Business ethics
Business ethics1Nature, purpose and scope of ethicsImportance of ethics and moral standardsRelevance of valuesSecular vs. spiritual values in managementBusiness ethics3A business that makes nothing but money is a poor business.Henry Ford
4The concept comes from the Greek word ethos that means both an individuals character and a communitys culture.
Business ethics involves adhering to legal, regulatory, professional and company standards, keeping promises and commitments and abiding by general principles like fairness, truth, honesty and respect.
5The institute of global ethics defines ethics asobedience to the unenforceable.6The maxims such as business is business or principles like caveat emptor (let the buyer beware) fall for short of public expectation.
Businesses are under pressure to define their standards and codes of practice.For eg. A doctor must not increase the price of medicines for a dying patient, thus taking advantage of his serious predicament; an employer must not pay a worker less than a living wage.67Ethics are moral guidelines which govern good behaviourSo behaving ethically is doing what is morally rightBehaving ethically in business is widely regarded as good business practice.Friday, July 31, 20158An important distinction to remember is that behaving ethically is not quite the same thing as behaving lawfully:
Ethics are about what is right and what is wrongLaw is about what is lawful and what is unlawful
89Ethics constitutes desirable conduct in a particular set of social circumstances.
Business ethics are that functions which leads to choosing right decision at right time which leads for the welfare of not only business owners but also society, consumers, stakeholders and its employees.
10There are three approaches to studying business ethics-Descriptive- describing practices, moral codes and beliefs
Prescriptive- an attempt to formulate and defend basic moral norms
Conceptual study- analyzing central ethical terms such as right, good, an attempt to distinguish what is moral and what is immoral.
11Proponents of moral relativism believes that the bulk of moral rules are culture-specific. In other words things are right or wrong in a particular context.Nature of business ethics12Business ethics has a five part structure:
The specification of moral judgmentMoral judgment and the moral standardJustification of moral judgmentLogical reasoning and moral judgmentMoral judgment and moral responsibility13Requirements for moral judgments
Moral judgment should beLogical- our goals should be able to support our moral judgments with reason and evidence.
Based on facts- must collect as much relevant information as possible for making them.
Based on acceptable moral principles-
14The ethics movement has grown most strongly in the USA because the risk of being penalized by the courts for unethical behavior is greatest there. 15Initial approaches were heavily based on compliance, the creation of rules and systems that people and companies had to follow. But rules are hard to draft and can quickly become out of date.
This has led to the evolution of the belief that although some level of compliance will always be necessary, it is more important to instill ethical values into the corporate body and the employees that inhabit it.16To do this successfully businesses must have a vision about why they exist and which ought to be shared by every one connected with the company.
They must also have shared beliefs about acceptable standards of behavior. 17Unethical behavior can cost a company its reputation and hard cash and reduce its stock price.
Whereas, ethical companies are most likely to build trust among their shareholders, employees, customers and wider community and thus surely is good for business.Ethical relativism18What is right in one place may be wrong in another because the only criterion for distinguishing right from wrong is the moral system of the society in which the act occurs.
For e.g., abortion is condemned as immoral in catholic Ireland but is practiced as a morally neutral form of birth control in Japan.
19Many immoral moralities have been adopted, tolerated or even encouraged by the moral system of one society or another.
Albert Carr argues that business has its own norms and rules that differ from those of the rest of society.
There are number of things that we normally think of as wrong are really permissible in business context.20Conscious misstatement and concealment of pertinent facts in negotiation.Lying about ones age on a resume.Deceptive packagingOvercharging of electricity uses.
Hence business has its own moral standards and business actions should be evaluated only by those standards.Herd morality and conventional morality21In the earliest period of human history, men lived in herds and were totally dependent for their survival on the group of herd, and hence what was good for the herd was good for its members. Also known as instinctive morality.
22When men graduated from nomadic stage to the agricultural stage, his struggle for existence became less harsh, he found some leisure to think and social life begin to take shape.
But here too, the iron grip of social rules and regulations held complete sway over the individual.Friday, July 31, 201523When we claim to be highly civilized, the majority of us follow the rules of conduct regarded as good and avoid those regarded as bad.
This certainly ensures smooth functioning of the society and simplifies problems of the individual. 24The question is why do we call a particular conduct good and another bad.
