Business Ethics IBS 2012 (2)

7/29/2019 Business Ethics IBS 2012 (2)

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Business Ethicsand

Corporate Governance

Understanding Ethics


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Ethics Ethics was considered as irrelevant by corporate loyalists

Now it is seen as critical for success of business

Factors forcing towards Ethical practices

Consumer Movement

Awareness in stakeholders They are not indifferent tounethical practices like

Financial Irregularities,

Tax evasion,

Kick-backs,

Poor Quality products

Hazardous working conditions

Non-compliance with environmental issues


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Ethics

New Norms are

Integrity,

Transparency

Open communication

They result in long run in economic gains like market

capitalization


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Ethics

Ethics fromLatin word Ethicus &Greek word Ethikos

Meaning character or manners

Ethics is a science of Moral, Moralprinciples & recognized rules of conduct

Ethics deals with right or wrongbehavior of individual


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Ethics

Ethics deals with values relating to human conduct withrespect to

Right or wrong of actions

Good or bad motives of actions

Actions can be good or bad, right or wrong, Moral or

immoral

These are judgments

Now-a-days ethical guidelines are often transferred into

law or regulations


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Ethical ConceptsSome of the concepts that are frequently used when

discussing the subject of ethics are:

Ethical Absolutism

Ethical Subjectivism

Ethical relativism

Consequnetialism

Ethics of virtue


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Ethical Absolutism

Ethical absolutism is a view that certain actions areabsolutely right or wrong, regardless of other

contexts such as their consequences or the intentions

behind them and are independent of human opinionand have a common or universal application

Thus stealing, for instance, might be considered to

be always immoral, even if done to promote someother good

Objectivism is another name for absolutism.


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ETHICAL CONCEPTS

Ethical Subjectivism

What is ethically right or wrong is entirely personal

matter

Principles chosen by a person may be unethical

Ethical Relativism

There is no universal set of principle to judge morality

Each society has its rules

It is possible that ethical practices are based on falsebeliefs, illogical reasoning


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ETHICAL CONCEPTS

Consequentialism

It is a concept of value and maximization of that value

Ethics of virtue

Emphasized role of individual traits

Virtues are like Courage, Tolerance, Generosity, Honesty

Virtuous acts are not done out of self- interest or to maximize

pleasure

In business it is a conflict between

Economic performance and Social Performance

To resolve this conflict it is important to have people with ethical

behavior


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ETHICAL THEORIES

Ethical theories are divided in three subject areas-

Metaethics

Normative ethics Applied ethics

Metaethics

It is a study of the origin and meaning of ethicalconcepts


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Metaethics It is a study of the origin and meaning of ethical concepts

Meta-ethics addresses questions such as "What isgoodness?" and "How

can we tell what is good from what is bad?"

Deals with 3 issues-

Metaphysical issues that deal with the question whether the moral

values exist independently of human or they are simply human

inventions.

Psychological issues that deal with psychological basis of the moralactions-How may moral judgments be supported or defended?

Linguistic issues that deal with the meaning of the key moral terms we

use-What is the meaning of moral terms or judgments?


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Normative Ethics

Guides human conduct.

Sets moral standards helping to determine what is

right & what is wrong.

Example is Golden Rule that isWe should treat others the way we want others

to treat us.

Golden Rule lays down one single principle to adjudge

right or wrong.


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Normative Ethics

If moral principle is to be accepted it must be

Prescriptive emphasizing that a proposed action is

obligatory.

Universal applicable to any person

Overriding should be primary consideration in action

assessment.

Public presupposes social interaction. Practical achievable by average person in ordinary

circumstances.


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Normative Ethics

Three theories to resolve normative question,

How one should act in particular situation

1. Teleological Ethical Theory thinking rationally about

ends.Also called as consequentialist theories.

Action is considered normally correct, if

consequences are more favorable than unfavorable. The drawback is that consequences are required to

be quantified and quantitative terms like good depend

on perception by a person.


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Normative Ethics-Teleological Theory

Three definitions of good by consequentialist Egoism consequences are more Favorable than

unfavorable to person performing action then

action is morally right.

Utilitarianism- morally right, if more Favorable

to everyone.

Altruism morally right if more Favorable to

everyone except the individual


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Normative Ethics-Deontological Theory

Deontological Ethical Theory focuses on certain

fundamental duties that we have as human being.

Duties are classified under 3 headings-

Duties to god

Duties to oneself

Duties to others


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Normative Ethics-Virtue Ethics

Virtue ethics virtues are qualities and

character individual considers to be

good.

The theory is concerned with attaining

these qualities and

Hence calls for character development.


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Ethical Theories

Applied Ethics deals with specific,

often controversial moral issues.

Moral standards based on ethical

theories are reference point for judging

the moral value of decision.


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Traditional Ethical Theories Consequentialism

It holds that the rightness or wrongness of actions and

institutions is a function of the goodness or badness of

their consequences.

Utilitarianism Right actions and institutions maximize aggregate

happiness

Happiness is experiencing pleasure or not

experiencing pain

Happiness is achieving integrated satisfaction of

desires, plans


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Traditional Ethical Theories

Non-consequentialism It holds that the rightness or wrongness of

actions and institutions is a function of

something other than the goodness or badnessof their consequences.

Three approaches

Ethics of Rights Kantian ethics

Virtue theories


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Ethics of Rights

If a person has right to something then it is wrong todeprive him of that thing on Utilitarian grounds

A right is a justified claim on others

The "justification" of a claim is dependent on some

standard acknowledged and accepted not just by theclaimant, but also by society in general

Moral rights

Justified by moral standards that most people

acknowledge, But not necessarily codified in law

These standards can be interpreted differently bydifferent people


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Ethics of Rights

Legal Rights Enshrined in law or in a system of formal rules

Enforceable through courts

Negative rights Such rights are a claim by one person that

imposes a "negative" duty on all others

Positive rights Provide something that people need to secure

their well being

Impose a positive duty on us


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Kantian Ethics Persons as ends-in-themselves

Always treat persons as ends-in-themselvesand never merely as means to your ends

Social contract theory

The right moral rules are those whichpersons would freely choose to have governthem

Universalizability


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Kantian Ethics

Universalizability Act only on universalizable maxims A maxim is an explicitly stated principle of

practical reason. A fully stated maxim wouldinclude:

a statement of the goal you propose to achieve, a description of the action by which you propose to

achieve it, and a statement of the circumstances under which acting that

way will help you to achieve your goal. A maxim is universalizable if and only if you could

effectively achieve your goal by acting on it in aworld where everyone else was pursuing the samegoal by acting similarly in similar circumstances


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Categorical Imperative

In order for an act to be categoricallyimperative

It must be thought to be good in itself and

in conformity to reason As a categorical imperative, it asks us

whether or not we can "universalize" ouractions

That is, whether it would be the case thatothers would act in accordance with thesame rule in a similar circumstance


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Virtue Ethics

Virtue ethics

The key ethical concept is

neither utility, rights, nor principles,

but virtue, or good character traits, which is what moral education should focus

on developing


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Ethics of Justice JUSTICE

The most fundamental principle of justice is that "equals

should be treated equally and unequals unequally." Deals with moral choices through a measure of rights of the

people involved and chooses the solution that seems todamage the least number of people

Supposed to ensure that all members of society receive fairtreatment.

