Ch 1 into to ethics part 2 becg Prof. shirufi

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Introduction to Business Ethics

(Part 2 )

Prof. Shirufi Purohit

1 Prof. Shirufi Purohit

Moral standards

Person learns morality from his or her

very childhood and from family, friends,

society, school etc.

Many a times in business tractions, one

may face the conflict between legal and

moral righteousness.


Supporting example

An employee seeks leave of absence for a

medical emergency at home , even when

he is not entitled to immediate leave. If

the boss does not sanction the leave, he is

legally right- yet morally wrong.


Supporting example 2

Selling a refrigerator to a customer after

customers inspection and satisfaction is

legally right. But still if the product dose

not function as specified by seller would

be immoral.


1. Moral standards deal with subject matters that have serious

implications in society, environment and workplace, irrespective

of whether the implications are beneficial or harmful.( eg

pesticide in cold drink)

2. Moral standards are self-regulatory.( Indian law permitting

pesticide should be change or company should withdraw

product)

3. Moral standards are not guided by the self-interest or other non-

moral standards and values.( celebrity who promoted for money)

4. Moral standards are based on impartial considerations.( benefit

for all and not be benefit competitors in same case)

5. Moral standards are self-inflicting.( if one fails in moral standard

he would feel guilty about it)

CHARACTERISTICS OF MORAL

STANDARDS

Prof. Shirufi Purohit 5

Level – I: Childhood Stages

◦ Punishment and obedience orientation

◦ Instrument and relativity orientation

Level – II: Conventional Stages

◦ Interpersonal concordance orientation

◦ Law and order orientation

Level – III: Principled Stages

◦ Social contract orientation

◦ Universal ethical principles orientation

Levels of development of Moral understanding-

Kohlberg


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Moral reasoning tries to logically place or project facts and

figures that help one to judge human behaviour, institutional

activities, policies, programmes, etc. as to whether they are in

accordance to, or in violation of, acceptable moral standards.

Distinct features of Moral or ethical reasoning:

◦ Identifying what constitutes ‘moral standards’

◦ examining facts and figures concerning the policy, behaviour and actions

under the specific situation; and

◦ arriving at a moral judgment on the basis of rightness or wrongness of

policy, behaviour or actions.

MORAL REASONING FOR

ETHICS


To decide if an action or policy is ethical, one has to exercise moral

reasoning by examining the factual information with regard to

morality of the action or policy by analyzing:

a) the utility of the decision, rights and duties of the individuals

concerned with the decision;

b) if justice is being meted out by the decision;

c) the amount of care being shown to those who are related and valued

in the subject matter; and

d) the consistency of the decision with the past and present.

Cont…


Moral reasoning

Many a times individual genuinely believes

that what they are doing is unbiased and

morally justified but they fail to see the

expectations of the society or fail to play

a fair role.


Supporting case

A company adverse for a position. About

470 application reached the office, 278

candidates were round appropriate. In

that 163 candidate were female and 115

were male. The company decide to call

100 candidates for interview ( 50 each of

gender)


After interview company decided to

select 25 candidates- 15 female and 10

male.

When the list of selected candidate when

to boss for final approval, he asked so

many female candidate would not be

comfortable to work in night shift. Hence

the list was revised 20 Male and 5 Female

were finally selected.


conclusion

Here the boss as an Individual was bias

and morally wrong

Her company is also in fault as its claim

equal opportunity.

Here the female candidate were not even

asked whether they are willing to work

for night shift or not and the list was

change that was wrong.( 15 to 5).


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MORAL RESPONSIBILITY

word responsibility means being legally or ethically accountable for

the welfare or care of another.

‘Moral responsibility’ means owning responsibility for doing

something knowingly and deliberately that had caused harm or

injury to others.

Establishing moral responsibility has the connotation of law or

rules, in addition to its ethical implications.

If any one under the circumstances acted out of (a) ignorance or

(b) inability, he or she may be excused of moral responsibility.

However, one cannot deliberately stay ignorant and claim

innocence for a wrongdoing – be it as a person or company.

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example

Child labor

not paying minimum wage

Discrimination in pay

Harmful particulates in air

Discharge of industrial effluents


Supporting case

If a seller cells air condition and if that is

defective and cause inquire due to an

electrical short circuit and fire thereof.

But here the seller is not morally

responsible for injury as long as he did

not knowingly sell a defective product.


