Managerial Ethics, Governance and Leadership

Managerial Ethics, Governance and

Leadership

Dr M Manjunath Shettigar

Business Ethics

• Business ethics (also called managerial/corporate ethics) is a form of applied ethics that examines ethical principles and moral or ethical problems that arise in a business environment. • It applies to all aspects of business conduct and is relevant to the

conduct of individuals and entire organizations.

Ethics & Religion

Ethics

• At its simplest, ethics is a system of moral principles. • They affect how people make decisions and lead their lives. • Ethics is concerned with what is good for individuals and society and

is also described as moral philosophy.

Ethics

• Ethics defines the elements essential to human well-being and proposes principles to be used as guidelines for generating an ethical culture. • Ethics also refers to the specific values, standards, rules, and

agreements people/organizations adopt or people/organizations should adopt for conducting their lives.

Ethics, Morality, Religion and Law

• Ethical• Moral • Legal• Religious

How children think

If it's mine it's mine,if I like it is mine,if I can take it from you it is mine,if I am playing with something ALL of the pieces are mine,if I think it is mine it is,if I saw it first it's mine,if I had it then put it down it is still mine,if you had it then you put it down it is now mine,if it looks like the one I have at home it is mine,if it is broken it is yours.

Ethical/Moral standards Lawrence Kohlberg’s theory of stages of Moral reasoning

Heinz’s Dilemma• Heinz Steals the Drug

"In Europe, a woman was near death from a special kind of cancer. There was one drug that the doctors thought might save her. It was a form of radium that a druggist in the same town had recently discovered. The drug was expensive to make, but the druggist was charging ten times what the drug cost him to make. He paid $200 for the radium and charged $2,000 for a small dose of the drug.

The sick woman's husband, Heinz, went to everyone he knew to borrow the money, but he could only get together about $ 1,000 which is half of what it cost. He told the druggist that his wife was dying and asked him to sell it cheaper or let him pay later. But the druggist said: "No, I discovered the drug and I'm going to make money from it." So Heinz got desperate and broke into the man's store to steal the drug-for his wife. Should the husband have done that?" (Kohlberg, 1963).

Heinz’s Dilemma

• Kohlberg was not interested so much in the answer to the question of whether Heinz was wrong or right, but in the reasoning for each participant's decision. The responses were then classified into various stages of reasoning in his theory of moral development.

Ethics

• Ethics is a branch of Philosophy• Ethics is also called ‘Moral Philosophy’

• It is about what is right and what is wrong, what is good and what is bad, what fair and what is unfair, what is just and what is unjust

Ethics

• Ethics is a conception of right or wrong conduct. Ethics tells us when our behavior is moral and when it is immoral.• It deals with the moral choices that we make in the course of performing our duties with regard to the other members of society.• They are important not only in business and politics but in every human endeavour.• The concepts of equity and justice are implicit in ethics. Fair and equitable treatment to all is its primary aim.

ETHICS IN BUSINESS

Business ethics is one of the important branches of applied ethics.

Business ethics is the application of general ethical ideas to business.

It refers to the moral principles and standards and a code of conduct that businessmen and businesses are expected to follow while dealing with others.

Business ethics refers to a ‘code of conduct’ which businessmen are expected to follow while dealing with others. It comprises of the principles and standards that guide behaviour in the conduct of business.

It reflects the philosophy of business, one of whose aims is to determine the fundamental purposes of a company.

ETHICS IN BUSINESS

Businesses must balance their desire to maximise profits against the needs of stakeholders.

The significant issues in business ethics include ethical management of an enterprise in relation to its stakeholders in particular and social & natural environment in general.

The responsibility towards society is a moral obligation arising out of business ethics, which in turn is steeped in the philosophy of business.

It is also concerned with adherence to sound ethical principles in the conduct of all functional operations – Finance, HR, Marketing and Operations

Dimensions of business/corporate ethics• It is about fairness to all stakeholders• It is about transparency• It is about raising the level of trust and confidence of stakeholders in

the way the company is run• It is about understanding and discharging societal responsibility• It is about long term thinking – sustainability• It is about overcoming greed, insecurity, and lack of confidence• It is about following the law of the land

Why ethics is necessary and important in business ?1. Company reputation and goodwill2. Attracting and retaining talent3. Investor loyalty4. Customer satisfaction5. Regulatory compliance & credibility6. Corporate social responsibility

Ethics

• The term ethics is derived from the Greek word ethos, meaning ‘custom’ or ‘character’.• In philosophy, ethical behavior is that which is “good.” • The field of ethics or moral philosophy involves developing,

defending, and recommending concepts of right and wrong behavior.

Oxymoron/Oxymora - a set of words that carry opposite meaning

1) Clearly misunderstood2) Exact Estimate3) Small Crowd4) Act Naturally5) Found Missing6) Fully Empty7) Pretty ugly8) Seriously funny9) Only choice10) Original copies&the Mother of all11) Happily Married

Types of ethics

• Deontological ethics• Teleological ethics• Egoism• Utilitarianism• Relativism• Virtue ethics• Justice

Deontology (or Deontological Ethics)• Deontology (or Deontological Ethics) is an approach to Ethics that

focuses on the rightness or wrongness of actions themselves, as opposed to the rightness or wrongness of the consequences of those actions (Consequentialism) or to the character and habits of the actor (Virtue Ethics).• Deon = duty. Logos = science• Akin to the philosophy of karma – do your duty without thinking

about the rewards (consequences)• Based on Kant’s concept of ‘Categorical Imperative’ (as distinguished

from ‘hypothetical imperative’)

Teleology 

• Teleology (from the Greek telos, meaning goal or end) describes an ethical perspective which contends that the rightness or wrongness of actions is based solely on the goodness or badness of their consequences. • In a strict teleological interpretation, actions are morally neutral when

considered apart from their consequences. • Ethical egoism and Utilitarianism are examples of teleological

theories.