Distributive justice Concerns what is considered to be socially just allocation of

goods in a society A society in which incidental inequalities in outcome do not

arise would be considered a society guided by the principlesof distributive justice

Concerned with giving all members of society a "fair share"of the benefits and resources available.

When issues of Distributive Justice are inadequatelyaddressed and the item to be distributed is highly valued,conflicts frequently result.


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Ethics of Justice

Retributive Justice

People deserve to be treated in the sameway they treat others

Compensatory Justice Refers to the extent to which people are

fairly compensated for their injuries by

those who have injured them Just compensation is proportional to the

loss inflicted on a person


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The Ethics of Care Emphasize the importance of relationships.

The basic beliefs of the theory are:

All individuals are interdependent for achievingtheir interests

Those particularly vulnerable to our choices andtheir outcomes deserve extra consideration to bemeasured according to

the level of their vulnerability to one's choices

the level of their affectedness by one's choicesand no one else's

It is necessary to attend to the contextual details ofthe situation in order to safeguard and promote theactual specific interests of those involved


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Gilligan's Model

Based on Ethics of Care

Moral development is the developmentof a self-in-relation

Morality is understood in terms of thepreservation of valuable human relations

Progress from stage to stage ismotivated by increasing understandingof human relationships


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GILLIGAN'S SIX STAGES OF MORALDEVELOPMENT (ETHICS OF CARE)

Caring for the self. Caring for self is judged to be selfish.

Goodness is caring for others, frequently equatedwith self-sacrifice.

Illogic of the inequality between self and othersbecomes evident. Search for equilibrium.

Focus on the dynamics of relationships, to eliminatethe tension between self and others.

Care is extended beyond personal relationships to ageneral recognition of the interdependence of selfand other, accompanied by a universal condemnationof exploitation and hurt


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Kohlbergs Model ofCognitive Moral Development

The model is necessary for study and understanding the process ofEthical Decision making

People pass through six stages of moral development

Punishment and Obedience

Obedience of rule out of fear of possible punishment

Good or bad is considered purely in terms of potential panalty Individual Instrumental Purpose and exchange

Individual evaluates behavior on the basis of fairness tohim/her

Behavior is based on what one gets in return

Mutual Interpersonal Expectations, relationships and Conformity Individual considers the well-being of others

People live up to what is expected of them by those close tothem


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Kohlbergs Model

Social System and Conscience Maintenance Individual considers his duty to society as rightthing to do People tend to uphold law s except when they

conflict with fixed social duties Prior Rights, Social Contract or Utility

Individual is concerned with the maintenance ofvalues of society and recognizes the legal or moralview that may conflict

Arrive at arational decision by calculating overallutilities

Universal Ethical Principles Individual realizes that there are certain universal

principles that are to be respected Person at this stage favours social ethics to

organizational ethics for ethical direction


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Law and Morality

Law, unlike morality, is made by someone

So it may, unlike morality, have aims, which are the aims of itsmakers (either individually or collectively)

However, because not all law-making is intentional, not all law has

aims Is there a moral obligation to obey the law?

A legal rule may be morally justified as it applies to oneperson and not as it applies to another, or morally justifiedas it applies to one action and not as it applies to another

There is distinction between what is legally or conventionallyright and what is naturally (or as we would say today morally)right.


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Relationship between Morality and Law

The existence of unjust laws proves that morality and law are

not identical and do not coincide. The existence of laws that serve to defend basic values--such

as laws against murder, malicious defamation of character,fraud, bribery, etc. --prove that the two can work together.

Laws can state what overt offenses count as wrong andtherefore punishable. Although law courts do not always ignore aperson's intention or state of mind

Laws govern conduct at least partly through fear of punishment.Morality, when it becomes habit-like or second nature, governsconduct without compulsion

Morality can influence the law in the sense that it can providethe reason for making whole groups of immoral actions illegal.

Law can be a public expression of morality which codifies in apublic way the basic principles of conduct which a societyaccepts.


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Managing Business Ethics

Organization & its

Customers


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Customer and Ethical Issues

Marketing concepts are becomingsynonymous with consumer orientation

Code of ethics is required to framemarketing policies at every level foremployees to follow uniform standards

towards all customers

Marketers should be fair and just


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Issues with 4 PsProduct Product should be safe and fit for intended use Disclose the risks associated with products use if any Any changed feature that might have effect on buying

decision should be informed Updating of consumer product is one more issue.Price

Higher than normal price should not be charged for aproduct with high demand No undercutting or Price fixation Disclose full price associated with any productPlace No manipulation about availability of product for

exploitation No use of coercion in the marketing channelPromotion Advertisements which are offensive, misleading not in

accordance with law are not allowed Communication about offered product should not be

deceptive


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Consumer Protection

Although consumer is regarded as king, there

are many problems in realizing such state ofcondition

Most of the consumers are not aware of theirrights and most of those who are aware are

not ready to fight to execute their rights Consumer has been exploited systematically in

all walks of life So consumer needs protection which can come

from three different parties The business The government The consumer himself


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The Business and Consumer Responsibilities of corporate towards Consumers are

5 Rs Right Quality Right Quantity Right Time Right Place Right Price

Some more responsibilities are

Producing goods according to specific needs ofconsumers and their purchasing power Providing prompt and adequate service Improving standard of living by providing goods

and services of high quality

Treating customers fairly in all businesstransactions Ensuring health and safety of customers


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The Government and Consumer

Consumer protection laws designed to ensure fair tradecompetition and the free flow of truthful information inthe marketplace

Consumer Protection laws are a form ofgovernment regulation which aim to protect the rights

of consumers Consumer is defined as someone who acquires goods or

services for direct use or ownership rather than forresale or use in production and manufacturing

Consumer interests can also be protected by promotingcompetition in the markets

Consumer protection can also be asserted via non-government organizations and individuals as consumeractivism

C Ri ht


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Consumer Rights Consumer Protection Act 1986 of India recognizes six Consumer

Rights

Right to Safety - Right to protection of health and safetyfrom goods and services the consumers buy or offered free

Right to physical environment that will protect andenhance the quality of life

Right to Information - Right to be informed about quality

and performance standards, ingredients, operationalrequirements, freshness, possible adverse side effects andother relevant facts of the product or service that consumerbuys

Right to Choose Right to be assured, wherever possible to

have access to have variety of goods and services atcompetitive prices

Right against exploitation by unfair trade practices

Right to be heard of grievance

Right to Redressal

Right to Consumer Education


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Product Liability

LIABILITY FOR MANUFACTURING ORDISTRIBUTING A DEFECTIVE PRODUCT IN INDIA In India, Product liability law, also called products

liability, governs the liability of manufacturers,wholesalers, distributors, and vendors for injury to

a person or property caused by dangerous ordefective products

The goal of product liability laws is to help protectconsumers from dangerous or defective products,

while holding manufacturers, distributors, andretailers responsible for putting into the marketplace products that they knew or should haveknown were dangerous or defective.

Product Liability


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Product Liability

Civil Product liability in India is, essentially, governed by

a) The Consumer Protection Act, 1986

b) The Sales of Goods Act, 1930 c) The Monopolies and Restrictive Trade Practices Act, 1969

d) The law of Torts.

e) special statuates pertaining to specific goods

The product liability law, in India, also imposes criminal liability in case

of non-compliance with the provisions of each of the below mentionedActs

The Foods Adulteration Act, 1954

The Food Safety and Standards Act, 2006

The Drug & Cosmetics Act, 1940

The Indian Penal Code, 1860 The Standards of Weights and Measures Act, 1956

The Agricultural Produce (Grading and Marking) Act, 1937 formarking and grading of commodities like vegetables, butter, etc.