Is good a fact like tables and chairs? If so a conduct called good by one should be regarded as good by others.25Ethics is essentially a social phenomenon. That which is approved by the group or society is ethical and conduct frowned upon by the group is bad or immoral.
Does this not prove that morality means following rules prescribed by the elders or majority of society?26For e.g., At the beginning of the battle of Kurukshetra, Arjuna asked Sri krishna to take him before the army of Kauravas. He was overwhelmed by the idea of killing his kith and kin and was on the point of fleeing the battlefield.
He could not determine what is his duty and what is good for him.Ethics as a normative science27A normative science seeks to determine norms, ideals, standards or values.
There are three ideals of human life viz., Truth, Beauty and Goodness. They correspond to three aspects of our experience thinking, feeling and willing.28Ethics is concerned not with human conduct as it is but as it ought to be. It passes judgments of value upon human actions with reference to the moral ideal.
Moral judgments are not descriptive but prescriptive, they state what we ought to do, not what we actually do.Postulates of ethicsPostulates: Something assumed without proof as being self evident.29All types of behaviour or conduct of men do not come under the purview of ethics.
E.g., an office employee going to a bank to deposit a large office sum. On the way he is shot at by certain miscreants, is slightly wounded and the money is snatched from him by those miscreants.30Freedom of will of the agent or doer is fundamental postulate of morality. Such events that do not follow from the free will of the doer, do not form the subject matter of moral judgments.
31Exceptions are:Instinctive action- A man fleeing from a dangerous animal is behaving under the influence of the instinct of self preservation.
Reflex action when we withdraw our hand when it touches a very hot object.
32Ideo motor action- A spectator watching a footballer about to kick ball into the net, himself kicks the man standing in front of him.
Accidents breaking ones leg as a result of slipping on a banana skin.33Reason only persons with a properly developed rational faculty, i.e., with the power of distinguishing good from bad are to be held responsible for their voluntary actions.
For e.g., A boy of eight sets fire to a hut and causes considerable loss of property.34Personality the unity and continuity of the mental life of a person.The consequences of actions come after the deeds are done. Sometimes, there is considerable time gap between an action and its result.
For e.g., a man commits a crime and during the course of his trial, is found to be insane, he is not punished for his crime.35Apart from voluntary actions, habitual actions also come under the scope of moral judgment.
For e.g., a smoker tries hard to give up smoking, but he does not succeed. This is more of a psychological problem, how can he be held morally responsible?Habitual actions being voluntary in origin come under the scope of moral judgment.3536A voluntary action is not a simple event. It has three stages
The mental stageThe bodily stageThe external stage of consequences
For e.g., quenching thirst by water.Sometimes different desires conflict with one another, if we succeed in overcoming this conflict and make a firm choice, then the choice translates into bodily action.If thirst is not quenched, we continue to suffer and make various efforts to find some water to remove our thirst.36Motive or intention?37The motive is the fuel for the intent. The motive is the reason why someone is going to do something, the intent is what they desire the outcome of that something to be.
Motive is the fountain from which the actions spring, whereas intent is the goal to which they are directed. 38In short intention = motive + means adopted
To actually do good to my friend, I need to adopt proper means then only the result will be satisfactory.
E.g., A surgeon performs an operation with utmost care to cure a patient; but in spite of that the patient dies.39The means adopted for realizing the motive must be good.
For e.g., motive of passing exam is good, but adopting unfair means to do that is not good.
Hence the morality of an action depends not merely on the motive but also on the means adopted.40The term intention is used in a wide sense which includes:
Immediate and remote intentionDirect and indirect intentionConscious and unconscious intentionFormal and material intention41Examples:
Two person trying to save a man from drowning, one is policeman.
Helping a beggar.
A politician adopting various measures to strengthen his hold on power.Importance of ethics and moral standards42Importance of ethics in business43Ethical behavior is essential for long term success in business, both from micro and macro perspective.
Friday, July 31, 201544The market system leads to a more efficient way of allocating resources and the conditions required are:
The right to own and control private property.Freedom of choice in buying and selling goods and services.The availability of perfect information regarding these goods and services.Macro perspective unethical behaviorFriday, July 31, 201545Bribery reduces freedom of choice by changing the conditions under which the decision is made. Greater appeal is created by enhancing the personal gain associated with the choice by addition of unearned income.