Contradictory case

Driving a car without a license and

meeting with an accident causing injury to

a pedestrian. Here the driver knows

hence here he is morally wrong and

cannot deny his moral responsibility.


Supporting case

It was reported that the contaminate milk

caused the death of 6 children and nearly

3 lakhs children fell sick after drinking

milk that was intentionally laced with

melamine a toxic compound that can give

a fake positive on protein tests.


Result

Officers on the Sanlu Group were aware

of the same but did not make it public. It

was a case of serious food safety failure.

Chinese court sentenced two men to

death and the General Manager of the

company to life imprisonment. The

company has since gone bankrupt due to

unethical scandal.


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Supporting case

A car driver was continuously honking

loudly near a children's hospital. Due to

this shrill and loud noise from the car, one

child patient- critically ill started crying

loudly, got choked in the process and died

before any emergency treatment could be

extended at that time of the night.


Question ;- Is he morally

responsible?


Answer

Ignorance cannot be an excuse for such

violation of rules( Silence Zone signboard

at hospital) and thereby showing no

respect for moral standard.


Principles to establish Moral Responsibility

1. Ignorance of fact or

consequences.( eg Seller

Refrigerator)

2. Ignorance of moral standards.(

unable to read sign board- No

smoking in Chinese and smoking

in that area.

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A tentative flow sheet for Ethical Judgement


Moral standards vis-à-vis ethical

standard 1. Moral standards are not absolute.( they may change

with society, place an with maturity of person.

2. Moral standards are based on impartial considerations

without any self interest or bias

3. Moral standards are self regulating and self inflicting

4. Ethics on the other hand mean the logical study of

morality of an action by searching the principles that

nullify the action or justify it as fair and good. For

example if a nursing home fails to admit a road

accident victim for want of medical insurance coverage

it would be unethical according to medical ethics.


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Characteristics of ethics

Honesty

Transparency

Legality

Integrity

Accountability

Humanity

Values

Commitment

Humility


It is difficult to disentangle the two terms

morality and ethics.

They are like chicken and egg story –

seeking debate which ne came first.


Difference

1. Moral standards :- these are common

rules for everybody in a society.

2. Ethical standards :- these are rules ob

behavior established through moral

reasoning.

3. Legal standards :- These are systems of

punishments and incentives in a society

or country for ensuring laws and

regulations.


5 approaches to ethical standards

1. Utilitarian approach

2. The rights approach

3. The fairness or justice approach

4. The virtue approach

5. The common good approach


1. The utilitarian approach

This means that the ethical action

produces the greatest good and does the

least harm to all those who are affected

by it.


2. The rights approach

Every living being has certain moral rights

for example the opportunity to live, the

right to privacy, the right to justice, not to

be harmed, choice of actions.


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3. The fairness or justice approach

Greek philosophers like Aristotle, that all

equals should be treated equally.

For example persons guilty of similar

crime have to be treated equally for

punishment, whether one is a common

man and the other is a man of high

position in the society.


4. The virtue approach

One should focus on values and well

being of humans.

Values like the truthfulness, honesty,

integrity, generosity, fairness, prudence

and self regulation.


5. The common good approach

Welfare of everyone in the society.

The purpose of common good approach

is to spread the reach of benefits to as

many as possible in the society.

Example the work of charitable trusts,

blood donation camps run by clubs and

the corporate social responsibility ( CSR)

activities of companies and business.


What is an Ethical Dilemma?


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An ethical dilemma is a moral situation in which choice has to be made between two equally undesirable alternatives.

That is a person failing to choose between right and wrong but between right and right.

A business dilemma exists when an organizations decision maker faces a choice between two or more options that will have various impact on (a) organizations profitability and competitiveness (b) its stakeholder.

Examples…

1. Profitability and work load of worker

2. Use of computer and reduction in job opportunity

3. Merger of two firms and reduction in employment opportunity.

4. Conflict of person and his professional values e.g. Marketing guy bribing customer( Purchaser) to achieve his target.

5. Ones values vs. perceived role of a task. E.g. To get environment pollution clearance certificate immediately you may have to bribe committee.


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Supporting Case( pg 34 to 35 )


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Ethical dilemmas involves problem solving situations in which decision rules are always vague or in conflict.

The outcome of an ethical decision cannot be predicted with any degree of accuracy or precision.

We can not make sure that we have made a right decision Nor any one can tell us so.