The Indian Standards Institution (Certification Marks) Act , 1952

to formulate a number of standards for different products by ISI The Bureau of Indian Standards Act , 1986


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Product Liability

Claims regarding product liability usually fall underone of the following categories Negligence. Extends to all parts of the production and

marketing process. It involves being negligent in theway a product is presented to a client, such as usingdeficient labels, false advertising, and so on

Warranty. Consumers may sue if advertising orinformation overstate the benefits of a product, or ifthe product does not perform as stated

Strict liability. In this action, a consumer is suingbecause the product in question was defective beforeits receipt

Misrepresentation. This occurs when advertising,labels, or other information misrepresent materialfacts concerning the character or quality of theproduct


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Intellectual Property

Intellectual property (IP) is a termreferring to creations of the mind forwhich a set of exclusive rights are

recognized Under intellectual property law, owners aregranted certain exclusive rights to avariety of intangible assets such as

musical, literary, and artistic works;discoveries and inventions; and words,phrases, symbols, and designs


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Intellectual Property Rights (IPR) Intellectual property rights as a collective term includes

the following independent IP rights Patents Copyrights Trademarks Registered ( industrial) design Protection of IC layout design Geographical indications Protection of undisclosed information

Intellectual property is divided into two categories Industrial property which includes patents for inventions,

trademarks, industrial designs and geographical indications

and Copyright and related rights which cover literary and artisticexpressions (e.g. books, films, music, architecture, art), plusthe rights of performing artists in their performances,producers of phonograms in their recordings, andbroadcasters in their radio and television broadcasts whichare also referred to as neighboring rights.


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IPR & Acts Patents

A patent is an exclusive right granted by acountry to the owner of an invention tomake, use, manufacture and market theinvention, provided the invention satisfiescertain conditions stipulated in the law

In India there is The Indian Patent Act

The first Indian patent laws were first

promulgated in 1856. These were modifiedfrom time to time

Recent amendment were made in 2005


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IPR & Acts

Copyrights Copyright is a right, which is available for creating an

original literary or dramatic or musical or artistic work Cinematographic films including sound track and video

films and recordings on discs, tapes, perforated roll or

other devices are covered by copyrights Copyright gives the creator of the work the right to

reproduce the work, make copies, translate, adapt, sellor give on hire and communicate the work

Under the Indian Copyright Act there is a provision to

register copyright although this is voluntary

PR &


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IPR & Acts

Trademarks

A trademark is a distinctive sign, which identifiescertain goods or services as those produced orprovided by a specific person or enterprise

Trademarks may be one or combination of words,letters, and numerals

They may also consist of drawings, symbols, threedimensional signs such as shape and packaging ofgoods, or colours used as distinguishing feature

A trademark provides to the owner of the mark byensuring the exclusive right to use it to identifygoods or services, or to authorize others to use itin return for some consideration (payment)

Enactment of the Indian Trademarks Act 1999 is abig step forward from the Trade and MerchandiseMarks Act 1958 and the Trademark Act 1940


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IPR & Acts The Geographical Indications of Goods Act,

1999 affords protection to goods that can be identified as originating ormanufactured in the territory of a country or aregion or locality in that territory

where a given quantity, reputation or other

characteristic of such goods is essentiallyattributable to its geographical conditions In the case where such goods are manufactured

goods, one of the activities of production or ofprocessing or preparation at goods concernedtakes place in such territory or locality as the casemay be

The legislation will be administered through theGeographical Indications Registry under theoverall charge of the Controller General ofPatents, Designs and Trademarks


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Advertisement and Regulations Advertisement is often described as commercial speech and enjoys protection under

Article 19(1)(a) of the Indian Constitution

Under the Indian legal system, the prominent, prohibitory legal provisions thatregulate advertising are:

Obscene publication or advertisement of a lottery under the Indian Penal Code

Harmful publication under the Young Persons (Harmful Publications) Act, 1956

The indecent representation of women under the Indecent Representation ofWomen (Prohibition) Act, 1986

Use of report of test or analysis for advertising any drug or cosmetic under theDrugs and Cosmetics Act, 1940.

Inviting transplantation of organs under the Transplantation of Human OrgansAct, 1994.

Advertisement of magical remedies of diseases and disorders under Drugs andMagical Remedies (Objectionable Advertisements) Act, 1954.

Advertisements relating to prenatal determination of sex uner the Prenatal

Diagnostic Techniques (Regulation and Prevention of Misuse) Act, 1994. Advertisements of cigarettes and other tobacco products under tah Cigarettes

and other Tobacco Products (Prohibition of Advertisement and Regulation ofTrade and Commerce, Production, Supply and Distribution) Act, 2003.

Any political advertisement forty hours prior to polling time under theRepresentation of People Act, 1951

THE CODE FOR SELF-REGULATION


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THE CODE FOR SELF-REGULATIONIN ADVERTISING

In 1985, a self regulatory mechanism of ensuring ethical

advertising practices was established in the form of theAdvertising Standards Council of India (ASCI), a non statutorytribunal

The key objectives of ASCI code is to ensure thatadvertisements must

Make truthful and honest representations and claims which isessential to prohibit misleading advertisements;

Not be offensive to public decency or morality;

Not promote products which are hazardous or harmful tosociety or to individuals, particularly minors; and

Observe fairness in competition keeping in mind consumersinterests.

Under the ASCI Code, complaints against the advertisementscan be made by any person who considers them to be false,misleading, offensive, or unfair


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Organization & its Employees


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ETHICAL ISSUES IN HR

Manner in which Organizations deal with

its employees is an indication of its ethicalcharacteristics.

Employees should be given their duereward.

Ethics in HR deals with all the issues inrelationship between the employees andbusiness.

Usually, permanent employees are moreloyal as they have job security, a sense ofbelongingness and expect support at thetime of difficulty


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Responsibilities towards Employees

To listen to and where possible act onemployees suggestions, ideas, requests andcomplaints

To engage in negotiations when conflict arises To avoid discriminatory practices and

guarantee equal treatment and opportunityregardless of gender, age, race and religion To protect employees from avoidable injury

and illness at the workplace

To encourage and assist employees indeveloping skills and knowledge that arerequired for accomplishing the tasks


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Ethical Issues in HIRING

Right principle is to select one who is perceived to

have ability to contribute most to the long-termowners value. Ethical selection is honest, fair, non-coercive, legal

and conveys clearly requirements & benefits to allcandidates

Unethical selection Wrong candidatesDissatisfaction Unethical practices are

Discrimination based on Age Gender Religion Nationality


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Discrimination in Hiring It can be ethical only if criterion for selection is

Functional qualities / abilities required to do the job By discrimination pool of talent is limited

Referrals beneficial for business but unethical

Discrimination over qualification, age, selection oncredentials and test

Age criterion is unreliable measure of ability tocontribute towards maximizing owners value; henceunethical

Credentials may not always reflect an applicantsfunctional ability

Test that challenges applicants right to privacy areconsidered unethical


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Ethical Issues in HIRING

Ethical Practice is Equality of Opportunity

Rules should apply equally to all

No applicant should be rejected forreasons beyond the rules laid down forhiring

Reservation is termed as ReverseDiscrimination


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Ethics in Remuneration

Remuneration is considered ethical whenit is just and equitable

Ethical remuneration is rewarding any

action that contributes to long-termowners value. Employees needs, his effort, ability,

seniority and loyalty are of no

importance in deciding remunerationunless they play a role in achievingresults


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ETHICS IN RETRENCHMENT

At times of recession, business reduces itssize and overhead cost by reducing man-power

Firing Employers include at will clause inemployment contract.