Coercive acts threats that prevent a seller from dealing with certain customers.Friday, July 31, 201546Deceptive information creates false impressions and leads buyers to select goods and services that provide less satisfaction. Delivering products and services below the promised quality also distorts the system.
Theft losses due to theft may be made up via larger profit margins that increase prices.Friday, July 31, 201547Unfair discrimination results in the purchase of services from less capable people or sale to less capable people.Macro perspective ethics and trust48Ethics is closely associated with trust. In order to develop trust, behavior must be ethical.
Trust in a business setting reduces costs, makes life more pleasant and improves efficiency.Friday, July 31, 201549Two norms are to be honored in all situations:Commitments are to be honored in almost all situations.
One ought to produce a good product and stand by it.50Trust involves three fundamental elements
PredictabilityDependabilityFaith
Need for trust arises when one faces some type of risk. Thus trust, is a risk reducing mechanism.Predictability tends to eliminate surprises.Dependability provides assurance that the product can be counted upon to perform as expected5051Trust in supplier relations purchases move from a series of discrete transactions to an on going buyer seller relationship which is called an exchange relationship, which is based on trust between both parties that each will honor his commitments.
It also provides several benefits to the buyer. The buyer gets a dependable source of supply, during the period of shortages also.52Trust in customer relations a salesman earn customers trust by being dependable, honest, competent and customer oriented.
Customers who trust suppliers are more likely to stay with them.
Friday, July 31, 201553Trust in employee relations a climate of trust provides:
Improved communicationGreater predictability Dependability and confidence among employeesReduction in employee turnoverOpenness and willingness to listen and accept criticismReduction of friction among employees
54The following factors promote trust:
Open communicationsGiving workers a greater share in decision making.Sharing of critical informationTrust based sharing of perceptions and feelings
Moral standards55Moral standards are the yardsticks of business ethics. They provide the basis for deciding whether an act is right or wrong.
Moral standards consist of specific moral norms and general moral principles.5556Business ethics is the process of evaluating decisions, either pre or post, with respect to the moral standards of societys culture.
Moral norms prohibit certain types of behaviour such as lying, stealing and killing.
Moral principles provide more general guidelines for behaviour and are applicable to decision situations.Moral Versus Nonmoral Standards Friday, July 31, 201557Nonmoral standards: Standards about behavior or practices with no serious or immediate effects upon human well-being.
Moral standards: Standards about behavior or practices with serious or immediate effects upon human well-being.
Some Features of Moral Standards
Friday, July 31, 201558Not all standards and rules in a society are moral ones. For example chewing with ones mouth open violates etiquette laws not morality laws. Driving faster than allowed with a city without harming someone violates traffic laws not morality laws. On the other hand, breaking promises, stealing, telling lies are all moral violations. Characteristics of moral standards.
Friday, July 31, 2015591. Violating moral standards may result in a serious threat to human welfare. It may hurt people but violating non-moral standards does not. Stealing, lying and killing deal with action can hurt people. The moral principal that human beings should be treated with dignity and respect strengthens the human personality. The standards that govern our conduct in these matters are moral standards.602. Moral standards take priority over other standards including self-interest. For example, stealing from your neighbors home cannot be justified on the non-normal ground that it would be fun or it would make you rich. We take moral standards to be more important than other consideration in guiding our actions.
3. The strength or the validity of moral standards depends on the sufficiency of reasons that support or justify the standards. No authorities create moral standards, however, they can accept them or reject them based on the quality of arguments of the reasoning that supports them. Example: When law makers discussing a new law.
Morality and Etiquette
Friday, July 31, 2015611. Morality refers to the rules and standards of what is right and what is wrong; what is good and what is bad in society.2. Etiquette refers to the rules and standards of what is polite conduct and what is impolite conduct; what is correct conduct and what is incorrect conduct in society.Not all societies have the same etiquette standards. For example some people may consider eating with ones right hand as an incorrect conduct; while others perceive it as correct and normal.
ExamplesFriday, July 31, 201562A. What is (un)ethical is not necessarily (il)legal, and vice versa:
EX: Ethical and legal: donating money to charity.EX: Ethical and illegal: hiding Jews in Germany during WWII.EX: Unethical and legal: slavery (years ago in America).EX: Unethical and illegal: first degree murder
The Sources of Morality
Friday, July 31, 201563Some people argue that without religion people will have no incentive to be moral.Religion teaches us to be good so we should base morality on it.