Egoism

• EGOISM: Egoism is derived from the Latin word 'ego' meaning 'I'. • The theory of egoism holds that the good is based on the pursuit of

self-interest. • This model takes into account harms, benefits and rights for a

person’s own welfare.• Under this model an action is morally correct if it increases benefits

for the individual in a way that does not intentionally hurt others, and if these benefits are believed to counterbalance any unintentional harms that follow or occur

UtilitarianismUtilitarianism prescribes that the moral worth of an action is solely determined by its contribution to overall utility, that is, its contribution to the happiness and satisfaction of the greatest member.Utilitarianism can be described by the phrase, “the greatest good for the greatest number.”The utilitarian principle states, “an action is right from ethical point of view if and only if the sum total of utilities produced by that act are greater than the sum total of utilities produced by any other act that can be performed at that point of time by any person”.The utilitarian approach prescribes ethical standards for managers in the areas of organisational goals, i.e., maximisation of profits; and having efficiency which denotes optimum utilization of scarce resource.

UtilitarianismJeremy Bentham is considered the founder of traditional utilitarianism. He propagates an objective basis for making value judgements that would provide common acceptable norm for determining social policy and social legislation.J S Mill is another thinker who contributed to this ethical perspective

Relativism

• Theory of Relativism promotes the idea that some elements or aspects of experience or culture are relative to (i.e., dependent on) other elements or aspects. • It holds that there are no absolute truths in ethics and that what is morally

right or wrong varies from person to person or from society to society.• This perspective stresses on the importance of being non-judgemental and

accepting others and their actions as they are• For example,

- killing animals for sport (like bull fighting) could be right in one culture and wrong in another.

- Non-vegetarianism

Virtue theory

• Virtue theory is more concerned with answering the question of how to live a good life or how to be a good person. Virtue theory aims to offer an account of the characteristics one must have to be considered virtuous.• Virtue theory of ethics is a very old concept existing since the time of Aristotle

(384BC), and there are a variety of theories that fall under the category of virtue theory.• According to Aristotle, “role of ethics is to enable us to lead a successful and good

life”. This in Aristotle's view is possible only for virtuous people. In his words “virtue is a character trait that manifests itself in habitual action”.• Thus, we can define virtue as a trait of character, that is essential for leading a

successful life. Virtues should contribute to the idea of a good life. They are not merely means to happiness but are constituents of it.

• Virtue Ethics (or Virtue Theory) is an approach to Ethics that emphasizes an individual's character as the key element of ethical thinking, rather than rules about the acts themselves (Deontology) or their consequences (Consequentialism).• Virtue ethics is person rather than action based: it looks at

the virtue or moral character of the person carrying out an action, rather than at ethical duties and rules, or the consequences of particular actions.

Character ethic for All of Us ! • We will respect others' right to live and work• We will respect others' ways of living (including food habits), without being judgemental• We will not resort to violence to sort out our differences. Instead, we will engage in debate

and discussion by democratic means• For us humanity and its wellbeing counts more than anything else, including religion and caste• We will profess and practice the principle of gender equity• We will strive to imbibe the spirit of scientific temper and rational thinking• We will develop qualities of responsible citizenship• We will respect the constitution and its democratic tenets• We commit ourselves to build an inclusive society that works for all of us• We will rise above all our differences, divisions and deviations, and will build a progressive

and prosperous commonwealth of India

Let’s celebrate our plurality and our oneness!

JUSTICE THEORY

• Justice approach is also known as fairness approach. Greek philosophers have contributed to the idea that all equals should be treated equally. Justice does not depend on consequences; it depends on the principle of equality.• The key to a well-ordered society is the creation of institutions that

enable individuals with conflicting ends to interact in mutually beneficial ways. • The focus here is on social justice.

JUSTICE THEORY

The contemporary American Philosopher John Rawl’s objection to utilitarianism is that it does not give adequate attention to the way in which utility is distributed among different individuals. As an alternative to the utilitarian idea of society with highest welfare, Rawls proposes a society that recognizes its members as free and equal person who attempt to advance their own interests and come into conflict with others pursuing their self interests.The key to a well-ordered society is the creation of institutions that enable individuals with conflicting ends to interact in mutually beneficial ways. The focus here is on social justice. Rawls promotes “Play It Safe”. He argues that a rational person should choose the alternative in which the worst possible outcome is still better than the worst possible outcome of any other alternative.

Some additional theoretical perspectives• Stockholder theory• Stakeholder theory• Social contract theory

See – Fernando BECG – pp

Approaches to ethics

• Ethical relativism• Ethical absolutism see – ACCA

Approaches to ethics

• Ethics in relation to action• Ethics in relation to consequences

see – ACCA

Approaches to ethics

• Descriptive ethics• Meta – ethics• Normative ethics• Stanwick & stanwick – pp 4

Influences on Ethics

• Cultural factors influencing ethics & CSR1. Individual and 2. Situational 1. Individual

• Age & gender• National & cultural beliefs• Education and employment• Psychological factors• Locus of control• Personal integrity• Moral imagination

Influences on Ethics• Cultural factors influencing ethics & CSR2. Situational • Issue related factors

• Moral intensity• Moral framing

• Context related factors• System of reward• Authority • Bureaucracy• Work roles• Organizational field• Organizational culture• National and cultural context

For & Against Business Ethics

• Business ethics – Velasquez pp 38 to 46

Stages of Ethical Consciousness in Business• Law of the jungle• Anything for profit• Profit maximizing in the short run• Profit maximizing in the long run• Stakeholder concept• Corporate citizenship