Firing affects reputation of business Reputation is affected particularly when

firing is discriminatory, unfair or vindictive Ethical issue in lay-offs or retrenchment is

who should be fired first


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Ethics and Working Conditions

Should deal with the issues like Forced Labor

Child labor

Working Hours and Compensation Health and Safety

Abuse; Discrimination

Compliance with Applicable Laws

Affi ti A ti


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Affirmative Action

Affirmative action refers to policies thattake factors like race, color, religion, gender,national origin into consideration in order tobenefit an underrepresented group, usually as

a means to counter the effects of a historyof discrimination

Affirmative action is intended as an attemptto promote equal opportunity

It is often instituted in government andeducational settings to ensure that minoritygroups within a society are included in allprograms


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Structuring Ethics in Organization

To be considered EthicalOrganisation should ensure that itsCorporate code incorporatesCompanys values, which ensure

Ethical behaviour of its employees These are policy statements laying down companys

ethical standards to govern the conduct ofemployees.

Corporate codes are voluntary. They have freedom to address any issue Top management formulate the corporate codes

C C d / C d f C d


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Corporate Code / Code of Conduct

Corporate Code enhances Clarity of strategy

Better decision making

Clearer communication

Ease in delegation

Inspiration to have greater commitment& loyalty

C C d


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Corporate CodeThree formats of corporate code Compliance code Directive statements Corporate Credos Broad general statements of

commitments Management philosophy statements formal

statement of companys vision of the business

Formats used while formulating the corporate code Special documents reflecting companys values,

principles and guidelines Circulated letters reflecting companys policies on

certain issues Compliance Certificates designed for suppliers,

contractors Purchase Orders


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Corporate Code

Code of Conduct can be successful if it iscredible and

To be credible it must be

Transparent by communication and training Easy to enforce

Positive enforcement involving retentionof current contracts

Negative enforcement involving monetaryfines, corrective acts Easy to monitor Implies validation of code


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Development of Corporate Code

Initiative to be taken by top managementGuidelines to be followed

Identification of the key behaviors relating

to the areas that are crucial for achieving thecorporate goals

Review by key members of the organisation like Legal dept.

Communicate the code to every employee

Update at least once in a year

I l t ti f C t C d


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Implementation of Corporate CodeApproach by Ferrell and Fraedrich is based on

four aspects Organisational Structure based on this

appropriate authority should be delegated toensure ethical behavior

Coordination ensures different departmentsfollow same ethical code

Motivation of employees through quality ofethical performance of company

Communication aims at maintaining ethicalclimate in company


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Implementation of Corporate Code

Another approach by Mac Donald and Zeppbased on three perspectives

Individual dimension

Group influence Organisational strategies Their opinion is that recruit candidates with

ethical standards rather than attempting to

change behaviourTheir should be ethical leadership rather thanpolicies


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Employees Responsibilities Respect Respect laws, people, and property Teamwork Work openly and supportively with others,

aiming toward common goals Leadership Show leadership in areas where you are

strong Citizenship Build a workplace that protects health and

welfare of employees, your community, and yourenvironment Value Build a profitable company that will have stability

and prosperity Honesty Believe that honesty IS the best policy

Integrity Always take the high road Responsibility Take responsibility for your actions Quality Strive for quality in every aspect of your work Trust Work to build the trust of employees,

supervisors, customers, and the community.


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Organization & NaturalEnvironment


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BUSINESS ETHICS & ENVIRONMENT Environmental Ethics examines moral basis of

environmental responsibilities. Environmental Responsibilities are to be weighedagainst responsibilities to stakeholders and benefitsto society.

Environmental issues -

Toxic Waste Contamination of ground water Oil spills Use of fluro carbons Air Pollution Burning of fossil fuel Noise Pollution Destroying of forest and seashore

ENVIRONMENTAL ISSUES


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ENVIRONMENTAL ISSUES As business expands, environmental issues

start gaining importance Most of the times chemical industries create

maximum pollutionEuropean legislation has proposed more than

120 acts based on Promoting the benefits of pollution prevention Customizing legislation to meet requirements

of members Developing and enforcing Polluters pay policy

aiming at imposing fines on defaulters

The Environment (Protection) Act, 1986


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( ) ,

By the Act Central government has power to make rulespertaining to all or any of the following matters

1. the standards of quality of air, water or soil for variousareas and purposes

2. the maximum allowable limits of concentration of variousenvironmental pollutants (including noise) for differentareas

3. the procedures and safeguards for the handling ofhazardous substances

4. the prohibition and restrictions on the handling ofhazardous substances in different areas

5. the prohibition and restriction on the location of industriesand the carrying on process and operations in differentareas

6. the procedures and safeguards for the prevention ofaccidents which may cause environmental pollution and forproviding for remedial measures for such accidents

GREENING


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GREENING When a company adopts an anti-pollution environment

policy, it is said to be Going Green.

Reasons for Green initiative - Economic benefits from increased efficiency Competitive advantage through innovation Public Image

GREEN INITIATIVES Environmentally friendly technological innovation Green tourism Green Community Environmental campaigning Environmental counsellingEnvironmental issues are many times handled by Safety/

R&D / Maintenance departments

Green Marketing


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Green Marketing Green marketing is the marketing of products

that are presumed to be environmentally safe It incorporates a broad range of activities

like product modification changes to the production process packaging changes as well as modifying advertising

Other similar terms used are Environmental Marketing and Ecological Marketing

The Green Marketing Mix


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The Green Marketing Mix Product

Ecological products not contaminating the environment Should protect environment and even liquidate existingenvironmental damages

Price Prices may be a little higher than conventional alternatives

Place

Main focus is on ecological packaging Marketing local and seasonal products e.g. vegetables from

regional farms is more easy to be marketed green thanproducts imported.

Promotion Should put stress on environmental aspects Companys expenditures on environmental protection should

be advertised Sponsoring the natural environment is also very important Ecological products will probably require special sales

promotions

S st in bl D l pm nt


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Sustainable Development Sustainable Development is development that

meets the needs of the present withoutcompromising the ability of future generations tomeet their own needs

It calls for a broad-based alliance betweenindustry and society to combat poverty,

environmental degradation and promotedevelopment We should strive for

Changing Unsustainable Patterns of Consumption andProduction

Evaluate and make development decisions which lead toa more sustainable society. Make efforts to identify, evaluate, introduce and use

the technologies through which substantial reduction inconsumption of resources is possible

Sustainable Development


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Triple Bottom Line

The economic dimension enhancing profitability, increasing shareholder

value and creating wealth whilst aggressivelypursuing opportunities for growth

The social dimension achieving high rates of economic growth in order

to enable all sections of society enhance theirquality of life and live with dignity

The environmental dimension

pursuing economic growth whilst preserving andenhancing our natural resources.