Kruckberg (1996: 181-189) noted that religion heavily influences the peoples ethical judgments throughout the Middle East. (Sharia Law)
The Sources of MoralityFriday, July 31, 201564The justification of moral norms: Moral philosophers study mainly the justification, rather than the origin, of moral norms.The claim that morality is based on religion:Religion provides incentives to be moral.Religion provides moral guidance.Moral norms are in essence divine commands.
65Integrative social contracts theory is used for evaluating the ethical dimension of decisions.
It is a normative theory of business ethics and it allows for moral diversity among various cultures while maintaining certain universal norms.Essential elements of social contract theory66S.No.HypernormsUniversal1 Personal freedom2Physical security3Political participation4Informed consent5Ownership of property6Right to subsistence7Equal dignity to all humans66S.No.Macro social contractGlobally based1 Moral free space2Free consent with right to exist3Compatible with Hypernorms4Priority levels67S.No.Micro social contractIndividual normsCommunity based1 Do not lie in negotiations2Honor all contracts3Give job preference to natives4Give contract preference to local suppliers5Provide a safe workplace68Relevance of values69Value70The word value is derived from a French word, Valoir which means the worth, merit, usefulness or importance of a thing.
Values are prescriptive belief which depicts what is good and what is bad.7172Allport described a value as a belief upon which one acts by preference. When we place importance on something that we cherish we are valuing that trait, ideal, or characteristic.
Values describe what managers try to achieve through work and how to behave.
73Values may be based on rules and are referred to as deontological or rule based belief;
or values may be based on the perceived outcomes and are referred to as teleological beliefs.Features of values74Values are the core of personality and are a powerful force affecting behaviour.
Values contain a judgmental element in that they carry an individuals ideas as to what is right or wrong.
Values are not fixed, they change over time.
75Values have both content and intensity attributes. The content attribute indicates that a mode of conduct of existence is important. The intensity attributes specifies how important it is.
Many values are relatively stable and enduring.Value formulation 76Genetic sourceEnvironmental sourceInfluence of superiorsMedia
Values describe what managers try to achieve through work and how to behave.
Importance of values in business77Values should be in alignment with the business goals, and mission and vision statements, otherwise there is bound to be organizational conflict.
Values will also help you in finding your purpose in life.
Values lay the foundation for the understanding of perception, attitudes and motivation of people.
78Values help you get and stay motivated.
Values relate to our purpose in life and are used as guiding principles, to make your life easier.
Values provide you with a strong foundation; a method for living your life to its fullest. 79Corporate culture: an effective value system creates a strong corporate culture which is necessary for high performance.
Guide to action: serves as social guides to decision making and actions to be taken in business.
80Objective standards: serves as norms against which the conduct of businessmen and their performance can be judged.
Social responsibility: help to persuade businessmen to discharge their social responsibilities.Value based management81Judgment and guided actions which are based on individuals beliefs or convections. Every organisation has its own beliefs and convictions.
A managers values determine the managerial functions he performs.82A managers value system plays a significant role in the performance appraisal of his subordinates.
The job of planning, organizing and controlling the behaviour of employees should be compatible with managerial values.Importance of value based management83Value orientations of managers underlie managerial behavior. The importance are as follows:
Managerial effectiveness based on value based management can solve problems harassing the economy in country.
Selfless action purifies our mind. Purer mind concentrate and mediate to approach divinity or perfection.Why do you do what you do? What motivates you? Why is it important to plan for the future? What are you planning for and why? These are just some of the questions I start asking myself when I begin thinking about my goals and my future.8384Proper use of valuable human and material resources offered by the earth.
Promotes work culture, self discipline and consciousness among the employees.
Helps in bringing human harmony and happiness in the organization.
85It cares for its people. People are protected from unwanted stress and strains, unrest and loneliness.
Helps in reducing conflicts and disputes. This enhances reputation and goodwill of the organization.Types of values86These are personal convictions about life-long goals (terminal values) and modes of conduct (instrumental values).87INSTRUMENTAL VALUES
Instrumental Valuesarecore values,permanent in nature, comprise personal characteristics and character traits.