There is no magic formula or software available to reach at best decision.

Supporting Case


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A newly established private educational institution for vocational courses proposed to air a 10-second advertisement at a peak time on a popular TV channel in a metro claiming “enrollment in the institution automatically guarantees 100% jobs in government offices.”

The proposal has put the account manager of TV channel in to a dilemma whether to accept the advertisement- accepting the advertisement means supporting and promoting wrong information and refusing the same means loss of revenue to the channel.


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The TV channel was more concerned with the consequences of their actions that might mislead many poor students to pay heavy fees to enroll in the course with false commitment.

Supporting Case The mother of a brain-dead boy request

the hospital where the boy was admitted after an accident to withdraw the life support fro the patients and allow him to die in natural course.

The reason keeping the boy alive in brain dead condition will cost massive amount of expenses that the family can not bear it. Besides, it is worthless to keep him alive in a brain dead condition.



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Dilemma before hospital - which alternative to choose.. Both are not only equally bad but also against professional ethics and law.

Even if they provides life support can they force the women to pay for the money, without her consent.

Structure of ethical dilemma

Either Doing what is

morally right

Results in bad outcome or bad effect


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Either Doing what is

morally wrong

Results in good outcome or good effect

Same dying child example

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Common analytical steps in

resolving ethical dilemmas

1. Identify moral issues

2. Analyze the issues- who will be

benefited who will be harm.

3. Examine options or alternative (

honesty, fairness equality, and dignity)

4. Examine the options in the light of the

principles of ethics.

5. Make the final decision


Principles of Personal Ethics

Personal ethics refer to the application of values in everything one does.

Principles of personal ethics include:

1. Concern for the well being of others; 2. Respect for the autonomy of others; 3. Trustworthiness and honesty; 4. Willing compliance to law; 5. Basic justice: being fair; 6. Refusing to take unfair advantage; 7. Benevolence: doing good; and 8. Preventing harm to any creature.


Principles of Professional Ethics The basic principles people are expected to follow in

their professional career are the following: 1. Impartiality: neutrality; 2. Trustworthiness and honesty; 3. Openness: Full Disclosure; 4. Confidentiality: Trust; 5. Due Diligence: Duty of care; 6. Fidelity to professional responsibilities; and 7. Avoiding potential or apparent conflict of interest


Nature of Ethics

1. The concept of ethics deals with human beings only. Only

human beings are endorsed with the freedom of choice.

2. The study of ethics has become a set of systematic knowledge

about moral behavior & conduct;- field of social science.

3. The science of ethics is a normative science.

4. It deals with human conduct which is voluntary & not

coerced by persons. It is basically an area dealing with moral

judgment regarding voluntary human conduct


Why have a code of ethics? Or

Objectives of Ethics

1. Makes evaluative assessment about what is moral &

immoral

2. To define acceptable behavior

3. Makes judgment upon human behavior based on these

standards & norms

4. To establish a framework for professional behavior and

responsibilities

5. To provide a benchmark for self-evaluation


What is Business Ethics? It deals with the study of the problems arising in the relationship

between the field of business & its management.

“business ethics is the art & discipline of applying ethical principles

to examine & solve complex moral dilemmas”

It is based on the principle of integrity and fairness and

concentrates on the benefits to the stakeholders, both internal

and external.

Stakeholder includes those individuals and groups without which

the organization does not have an existence. It includes

shareholders, creditors, employees, customers, dealers, vendors,

government and the society.


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What is not Business Ethics?

Ethics is different from religion

Ethics is not synonymous with law

Ethical standards are different from

cultural traits

Ethics is different from feelings.


Code of Conduct and Ethics for

Managers

Managers must observe the following ethical values while performing their duties:

Integrity

Impartiality Responsiveness to public interest

Accountability Honesty

Transparency Integrity


Importance and Need for Business

Ethics A business organization competes in the global market on its

own internal strength, in particular, on the strength of its human

resource, and on the goodwill of its stakeholders.

The value-based management and ethics that an organization uses

in its governance enables it to establish productive relationship

with its internal customers, and lasting business relationship with

its external customers.

Business needs to function as a responsible citizen


Reasons for occurrence of ethical

problems

Personal Gain

Clash of personal values & business goals

Competitive Pressure on profit


Values and Ethics in Business

A value is a view of life and judgment of what is desirable.