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Sustainable Development has become a

priority for businesses Since corporations are vital organs of

society, corporate interests must serve

societal concerns Such a focus of corporate interest will

eventually transform into multifold

business advantages

Sustainable Development Advantages


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Sustainable Development Advantages Cost and Risk Reduction

Adopting principles of eco-efficiency such as reducing theuse of materials and energy, minimising toxic dispersion andservice intensity, recycling materials and increasing productdurability will enhance profitability whilst simultaneouslyreducing damage to the environment

Reputation and Legitimacy

Being recognised by society and stakeholders as businessescommitted to practices that promote sustainability acrossthe Triple Bottom Line

Innovation and Respositioning

Retaining leadership in a highly competitive businessenvironment through continuous repositioning

Clean Technologies

Giving businesses a competitive edge by optimising use ofnatural resources and deploying clean technologies to reduce

damage to the environment


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Ethics in Marketing

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Ethics and Marketing


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Ethics and Marketing

Ethical issues in marketing strategy marketingstrategies are required to achieve higherstandards of ethics as it is in public scrutiny.

Issue involved are stance adapted by company towards its

competitors Ethics in Marketing Mix

Product Price Promotion

Place Marketing mix also includes the serviceaspect

Ethics in Information Acquisition Ethics in Marketing Research

Ethi d M k ti Mi


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Ethics and Marketing Mix

Product Product has an identity and personality of itsown like cigarettes, alcohol

Updating of consumer product is one more issue. Product should be safe and fit for intended use

Disclose the risks associated with products use if any Any changed feature that might have effect on

buying decision should be informedPrice Higher than normal price should not be charged

for a product with high demand. No undercutting or Price fixation Disclose full price associated with any product

Ethics and Marketing Mix


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Ethics and Marketing MixPlace by place marketers refer to the sum of location

Through which the product moves from the supplier to

customer. Part at which customer is able to access theinformation.Also includes process of distribution and type of deliveryservice.

No manipulation about availability of product forexploitation

No use of coercion in the marketing channelPromotion is subjected to closed scrutiny. Advertisements which are offensive, misleading not in

accordance with law are not allowed Attacking competitors product is not allowed Spreading unfounded and damaging rumors about

competitor is not allowed. Communication about offered product should not be

deceptivePeople, Physical evidence and Process Service aspects

Ethical issues in Information Acquisition


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Ethical issues in Information Acquisition

How much of a sensitive information acustomer shares with a firm is apowerful signal of their assessment ofthe firm.

Do not collect information which is notrelated to your business

Do not collect data indirectly Tell your plans about using data to

respondents and use data only for thoseplans Act as per respondents direction

Ethics and Marketing Research


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Ethics and Marketing ResearchThe research profession in business has

to ensure certain rights to the society Right to be informed of critical

research results

Issue involving rights to the researcher Protection against improper solicitation

of proposals

Misrepresentation of findings Ethical behaviour of respondents

Ethics and Marketing Research


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Ethics and Marketing ResearchFive entities affected by Market research process Society has right to be informed Respondents - has right to be informed, to choose, toanonymity and confidentiality, privacy and safety Client has right to anonymity, confidentiality, quality

research, avoiding unnecessary research, protectionagainst misleading presentation of data, protectionagainst abuse of position

Researcher Has right to expect ethical subjectbehaviour, protection against improper solicitation ofproposalsThe issues are excessive requests or reneging onpromises, availability of funds

The Research Profession Issues are appropriate useof marketing research techniques, use of acceptedresearch procedures, ethical behaviour

.Ferrell and Gresham have identified three


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Ferrell and Gresham have identified threefactors that determine code of ethics formarketing.

Individual factorMoral values inculcated in a person by familyeducation and culture.

Significant factorsExtent to which reference groups, topmanagement and peers influence the marketer

Opportunity factorsEthical codes and standards that arepromoted in organisation.

The above factors play a major role indeciding ethical status of an organisation


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Ethics and Finance

$$$$$$$$$$$$$$

ETHICAL ISSUES IN FINANCE


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ETHICAL ISSUES IN FINANCE

Most of the issues are concerned withFinancial Reporting. Importance of Financial Statements

For effective performance of anorganization, reporting should beHonest, Fair and Reliable

Companies are often tempted to falsify

the accounts. Ethics becomes important here

Financial Statements


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Financial Statements. Companies usually maintain two sets of

accounts One for shareholders and

Other for the internal management

accounts.Management Accounts give details about

Functioning of different departments,

the work they perform, The cost involved and the earnings.

Financial Statements


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For true fair and reliable ManagementAccounting

Determine the key elements like objectives ofthe firm, their definition and measurements

Ensure that funds are allocated to different

activities on the basis of their importance Projected earnings of activity are in

accordance with the funds allocated to itThe objective of Ethical audit is to bring in

accountability and transparency in thecompanys operations.Other aim is to track progress of the company.

Ethical Issues in Mergers and


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gAcquisitions

Mergers and acquisitions help company To develop a competitive advantage and Thereby increase shareholder value.

But takeovers harm the interest ofstakeholders

Like employee,

Suppliers and Customers.

Mergers and Acquisitions


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Mergers and Acquisitions Takeovers are criticized by employees whose personal

interests are harmed. Takeovers are looked upon as involving breach of

trust by

Isolating contracts with other stakeholders

Suppliers or employees lose security of their work While going in for takeovers or mergers

Each group must agree to respect certaincontracts or promises

Management should not encourage expectationwhich it may not be in a position to fulfill If impractical obligations are abandoned after

acquisition, then the change is not unethical

Mergers and Acquisitions


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g q Takeovers which take place to satisfy

management ambitions or just to follow trend

are unethical. In such cases resource misallocation takes

place by divesting resources Hostile Takeovers These elicit opposition

from the boards or the employees of thetarget company. Reasons for opposition may be a) Protecting their own interest

b) Disagreement over price One criticism for hostile takeovers is it does

not consider the interest of Target Company.

Insider Trading


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Insider Trading

Insider Trading refers to Trading on price sensitive information By people who are closely connected with the

firm.

The information is not disclosed to othermarket participants. Insider Trading / Dealing is considered

unethical As it violates equality of opportunity.

Insider Trading that is performed with thefull support & knowledge of shareholders isnot unethical

Money Laundering


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Money Laundering

Involves hiding, moving and investing theproceeds of criminal transactions.

Money laundering involves three basic steps

Physical disposal of cash After the funds have entered the financial

system (Layering stage ), they are distancedfrom the original source

Make the wealth derived appear as legitimate

New Companies Bill


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New Companies Bill

Introduced on 14/12/2011 to replaceCompanies Act 1956

Seeks to bring Insider Trading underambit of criminal law

Insider Trading punishable upto maximumof 5 years imprisonment

Depending upon quantum of damage,

offender can be fined fro Rs. 5 lakhs to 25crores or three times the amount of profitmade out of insider trading


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Business Ethics in

Global Contextsooooooooooooooooo

GLOBAL BUSINESS


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GLOBAL BUSINESS

Multinational Companies can be described aseither

Having substantial investment in othercountries deriving income from foreign

operations Substantial number of shareholders in other

country Top and senior managers are recruited from

different countries Have subsidiaries in many countries

Multinational Companies


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Multinational Companies Reasons for companies going global

Reduce sourcing and distribution cost Lower wage rates Reduced transportation cost

Opportunity to be close to supplier orcustomer Saturation of local market To maintain growth rate

To exploit opportunities in new market Recession or domestic completion

Advantages from MNCs to host country


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antag s from MN s to host country

Agent of change and progress

Bring in plant & machinery whichotherwise would have been difficult toacquire

Bring in skills & technology to run theoperations

Bring in ideas and practices thatimprove R & D infrastructure

Ethical Issues in MNCs


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Ethical Issues in MNCsMNCs have been accused of indulging in

unethical practices in several areas. Political Activities Supporting repressive regime Paying bribes to secure political influence

Not respecting human rights Paying protection money to terrorist groups Destabilizing national government which they

do not approve MNCs subsidiaries may act as de-factoinstrument of foreign economic policy of

other state



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Sales, Marketing & Advertising

Their advertising and marketing methods sometimesundermine ancient cultures and traditions Some engage in misleading and deceitful advertising

in the third world countries

Some of the marketing practices promote goods thatwaste valuable resources in poorer nations Many MNCs provide products which are inappropriate

to local needs MNCs do not always accept responsibilities for unsafe

product Environmental degradation



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Ethical Issues in MNCsEnvironmental MNCs are accused of using

developing countries as dumping grounds forenvironmentally hazardous goods.