INSTRUMENTAL VALUES88CheerfulnessAmbitionLoveCleanlinessSelf-ControlCapabilityCouragePolitenessHonesty
ImaginationIndependenceIntellectBroad-MindednessLogicObedienceHelpfulnessResponsibilityForgiveness
89TERMINAL VALUES
In our personal lives, Terminal Values are those things that we can work towards or we think are most important and we feel are most desirable terminal values are desirable states of existence.
TERMINAL VALUES90True FriendshipMature LoveSelf-RespectHappinessInner HarmonyEqualityFreedomPleasureAn Exciting Life
Social RecognitionWisdomSalvationFamily SecurityNational SecurityA Sense of AccomplishmentA World of BeautyA Comfortable Life
Secular versus Spiritual values in management91Secularism 92Secularism is the doctrine that morality should be based solely with regard to the well-being of mankind in the present life to the exclusion of all considerations drawn from belief in God.
Secularism means non-religious. The secular values are based on facts and science.93Secularism means being materialism and task oriented for managers.
Secularism is a professional value which completely ignores the difference of caste, color, religion, culture etc.Friday, July 31, 201594Main features:
Primary emphasis on the material and cultural improvement of human being.
Concern for this world and its improvement.
Maximize the profit without discriminating work force.Friday, July 31, 201595Responsibility towards society: One should take maximum efforts for the well being of society.
Professionalism: decision should not be on the basis of religion, caste, colour etc.
Secular values lay emphasis on brother hood of man and unity of the world.Secularism and managementFriday, July 31, 201596Under this the management acted as handmade of profit and motto was more and more money at any cost. Hence we got external growth at the cost of internal growth.
Some consequences of management by secularism are as follows:Friday, July 31, 201597Workers are demoralized
Labor management conflict is rampant.
Human welfare is neglected
Wealth is accumulated
Main objective of management is to earn money at any cost.Spiritualism Friday, July 31, 201598Spiritual means religious one or the people who believe in religion.
They behave that work and religion are two side of a coin.
Human values are based on spiritualism. They act as base for thoughts, actions, skills and behaviour and will mould character.Friday, July 31, 201599Main features:Divine qualities: such as respect for elders, belief in giving than taking, satisfaction etc.
Work is worship: one should work with more confidence, loyalty, dedication, responsibility and motivation.
Self disciplined: helps in proper usage of our time, energy and other resources.Friday, July 31, 2015100Belief in religion: spiritual people believe in religion.Spiritualism and managementFriday, July 31, 2015101The quality of work life in an organization is greatly influenced by the spiritual and ethical values prevalent in the organization.
There is no clash between secularism and spiritualism.
Spiritualism shows the goal and secularism supplies the tools.SECULAR Vs SPIRITUAL VALUES IN MANGEMENTFriday, July 31, 2015102Secular It refers to the worldly thoughts and philosophies as reproduced by management Gurus.
Find its way from maslows need hierarchy and culminate till most modern thoughts on management.SpiritualIt refers to the insights thrown on management by Vedas and Upanishad or by spiritual Gurus.
Find its base from Vedas and Upanishads with special reference to Gita.Friday, July 31, 2015103Secular Treat management values as a science.
Treat management values as an evolutionary concept.
Views on values are not generally ethical by nature.SpiritualTreat management values as a philosophy.
Believe sources like Bhagvad Gita, as a ready reckoner of value based management.
Ethical or moral in its true sense.Friday, July 31, 2015104Secular Contribution of Indian thoughts is comparatively poor.
As propounded by management experts lack any ideals.SpiritualContribution of Indian thoughts has magnificent theories.
Have divinity as the ideal to be portrayed.Examples Friday, July 31, 2015105Worship of Tulsi
Spiritualism: we do worship tulsi by giving water or by lighting a lamp in the plant of tulsi.
Secularism: believes that lighting a lamp in tulsi kills insects, and tulsi also has medicinal value as it cures cough and cold.Friday, July 31, 2015106Giving Argh to Sun
Spiritualism: it is a spiritual value.
Secularism: believes that when we give argh to Sun, our eye sights will also become good.
Friday, July 31, 2015107Touching feet of elders
Spiritualism: we get blessing by touching feet of elders.
Secularism: believes that blood circulation is maintained by it.
Friday, July 31, 2015108Secular practices with human dignity, human morality and human value will alone bring bright future for India.
The country should have common law which is applicable to all cities.
There should be no privileges based on religion or faith.
