INTRODUCTION TO BUSINESS ETHICS

PRESENTATION BYProf. Basavaraj S.Kudachimath

Why ethics required?

• Ethics contribute to customer satisfaction• Ethics contribute to employee commitment.• Ethics leads to investors loyalty and trust.• Ethics helps to earn profit.• Helps for survival.

What is Ethics?

• Ethics is the inquiry in to the nature about grounds of morality. Morality is the moral judgments, standard and rules of conduct.

• Business ethics are moral principles that define right and wrong behavior in the world of business. The right and wrong behavior in business is determined by the public interest, groups and business organizations as well as individual personal morals and values.

What is Challenge for Business?

Balancing ethics and economics:Points to be considered in ethics:1. Right2. Proper.3. Just.

Objectives of Ethics

1. Diagnostic objective: Judges human behavior based on moral values.

2. Fixing Moral standards.3. Implementing moral standards on human

behavior.4. Therapeutic objective: Prescribing moral

behavior based on analysis of present situations.

5. Generalizing ethical code of conduct.

Nature of Ethics

• Ethics is a subject that deals with human beings.

• Ethics is more a science than an art.

• Ethics is a normative science

• Ethics deals with voluntary human conduct.

Sources of Ethics:

1. General inheritance2. Religion3. The philosophy.4. The legal system.5. Code of conduct.6. Cultural experience.

Business Ethics

• Business Ethics refers to the application of ethical judgments to business activities.

• Business Ethics concerns itself with what is right or wrong in the workplace.

• It is the normative study of moral standards as they apply to business policies, institutions and human behavior.

Characteristics of Business Ethics• Business ethics is more a matter of religion than

management • Business ethics is a discipline best led by philosophers,

academics etc. • Business ethics is superfluous -- it only asserts the obvious:

"do good!" • Business ethics is a matter of the good guys preaching to

the bad guys. • Business ethics in the new policeperson on the block. • Ethics can't be managed. • Business ethics and social responsibility are the same thing. • Managing ethics in the workplace has little practical

relevance.

Ethical Problems.

• Overt – deals with bribery, theft, collusion. • Covert – deals with corporate acquisitions,

marketing and personnel policies, capital investment.

Ethical Issues in Business1. Honesty and Fairness2. Conflicts of Interest3. Fraud4. Discrimination5. Information Technology.

Ideal Ethical decision

• Right – Morally correct• Equitable – Just and equal• Good – Highest good for all concerned• Proper – appropriate and acceptable• Fair – Honesty• Just - Action

Characteristics of Ethical Decisions in Business

• Ethical decisions differ according to an individual’s perspective.

• Ethical decisions do not have a unique solution, but a multitude of alternatives.

• The consequences of unethical decisions are ambiguous in nature.

• Ethical or unethical decision depends upon individual actions.

MODEL OF ETHICS

Type-I Ethics : The sources of ethics= BeliefsType-II Ethics: What one believes = What one

Behaves

Ethical Guidance/

Sources

Our Belief What is right & Wrong

Our ActionsLeading to Determines

STAKE HOLDER MODEL OF ETHICS

1. The Management2. Owners3. Suppliers4. Customers5. Local Community6. Employees

Types of Ethics:

1. Transactional Ethics: Equality Principle2. Participatory Ethics: Good can only be realized

by participation of parties. Principle of Decency.

3. Recognition Ethics

END OF CHAPTER-I

CHAPTER-II

THEORIES OF ETHICS

Ethical Relativism

The concept of relating any given decision about right or wrong or true or false to the specific situation seemed appealing. It is the analysis of every action or situation through good or bad angles. The ethical relativism depends upon.

• 1. Situation ( Situational ethics)• Pragmatic approach ( Pragmatism)

Pragmatism is philosophy that evaluates actions according to their practical consequences.

How to sort-out the ethical dimensions of a given situation

Joseph Fletcher defines four factors:1. Goals. 2. Methods.3. Motives4. Consequences.

Ethical Reasoning

A set of guidelines has to be used by business as a need for thinking about ethics. These guidelines would help corporate managers in identifying ethical problems and decide course of action to produce best ethical results. Three methods are used in ethical reasoning.

1. Utilitarian: Should have benefit.2. Human rights: Should protect human rights3. Justice: Fair, impartial, and reasonable.

Ethical Theories

• Ethics or moral philosophy is at its simplest a study of right and wrong behavior, with the ultimate aim of defining what is right and wrong.Ethical theories are commonly divided into three subject areas:– Meta Ethics– Normative Ethics– Applied Ethics

Meta ethics

• Meta ethics deals with the entire gamut of ethical issues.

• It can be defined as “the study of the origin and meaning of ethical concepts.”