MNCs cause more damage to environmentthan domestic business.

Depleting natural resources

Polluting the environment Not paying compensation for environmental

damage Causing harmful changes in local living

conditions Paying little regard to the risk of accidentsand causing major environmental catastrophe



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Technology MNCs normally transfer existing or evensometimes outdated technology rather than

developing new suitable for local conditions. Not engaging in research and development in hostcountries

Encouraging Brain Drain from poor countries Making host country technologically dependent on

home

Country Not giving local employees access to information

about key technologies Not training local nationals in the use of imported

technologies

Not transferring latest technologies Dumping old or outdated technologies to earn

revenues



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Economic Activities MNCs operations inunderdeveloped countries have led to Dualeconomic structures

Foreign owned capital-intensive industryoperating in parallel with local labor-intensiveindustry.

Foreign owned sectors export most of theiroutput at lower price.

Lower import prices in advanced countriesfurther stimulate their economic development

Instead of using local raw material, theyimport it which may be surplus in othercountry or at higher price.



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Personnel Management & Industrial Relations Refuse to recognize trade unions who engage

in collective bargaining Not ensuring Equal opportunity policies for all

in the workplace Using expatriate staff for all significant

managerial positions Ignoring the occupational health and safety

needs of local workers Exploiting host country labor Not involving local employees in management

decision making

Global Business


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Regulatory Actions in Acquisitions of Global Business Many countries require MNCs to obtain government

clearance before establishing a new operation orpurchasing an on-going business

EC is imposing a new regulation on MNCs making itdifficult for them to enter Europe

Social Obligations in Global Business US, Japan are making efforts to carryout social

obligation They are assisting by way of loan, grants Their assistance is helping these countries to improve

their economic condition to some extent and alsoencourage other countries to fulfill their socialobligation

Ethical Issues in Other Countries


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Ethical Issues in Other Countries

Japan Rocked by number of scandals. France and Germany Study shows that

French and German managers are more

concerned with maintaining a successfulbusiness posture rather than ethical or legalquestions

China Ranked among the worlds gravest

violators of human rights; but Chineseofficials do not view their actions as unethical


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Corporate

Social Responsibility!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

What is CSR?


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Business exists and operates within society; so it

should contribute towards its welfare Corporate Social Responsibility is the continuing

commitment by business

to behave ethically and

contribute to economic development while improving the quality of life of the workforce and

their families as well as of the local community andsociety at large.

CSR is the deliberate inclusion of public interest intocorporate decision-making, and the honouring of aTriple Bottom Line:

People, Planet, Profit

Corporate Social Responsibility


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Companies are now expected to perform well in non-

financial areas such as human rights

business ethics

environmental policies

corporate contributions community development

corporate governance and

workplace issues

CSR-focused businesses would proactively promote thepublic interest by encouraging

community growth and development and

voluntarily eliminating practices that harm the publicsphere, regardless of legality

Responsibilities towards Community


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Respect human rights and democratic institutions

Supporting public policies and practices that promotehuman development through harmonious relationsbetween business and other segments of the society

Collaborating with such activities that aim atimproving the standard of health, education,

workplace safety and economic well-being Promoting and stimulating sustainable developmentand playing a leading role in preserving and enhancingthe physical environment and conserving the earthsresources

Supporting peace, security, diversity and socialintegration; respecting the integrity of local culture Encouraging charitable donations, educational and

cultural contributions and employee participation incommunity and civic affairs.

Trusteeship


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Trusteeship

The philosophy of Trusteeship believesin inherent goodness of human beings

Resources are for everybody and wealth

is for those who generate it Thus one who controls the resources is

not the owner but the trustee

Trusteeship Concept ofM h t G dhi


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Mahatma Gandhi

Trusteeship as the sole means of continuouslyredistributing wealth and simultaneously assuringgeneration and intelligent use of wealth.

Social order is based on social necessity and notpersonal greed

The workers realise their importance in society andshed the fear of and distrust of the rich while thelatter will no longer feel their existencethreatened but would realise their greatresponsibility towards upliftment of society

the trusteeship concept could be achieved byimplementing in degrees By looking for a equitable balance or balance of all

the stakeholders the todays entrepreneur takesthe first step towards tomorrows trustee.

Multiple Stakeholder Theory


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p y

Stakeholder Concept Business wanted to

strike a balance between socialresponsibilities & economic value Social responsibilities arise from

stakeholders Stakeholders are those who are interested or

affected by the business andthose who are vital for the survival andsuccess of organization Internal Stakeholders External Stakeholders

Multiple Stakeholder Theory


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p y

Internal Stakeholders Shareholders, Employees and

Management Any decision taken by them has direct impact on them.

External Stakeholders Consumers, Suppliers, Creditors,Competitors and Community

Multiple Stakeholder theory suggests that business has

responsibilities to all these stakeholders and not only toshareholders These responsibilities can be achieved through Triple

bottom line with

The economic dimension represented by Profit

The social dimension represented by People The environmental dimension represented by Planet

CSR is towards People & Planet

Social Responsibilities of Business


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There are two schools of thought on this issue: In the Free Market View, the job of business is to create wealth

with the interests of the shareholders as the guiding principle The Corporate Social Responsibility View is that business

organization should be concerned with social issues The Free Market case against Corporate Social Responsibility

The only social responsibility of business is to create shareholderwealth

The efficient use of resources will be reduced if businesses arerestricted in how they can produce

The pursuit of social goals dilutes businesses primary purpose Corporate management cannot decide what is in the social interest Costs will be passed on to consumers It reduces economic efficiency and profit Directors have a legal obligation to manage the company in the

interest of shareholders and not for other stakeholders CSR behavior imposes additional costs which reduce

competitiveness CSR places unwelcome responsibilities on businesses rather than on

government or individuals

Social Responsibilities of Business


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p f

Arguments for Corporate Social Responsibility It is the ethical thing to do It improves the firm public image It is necessary in order to avoid excessive

regulation Socially responsible actions can be profitable Improved social environment will be beneficial to

the firm It will be attractive to some investors

It can increase employee motivation It helps to corrects social problems caused by

business Being good is good for business

London Benchmarking Group Model


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The London Benchmarking Group was formed in September 1994

The LBG produced the London Benchmarking Group Model in 1997 The model provides a basis to decide what is, and what is not, Corporate

Community Investment

It is devised around three main motives for corporate communityinvestment

charitable gifts

community investment and

commercial initiatives in the community

Model distinguishes between "input" costs and "output" benefits.

