up. These are:y

a) Stabbing from behind (back-biting) b) Betrayal of trust (conspiracy betrayal) c) Erecting obstacles against others good.

The above mentioned three injuries could be added with the previous list of avagunas. It is the dharma ( ethical conduct) the first varga of purusharthas responsible for abhyudaya (prosperity) that talk not only of adoption of sadgunas but also encourage non-adoption of the avagunas.

Guna Dynamics Explained in Bhagabat GitaGunas or Substance attributes Characteristics of Gunas Characteristics of gunas expressed in terms of positive and negative qualities Sadgunas(positive) enlightenment or divine qualities Avagunas (negative) demonic qualities

Sattwa

Prasad and prakasha (eternal great happiness and illumination) Raga and trishna (attachment and craving)

Rajas Tamas

Moha and Pramada Avagunas (negative) (delusion and negligence) demonic qualities

y For performance improvement the dynamism of rajas is obligatory. y Kama (craving) ,Krodha (anger), lobha (greed) ,and moha (delusion) together laid the foundation of all the avagunas in a man. y Both craving and anger are the products of rajas (kama esha krodha esha rajo guna samudbhavah). y Here a dilemma emerges regarding the interpretation of the kama (craving) which is one of the avaguna nurtured by rajas.

y Simultaneously, kama is practiced legitimately and moderately as per the sanction of the society (as per dharma or ethical conduct) it will not be degraded into an avaguna. SECTION-IV (KARMA YOGA) y In verse 2.47 in Bhagabat Gita the principle of work psychology i.e. niskama karma (work without expectation) has been beautifully described. y This principle of work without expectation seems to be an impossible as well as an unexpected task before the selfish prone empirical modern mind.

y It s authenticity can be tested through another version 3.9 i.e. jajnartha -karma (all work to be done as a yajna or sacrifice). y The simple inner divine logic behind this says that sacrifice promotes interdependent living. y So humble sacrifice promotes interdependent living and create a healthy win and win situation in business. y But performing anxiety prone work with pure selfish motive is an energy dissipater.

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In Bhagabat Gita the version yudhyasya vigata jwara has been translated as to fight without mental fever. This mental fever is nothing but work related stress that arises due to the incessant prompting of our immature ego which indulged in the calculation of pure selfish interest. So stress like this leads to mental excitement and confusion that prompts worker to be indecisive about both end and means.

y This state of mental fever can be cured by adopting the philosophy of niskama karma where a worker not only become more effective (ethics-in-work) but also efficient (work-ethic). y Lord Krishna advised Arjuna to express equality to manage the existential dwandas (duality). y Nobody in this empirical world is free from the dual nature of work. y That is why one has to reduce the dissipating impact of these empirical dwandas (duality) upon his mind through the practice of niskama karma.

y In Gita, two important verses used like yogah karmasu kaushalam (the real skill of work is yoga) and samatwam yoga uchyate (the psychological state of inner poise and equality in yoga) to reduce the impact of these existential dualities. y The real technique to perform effective work is yoga i.e. (equality). y The cultivation of niskama karma and yajnartha karma attitude in the performers mind help him to operate with least stress in the organizations.

y People generally perform work when they are too much attached to their subsistence-level of wants. y Besides this, other option left before him is to perform work with ananda. y This ananda comes when a man perform all his work with an enlightened mind and love. y His spontaneous love and care for man, nature and the entire humanity prompts him to perform all of his work.

y Through this karma yoga the true nexus between man and the divine, the empirical and trans empirical be established. y Then only the style of performing work get transformed from the level of arrogance and selfaggrandizement to the level of atmananda (eternal joy). y This definition of work perfectly combines workethic with ethics-in work .

y The learning organizations of today must humbly adopt this holistic lesson from the ancient wisdom like niskama karma and brahmani samarpayate (all work you perform offer and consecrate it to the brahman or the supreme. y This type of attitude towards work inject the value of accountability within and made people normally creative and innovative in their work life. y It is always a positive, healthy and rich mind that can transform and enrich all negativity of work and not the vice versa.

Section-v (Role and Importance of Healthy Mind)y Based upon the rule of cause and effect relationship duties are preferred over rights which is the philosophy of true socialism. y Preferring duty-orientation is a healthy practice that unites work-ethic with ethics- in -work is a healthy practice but not the vice versa. y When people become more right centric than duty centric, negligence in their performance creates an unhealthy society.

y Duty has to be performed for the sake of duty without arrogance. y Your action is ethically correct if means justifies the end. y When work performance is conditioned too much with materialistic or monetary expectation then the sanctity and dignity of work as a means gets diluted. y But question is, if duty performed without any expectation, then what type of reward one gets from his performance.

y He gets reward but in a different fashion i,e. in terms of intrinsic self-satisfaction (atmananda) and possession of an enlightened and healthy mind etc. y Further, the doctrine of karma adds: any good work performed will procreate proportionately equal amount of reward both in terms of financial and nonfinancial as a consequence of the action performed.