Business Ethics

Chapter OneIntroduction to Business Ethics

Human beings are born with Conscience.

Conscience differentiates us from animals.

We have been given the title of superior most being of God which lays more responsibility on us than any other specie.

Conscience

We have been reminded by different

messengers in form of different religions to follow the inner voice of conscience which is built in.

Following the conscience, humans have made certain rules and laws which help the society to live peacefully.

There are certain acts which may not be considered as criminal activities but we still avoid doing them because they make us uncomfortable, we call them personal values.

Values

Values are the moral principles and beliefs or accepted standards of a person or a social group.

The philosophical study of the moral value of human conduct and of the rules and principles that ought to govern it; moral philosophy

Ethics

Business Ethics refers to clear standards and norms that help employees to distinguish right from wrong behavior at work.

Business Ethics

In the business context ethics has to do with the extent to which a persons behavior measures up to such standards as the law, organizational policies, professional and trade association codes, popular expectations regarding fairness and rights, plus an individuals internalized moral standards.

Business Ethics, then, is not distinct from ethics in general, but rather a subfield.

The subfield refers to the examination and application of moral standards within the context of finance; commerce; production, distribution and sale of goods and services; and other business activities.

An ethical dilemma is a situation where a potential course of action offers potential gain but is unethical.

The key question for the business leader when presented with an ethical dilemma is:

What to do?

Ethical leadership is exhibited when ethical dilemmas are resolved in an appropriate manner.

Ethical Dilemmas

.

Frequently rising ethical dilemmas are:

. Provide a product or service you know is harmful or unsafe.

. Misleading someone through false statements.

. Using insider information for personal gains.

. Playing favorites.

. Manipulating and using people.

. Benefiting personally from a position of trust.

. Violating confidentiality.

. Misusing company property or equipment.

. Falsifying documents.

. Padding expenses.

. Taking bribes or kickbacks.

. Participating in a cover up.

. Theft or sabotage.

. Committing an act of violence.

. Substance abuse.

. Negligence or inappropriate behavior in the work place.

While dealing with ethical dilemmas people sometime make poor ethical choices.

Reasons for weaker decisions may be because of:

flaw in character; intentional evil sociopathy; lack of conscience personal greed, envy, jealousy, resentment, Fear to lose or will to win at any cost

Poor ethical choices

Sometimes good people also end up making poor ethical judgments because of lack of understanding.

There could be indifference, Lack of knowledge and understanding of

standards on part of employees, Poor or inappropriate incentive system, Poor leadership.

Flaws in corporate culture

Business leaders need to take proactive measures to establish and maintain a corporate culture that emphasizes strong moral leadership

Strong ethical culture

Adopt a code of ethics

Provide ethics training

Hire and promote ethical people

Correct unethical behavior

Be proactive

Steps to create an ethical culture

Conduct a social audit

Protect whistle blowers

Empower the guardians of integrity

Code of ethics; Identify commonly held moral beliefs and

values of the members of the firm and codify them into a written document all can understand and support.

Post the code of ethics in prominent places around the worksite.

Make certain that all the employees subscribe to it by asking them to sign it.

Ethical Training

Frequent training sessions should be provided to employees, either through ethics experts or through managers of the company.

The employees have to be provided with real world scenario in which ethical dilemma is encountered.

Participants have to find solutions based on the code of ethics provided to them.

Hiring and promoting ethical people

When making human resource decisions always opt for people with good character along with technical competence.

Investigate the character of the people before you hire them.

Base promotional decisions on matters of character in addition to technical competence.

Correction of unethical behavior

A progressive discipline may be used;Oral warning, written reprimand, suspension

without pay and termination are the consecutive steps taken to enforce the application of code of conduct.

In some sever cases direct termination is also done to save organization from further losses and to signal all the employees that substandard moral behaviors will not be tolerated.

Being Proactive

In order to build a reputation of ethicality and good corporate social responsibility, the organization should conduct community services; education programs, hygiene, housing programs etc.

Seeking and adopting best practices from other businesses in the community is also a proactive strategy.

Social Audit

From time to time the leaders of business might invite responsible parties to examine the organization’s product design, purchasing, production, marketing, distribution, customer relations and human resource functions.

The concept is correction in the areas of policies as well as social responsibilities.

Protection of whistle blowers

When unethical actions are uncovered within a firm by one of the employees, managers should take corrective action.

Turning a blind eye towards the unethical actions will convey the message to employees that the ethicality is not the characteristic of that organization’s culture.

Empower the guardians of integrity

The leader of the organization has to lead by setting an example of firm’s commitment to ethics in its relationship with suppliers, customers, employees and shareholders.

Every business leader faces ethical dilemmas from time to time, some face daily temptations

How the leader manifests moral integrity when faced with ethical dilemmas sets the tone of everyone else in the organization.

Ethical shortcuts may give short term benefits but the end results are tragic in the long run.

Conclusion

Case Study on Ethical Dilemma

Ethical Principles and decision making

Chapter 2

An ethical decision rapidly involves choosing between two options:

One we know to be rightAnother we know to be wrong

Therefore we have to do ethical reasoning to find out which decision is actually right to take because our decisions built our identity.