The LBG model enables CCI (Corporate Community Investment)professionals to measure their company's overall contribution to thecommunity, taking account of cash, time and in-kind donations, as well asmanagement costs

The model also records the outputs and longer-term community andbusiness impacts of CCI projects



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LBG focuses more on what companies achieve asopposed to how much they spend.

The LBG model in essence covers four criticalquestions:

Why do we contribute?

Charity, Commercial investment, Commercialinitiatives in the community

How do we contribute?

Cash, In Kind, Time, Management costs What do we contribute?

Where do we contribute?



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Benefits of the LBG

The LBG model provides a comprehensive and consistent setof measures for CSI (Corporate Social Investment)professionals to determine their company's contribution tothe community

The model also captures the outputs and longer-term impacts of CSI projects on communities and thebusiness itself.

The LBG Model encourages community managers to: Account for their total community spend. Analyse the costs and benefits of community programs

consistently. Improve management information to guide future

strategy. Shift the debate from cash contributed to benefits

achieved. Capture and value all inputs, such as time, in-kind giving

and management cost

Ackermans Model


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Robert Ackerman tried to show howindividual companies can be moresocially responsible

He described three phases throughwhich companies commonly tend topass in developing a response to social

issues

Ackerman Model


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.

Phase I: Chief Executive will identify thesocial problem. Phase II: Company hires the staff to study

the problem and suggest the solution. Phase III: Division managers implement the

solution.Where the enlightened companies can makebest information available. Being responsivemay well be the only responsible course ofaction.

Organisationallevel

Phase I Phase II Phase III

Issue: Corporate


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Chief

Executive

Issue: CorporateObligationAction: Write and

Communicate PolicyOutcome: Enrichedpurpose, increasedawareness

StaffSpecialists

Issue: TechnicalProblemAction: Design DataSystem and InterpretenvironmentOutcome: Technicaland Informationalgroundwork

DivisionManagement

Issue: ManagementProblemAction: CommitResources andModify ProceduresOutcome: IncreasedResponsiveness

Carrolls Four-Part Model


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.

This Model suggests: Firm must produce the goods and/orservices that society wants and mustsell them at a profit.

Legal responsibilities are also basic.Firms should operate within the law.

EconomicResponsibilities

LegalResponsibility

EthicalResponsibility

DiscretionaryResponsibility

Carrolls Four-Part Model


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.

Ethical responsibility refers to behavior by the firmthat is expected by society but not codified intolaw

These responsibilities are not well defined,where in specific situations they are clear

Discretionary responsibilities encompass voluntaryactivities undertaken for the public good

It refers to the voluntary contribution of thebusiness to the social cause like involvement incommunity development or other socialprogrammes

Indices for CSRTh b f i di ( l ll d b h k )


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There are number of indices (commonly called as benchmarks),with the overriding objective to describe economic situation of

the companies meeting certain CSR requirements Dow Jones Sustainability Index series (DJSI)

Launched in September 1999 by Dow Jones, STOXX Limitedand SAM Group-Sustainable Asset Management

Since that time more than a dozen various indices have been

created for the world, regions or industries The DJSI methodology is based on positive selection and

aims at identification of best in class companies

The basic criterion considered during selection of companiesfor indices is the analysis of three aspects:

Economy

Environmental protection and

Social responsibility

Indices for CSR


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BiE Index of Corporate EnvironmentalEngagement The BiE Index of Corporate Environmental

Engagement Reports analyse the results ofBusiness in the Communitys leading environmentalbenchmark, the Environment Index

They detail the environmental management andperformance of the UKs leading companiesindividually, universally and by sector

The BiE Index, now known as the EnvironmentIndex, benchmarked companies against theirpeers, and against all companies that participatedin the Index, on the basis of their environmentalperformance in key impact areas.

Business of Mohammad Yunus


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Social Business is a cause-driven business In a social business, the investors/owners can gradually

recoup the money invested, but cannot take any dividendbeyond that point

Purpose of the investment is purely to achieve one or moresocial objectives through the operation of the company, nopersonal gain is desired by the investors

The company must cover all costs and make profit, at thesame time achieve the social objective, such as, healthcare for the poor, housing for the poor, financial

services for the poor, nutrition for malnourished children,providing safe drinking water, introducing renewable energy,etc. in a business way.

The impact of the business on people or environment,rather the amount of profit made in a given periodmeasures the success of social business

The objective of the company is to achieve social goal/s.

Types of Social Businesses


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Type I: Focuses on businesses dealing with socialobjectives only.

Eg. The product produced is for the benefit of thepoor.

Type II: Can take up any profitable business so longas it is owned by the poor and the disadvantaged, whocan gain through receiving direct dividends or bysome indirect benefits.

Eg. The product could be produced by the poor butexported to an international market while netprofits would go towards workers benefits

Seven Principles of Social Business


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Business objective will be to overcome poverty, or one or

more problems (such as education, health, technologyaccess, and environment) which threaten people andsociety; not profit maximization

Financial and economic sustainability Investors get back their investment amount only. No

dividend is given beyond investment money When investment amount is paid back, company profit

stays with the company for expansion and improvement Environmentally conscious Workforce gets market wage with better working

condition ...Do it with joy


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Complexity of Ethical Issues

000000000000000000000

ETHICAL DILEMMAS AT WORK PLACE


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Business runs on decisions by choosingbetween alternatives

But in many cases choice is difficult resultingin ethical Dilemma

Ethical dilemma involves range of actions andtheir consequences

Problem arises due to involvement of value

judgment So prioritize values and violate least possible

Ethical DilemmasFrequently occurring Ethical Dilemmas at


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Frequently occurring Ethical Dilemmas atWorkplace

To do right thing or go in line with companypolicy Whether to spend more time on quality job Use short-cut for quick job or follow

procedures Help colleague who is being harassed or ignoreit

To hide a mistake or admit and rectify Bribery, Child Labour

Ethical Dilemmas in Business relate to Power, Trust and Authority Secrecy, Confidentiality and Loyalty

Ethical DilemmasPower Trust and Authority Managers enjoy these


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Power, Trust and Authority Managers enjoy thesebecause of their position in the organization.

They are expected to use power and authority inequitable manner so trust is not destroyed.

The decisions should be fair and impartial.Secrecy, Confidentiality and Loyalty In organizations

we have to know who is entitled to know what In professions like medical, legal, consultants,

maintaining confidentiality is essential for buildingtrust with customers.

Even business has right to protect information whosedisclosure to competitors would threaten theirsurvival.