Business ethics relates to issues of “what is right” and “what is wrong” while doing business. What values are to individuals, ethics are to business.

Business ethics operates as a system of

values, relating business goals and techniques to meet specific human ends


Values

Ethics

Personal in nature (e.g.. a belief in providing customer satisfaction and being a good paymaster)

Generalized value system (egg. avoiding discrimination in recruitment and adopting fair business practices).

Distinction between Values and

Ethics


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The reasons for an organization to be ethical include: 1. To protect its own interest, so that the public will

have trust in it.

2. To keep its commitment to society to act ethically,

3. To meet stakeholder expectations.

4. To build trust with key stakeholder groups,

5. To prevent harm to the general public,

Why should Businesses act

Ethically?


The reasons for an organization to be ethical include: 6. To protect themselves from abuse from unethical employees and

competitors,

7. To protect their own reputations

8. To protect their own employees, and

9. To create an environment in which workers can act in ways consistent with their values.

Why should Businesses act

Ethically? (contd.)


Sources of Ethics

Genetic Inheritance

Religion

Codes of conduct

Legal system


1. Publish in-house codes of ethics to be strictly followed by all their

associates 2. Employ people with a reputation for high standards of ethical behavior

at the top levels 3. Incorporate consideration of ethics into performance reviews. 4. Give rewards for ethical behavior. 5. SEBI , CII and such other organizations representing corporations,

issue codes of best practices and enjoin their members to observe them.

6. IIMs and highly rated B-schools give extensive and intensive instruction in business ethics, corporate social responsibility and corporate governance as part of their curriculum.

7. Conduct an Ethics Audit

How Corporations Observe Ethics in their

Organizations?


The many benefits that arise from managing ethics in the workplace are: 1. Attention to Business Ethics improves Society 2. Ethical practice contributes towards high productivity and strong

team work 3. Changing situations require ethical education 4. Ethical practices create strong public image 5. Strong ethical practices act as an insurance

Benefits from Managing Ethics in

Workplace


Mark Pastin provides the following characteristics of ethical organizations: 1. At ease while interacting with diverse internal and external

stakeholder groups. 2. Obsessed with fairness. 3. Assuming personal responsibility for actions of the organization. 4. See their activities in terms of purpose.

Characteristics of an Ethical

Organisation


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Corporate governance is a set of processes, policies, regulations,

rules, customs and laws governing the way a corporation should be

directed, administered and controlled to maximize the efforts of its

employees and the resulting gains for all stakeholders.

Stakeholders include shareholders or promoters, board of

directors, management, financiers, employees, customers, vendors,

society, community, government, etc.

CORPORATE GOVERNANCE


In short… Corporate governance is a set of rules that governs the administration

and management of companies.

defined as “the system by which companies are directed and

controlled”.


ETHICS AND CORPORATE

GOVERNANCE From the ethics point of view, the aim of corporate

governance should be to ensure that certain moral

standards are maintained while dealing with the

internal systems & administration, product policy &

safety, marketing, customer care, order

procurement & social responsibility, else the

business can suffer, due to loss of reputation,

brand image, profitability or financial penalty


Important issues relating to ethics that

corporate governance must focus on, are:

1. setting ethical standards and rules in the

company,

2. accountability of actions,

3. managing the trusts, and

4. managing economic efficiency without

compromising ethical principles and values.


To achieve good corporate governance, the following ethical aspects

must be ensured:

1. Rights and equitable treatment of shareholders

2. Protection of interests of other stakeholders

3. Role and responsibilities of the board

4. Integrity and ethical behaviour

5. Disclosure and transparency

ETHICS AND CORPORATE

GOVERNANCE (Conti…)


Four Pillars of Corporate Governance

1. Accountability

2. Fairness

3. Transparency

4. Independence


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1. Accountability

Ensure that management is accountable

to the Board

Ensure that the Board is accountable to

shareholders


2. Fairness

Protect Shareholders rights

Treat all shareholders including minorities,

equitably

Provide effective redress for violations


3. Transparency

Ensure timely, accurate disclosure on all

material matters, including the financial

situation, performance, ownership and

corporate governance


4. Independence

Procedures and structures are in place so

as to minimize, or avoid completely

conflicts of interest

Independent Directors and Advisers i.e.

free from the influence of others


Why Corporate Governance?

Better access to external finance

Improved company performance –

sustainability

Reduced risk of corporate crisis and

scandals


Thank You All