Decision through reasoning

Utilitarianism

Universalism

Rights

Justice

Virtue

Ethical principles that can used in ethical reasoning

Jeremy Bentham and Stuart Mill are acknowledged as founders of the concept of Utilitarianism.

Utilitarian view holds that an action is judged as right or good on the basis of its consequences.

Utilitarianism is also called the consequentialist approach.

Utilitarianism

Stuart Mill is known for his “greatest happiness principle”, which provides that we should resolve ethical dilemmas by bringing the greatest good to greatest number of people.

There will always be a few disgruntled souls in every ethical dilemma solution, so we just do the most good that we can.

Some of the issues to which we have applied utilitarianism include providing health care even as cost escalate.

Protecting the environment even as we generate electricity, drive cars, and operate factories and outsourcing manufacturing of clothing to developing countries.

Utilitarianism is a theory of balancing that requires us to look at the impact of our proposed solutions to ethical dilemmas from the viewpoint of all those who are affected.

Immanuel Kant is considered one of the leading founders of the principle of universalism.

Universalism is also called Deonotological (duty based) approach.

According to universalism, ends do not justify the means of an action—the right things must always be done even if doing the wrong thing would do the most good to most people.

Universalism

It is also referred as nonconsequentialist ethic.

Kant’s principle of the categorical imperative, unlike utilitarianism, places the moral authority for taking action on an individual’s duty towards other individuals and “humanity”.

Kant’s approach forces decision makers to take into account their duty to act responsibly and respectfully towards all individuals in the situation.

An important part to Kant’s theory is that you not only have to be fair; you have to want to do it for the right reasons.

Self interest was not a big seller with Kant, and he wants universal principles adopted with all good will and pureness of heart.

The rights theory is also known as entitlement theory and is one of the more modern theories of ethics, as philosophers go.

Robert Nozick is the key modern day philosopher on this theory.

Rights

The two elements of right theory are:

Moral entitlement Every one has a set of rights also called

moral rights.

Legal entitlement It’s up to the government to protect those

rights, also known as contractual rights.

Moral rights are linked to individuals or groups but not to societies.

Moral rights are also connected with duties, i.e. my moral rights imply that others have a duty towards me to not violate those rights, and vice versa.

Moral rights also provide the freedom to pursue one’s interest, as long as they do not violate other’s rights.

Moral rights also allow individuals to justify their actions and seek protection from others in doing so.

Contractual rights or contracts provide individuals with mutually binding duties that are based on a legal system with defined transactions and boundaries.

1. The contract should not commit the parties to unethical or immoral conduct.

2. Both parties should freely and without force enter the contract.

3. Neither individual should misrepresent or misinterpret facts in the contract.

4. Both individuals should have complete knowledge of the nature of the contract and its terms before they are bound by it.

Another dimension of ethical principles is negative and positive rights.

Negative rights; refers to the duties others have to not

interfere with actions related to a person’s right, e.g. you have a right to freedom of speech so all, even your employer, have the duty not to interfere with that right.

Positive right; Imposes a duty on others to provide for

your needs to achieve your goals, not just protect your rights to pursue them.

Some of these rights may be part of national, state or local legislation. For example, you may have the right to equal educational opportunities for your child if you are a parent. This implies that you have the right to send your child to public school that has the same standard as any other school in the community.

So under this big umbrella of ethical theory we have the protection of human rights that includes issues such as sweatshops, abortion, slavery, property ownership and use, justice (as in court process) animal rights, privacy and euthanasia

Blame Locke and John Rawls for this theory, sometimes called the theory of justice and sometimes referred to as a social contract.

John Rawls offers two principles of fairness:

1. First principle states that all individuals should be treated equally.

2. Second principle states that justice is served when all persons have equal opportunities and advantages; through their positions and office, to society’s opportunities and burdens.

justice

Richard DeGeorge identifies four types of justice:

1. Compensatory justice.

2. Retributive justice.

3. Distributive justice.

4. Procedural justice.

Compensatory justice concerns compensating someone for a

past harm or injustice. E.g. affirmative action programs to compensate decades of injustice with minorities.

Retributive justice means serving punishment to some one

who has inflicted harm on another. A criterion for applying this justice is: “Does the punishment fit the crime?”

Distributive justice refers to the fair distribution of benefits

and burdens. Have someone been unfairly profited by a policy?

Procedural justice designates fair decision practices,

procedures, and agreements among parties. This criterion asks, “Have the rules and processes that governs the distribution of rewards, punishments, benefits and costs been fair.

Plato and Aristotle are recognized as founders of virtue ethics, which also has roots in ancient Chinese and Greek philosophy.

Virtue ethics emphasizes moral character in contrast to moral rules (deontology) or consequences of action (consequentialism).

Virtue Ethics

One of the purposes of teaching this course is to help you develop a set of virtues that can serve as a guide in making both personal and business decisions.

You will learn those virtues by studying the history of business through individual case studies.

You will learn what constitutes a good ethical choices in business and what brought disastrous results for a business.

From contrasting those results, you can develop your list of virtues.

Robert solomon’s list of virtues Virtue standard Ability Acceptance

Articulateness

Coolheadedness

Trustworthiness

Definition Being dependable and

competent. making the best of a bad

situation. Ability to make and defend

one’s case. Retaining control and

reasonableness in heated situation.

Fulfilling one’s responsibilities.

Case Study on Ethical Decision making