Resolving Ethical Dilemma


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To resolve ethical dilemma ask threequestions Utility : Does benefit exceed cost

(shareholder) Rights : Does it respect human rights

(society)

Justice : Does it distribute benefits andburdens evenly (employees)

Resolving Ethical Dilemma


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Two approaches : Deontological &Teleological Deontological (Action oriented) considers

duties to protect fundamental moral rightsof human beings, like Right to fairness, equality, honesty, integrity,justice

Teleological (Result oriented) Action that produce more benefits than harms

are right

Resolving Dilemmasll d d ff h l


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Manager Generally adopt different ethical

standards while performing different tasks. They provide rationalization for their behavior. According to Gellerman four major

rationalizations are

Actions are within reasonable ethical and legal limits Actions are aimed at best interest of individual or firm Actions will not be disclosed, so no danger to him or his

firm He will be protected by is company

Resolving dilemma needs skill and experience

Resolving DilemmasQuestions to be asked by managers to take ethical decisions


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Q y g How would you define the problem if you are on the other

side of the fence To whom and to what do you give your loyalty as a person What is your intention in making this decision Whom would your decision or action injure Before making a decision, can you discuss the problem with

affected parties Are you confident that your decision will be valid for a

long-period of time Could you discuss without qualm your decision with higher-

ups, family and society What is symbolic potential of your action if understood, if

misunderstood Under what circumstances would you allow exception to

stand

Ethical Decision-making Is the problem / dilemma really what it appears to


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Is the problem / dilemma really what it appears tobe

Is the action that you are considering is legal?Ethical? Understand the position of those who are opposing

you. Check for the reasonability Whom does the decision benefit/ harm? How much?

How long? Would you be allowing everyone to do what you are

considering now? Have you sought the opinion of others who are more

knowledgeable and would be more objective? Would your action be embarrassing to you if it were

made known to your family, friends, co-workers orsuperiors?

Factors in Ethical Decision-making


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Magnitude of consequence magnitude of

impact of decision on employees Probability of effect

Social agreement /acceptance

Time interval Proximity of the persons affected

Concentration of effect Decision thataffect large number of people

Final decision on ethical issue should be in linewith greatest social benefit

Resolving Dilemmas


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Employees In many organizations, theabsence of commonly held beliefs andvalues can give rise to ethical dilemma.

As a result employees have to decide

themselves, what is acceptable behavior Training Employees to deal with ethical

Dilemmas Step-by-step process known as

BELIEVE is one way of resolving ethicaldilemma

BELIEVE

B B k d f th


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B Background of the case

E Estimate the ethical dilemma present L List the possible solutions to theproblem

I Impact Consider the likely impact ofeach of the possible solutions

E Eliminate the totally unacceptable solution V Values Assess which values of the

company are held or violated by each solution E Evaluate Considering their likely impact

and the values that will be upheld or violated This approach enables organizations to

achieve a uniform approach to problemsolving.


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Ethical Leadership

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Ethical Leadership


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Leadership is ability To influence other people Shape their attitudes and behavior

To achieve goals Rightness of goal is ethical issue Ethical Leadership is for moulding the people

for right goals Three qualities of Ethical Leadership are

Character Knowledge Action

Leadership


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Leadership is critical factor in determiningoverall effectiveness Organizations have to be quick to respond,

adapt and innovate

This happens only through people whobring to work all knowledge & creativepotential

But people may not make them necessarily

available at work How they are applied depends on

leadership

Power of a Leader


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Managers become effective leaderbecause of power conferred upon them bytheir followers

Leaders do not use any official authority

Leaders power over his followers ispersonal which we call as Moral authority Moral authority does not flow from

temptations (rewards) or threats

(punishment) Leaders have to earn respect

Responsibilities of a Leader To achieve a Task


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To achieve a Task

Motivating people to put in best efforts byshowing path for growthLet people know Why they are doing what they are doing

(objectives) How they are doing (feedback) Helping them to do better (training)

Ensure that group functions as a cohesive unitas a team

Achievement of task is most important If that is not met, then growth of individual

and cohesiveness becomes irrelevant

Qualities for Ethical Leader


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Leaders must have integrity Integrity is consistency between thought,

speech and action Leaders act as head of family

Leadership needs character to inspireconfidence and command respect Six pillars of character

Trustworthiness Respect Responsibility Caring Justice and fairness Civic values

Attributes of Effective Leader


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Effective Leaders Mean what they say and know what they say

Become available for consultation and

advice Become available for support and help at

times of difficulty

Treats sub-ordinates as worthy individuals

Come across as genuine and authentic

Show concern, compassion and forbearance

Attributes of Effective Leader


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Effective Leaders do not Try to bluff Ridicule or insult either the person or his

knowledge Hesitate to point out errors or deficiencies

of sub-ordinates Carry prejudices, encourage cliques, or play

favorites Disown responsibility Panic in difficult situations

Wisdom-based LeadershipGuiding ethics for global business is


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Guiding ethics for global business is

wisdom leadership where wisdom is more than the sum of our knowledge,

intelligence, experience, and innovativethinking.

True wisdom is the deep understanding, keen discernment,

and sound judgment

that draws from a level of self-insight,personal and organizational values, andcultural broad-mindedness.

Four contexts for Wisdom Leadership1. Paternal-mechanistic


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1. Paternal mechanistic From this view, business is survival of the

fittest, and competition is a win-lose game Business leaders adopt the military model of

command-and-control to serve the overall goalsfor efficiency and productivity

This context offers the wisdom of: Honouring the experience and wisdom of "those who

have paved the way before us. Using resources efficiently

However, it has two limitations:

Discounting the inherent capability and motivation ofpeople to do good and be good Believing that life (including people and nature) can

and should be used and controlled for achieving one'sown (self-centred) goals.

Wisdom Leadership2. Humanistic


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2. Humanistic From this view, the purpose of business and

leadership is still wealth-creation, but with awin-win mentality

With this enlightened self-interestsupplants selfish-interest.

The leader's job is to help employees becomeself-actualized intra-preneurs who investboth their emotions and their minds, for theirown sake and the organizations

People are considered a resource to bemanaged sensitively.

Win-win" problem-solving is prominent in thiscontext.

Wisdom Leadership -Humanistic


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m

Inherent in this context is the wisdom to fulfil thepotential of the paternal-mechanistic context by: Recognizing the essential goodness and work ethic of

people. Providing opportunities for individuals to actualize their

potential, which includes self-actualisation as well as work

abilities and aspirations. However, it too has two limitations: Focusing on needs, where motivation occurs when something

is perceived as missing Focusing on individualism, where the "win-win" solutions are

to promote individual interests, And do not necessarily include the interest of theorganization as a whole, and other stakeholders such as

society and nature

Wisdom Leadership3 Holistic


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3. Holistic From this view, the goal of business and

leadership evolves beyond "wealth-creation forshareholders" to "wealth-creation for the optimalbenefit of all stakeholders

Leadership "control" lies more in having a commonpurpose and value-system rather than thecommand-convince or even participativeempowerment leadership styles

This view recognizes that people are, in fact, theprincipal assets of wealth-creation, especially inthe knowledge-intensive, learning organizations

The holisticcontext is increasing in strengththrough initiatives such as "corporate socialresponsibility."

Wisdom Leadership - Holistic


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Inherent in this context is the wisdom to fulfil thepotential of the humanistic worldview by: Recognizing the interconnectivity of people, nature, and

business enterprises. Emphasizing the holistic nature of values and principles from

which to operate harmoniously and creatively

But again, it has two limitations: Basing motivation primarily on self-oriented achievement,

even while it might benefit the larger whole Focusing personal and business goals only on having a better

"in-this-world life, rather than taking into consideration the

spiritual life that is both "in this world and transcends it."

Wisdom Leadership4 Spiritual-based


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4. Spiritual based Sees people as spiritual in nature, with a particular

spiritual purpose in life, along with gifts to helpfulfil that purpose

Leadership in this context focuse

Business Ethics IBS 2012 (2)

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Transcript of Business Ethics IBS 2012 (2)