• Meta ethics deals with 3 issues:Physical issuesPsychological issuesLinguistic issues

Normative ethics

• The term ‘normative’ implies something that ‘guides’ or ‘controls’.

• It is that branch of ethics that guides human conduct.

• It sets out certain moral standards that help us to determine what is right and what is wrong.

• Golden Rule: “Treat others the same way that we want others to treat us”

Acceptance of moral principles

• Moral Principle to be accepted must be PrescriptiveUniversalOverridingPublicPractical

Applied Ethics

• Applied ethics is a branch of ethics that deals with specific, often controversial moral issues such as

AbortionFemale feticide and infanticideDisplacement of tribal people due to various projectsCloningTesting drugs on animalsMisleading advertisingInsider trading Briberycorruption

• Applied ethics branch of ethics that deals with

Theories of Ethics

Teleological Ethical Theory/ Consequentialist TheoryDeontological Ethical TheoryVirtue Theory

Teleological Ethical Theory/ Consequentialist Theory

• The word ‘Teleological’ is derived from two Greek words “Telos” meaning ‘end’, ‘goal’ or ‘purpose’ and “logos” meaning ‘logic’ or ‘reason’.

• Thus teleological means “thinking rationally about ends”• An action is considered morally correct if the consequences of

that action are more favorable than unfavorable.• Consequentialists have offered three definitions of ‘good’

based on 3 theories.– Egoism– Utilitarianism– Altruism: is selfless concern for the welfare of others

Deontological Ethical Theory

• The word ‘deontological’ is derived from the Greek word ‘deno’ meaning ‘duty’ or ‘obligation’

• DT focus on certain fundamental duties that we have as human being, such as not committing murder or theft.

• The duties upheld by deontological theory is classified into 3 headings.– Duties to God, including honoring him and praying to him.– Duties to Oneself includes preserving ones life and sharing

happiness.– Duties to others, including family duties, social duties and

political duties.

Virtue Ethics• VE is associated with Greek Philosopher

Aristotle.• Virtue Mainly strength or courage; bravery;

daring; spirit;• Virtue may be defined as any disposition of

character or personality that an individual desires in himself or others.Four key virtues: wisdom, courage, temperance and justice.

END OF CHAPTER-II

CHAPTER-III

ETHICAL DECISION MAKING IN BUSINESS

A Framework of Ethical Decision Making in Business

Ethical issue intensity

Individual factors

Organizational Factors

Opportunity

Business ethics

Evaluations

Ethical or Unethical Business

Ethical Issue Intensity

• It is the analysis of the perception level of Individuals and their sensitivity towards the ethical issues. It is the study of relevance or importance of an ethical issue in the eyes of individual, workgroup ar organizations.

Individual Factors1. Values2. Attitudes3. Perception4. Goals etc.

Organizational Factors

1. Corporate Culture: It can be defined as set of values, beliefs, goals, norms that members of an organisation share.

2. Significant others: Those who have influence on work group such as peers, competators, co-workers etc.

Opportunity

Opportunity describes the conditions in an organization that permit or limit ethical or unethical behavior. Opportunity either provide rewards for ethical or erect barrier for unethical behavior.The rewards may be internal or External.Internal is the feeling of goodness and personal worth generated.

External may be social approval, status and esteem.

Business ethics evaluations

Corporate governance: It considers three things,1. Accountability: How an organisation work

with its strategies to satisfy ethical and legal bindings

2. Oversight: It provides a system of checking deviations from ethical practices

3. Control: Auditing and proving organisational ethical practices.

ETHICAL ISSUES IN GLOBAL BUSINESS

• Multinational Company – Overview• Ethical Issues in Multinational Companies• Ethical Issues in Global Business- Overview• Ethical Issues in various countries• Regulatory Actions in Acquisitions of Global

Business• Social Obligations in Global Business

Top Multinationals

• Microsoft* Nokia* Toyota Motor* Intel* Coca-Cola

• * Sony* IBM* General Electric* Nike* Citigroup

Multinational Company – Overview

• A multinational corporation (MNC) or multinational enterprise (MNE) or transnational corporation (TNC) or multinational organization (MNO) is a corporation/enterprise that manages production establishments or delivers services in at least two countries.

• A multi-national company, or commonly known as a MNC, is a firm that operates in more than one country, with a headquarters in one particular country. These companies are usually among the largest firms in the world, often selling billions of dollars worth of goods and services, and employing hundred thousands of workers across the globe.

Reasons for Companies Going Global

• Lower wage rates• Reduced transportation cost• The opportunity to be closer to the suppliers• Saturation of local markets• To maintain growth rate• To exploit opportunities in new markets• Recession or domestic completion

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MNCs have been accused of indulging in unethical practices in several areas.

• Political Activities• Sales, Marketing and Advertisement• Environmental• Technology• Economic Activities• Personnel Management and Industrial

Relations

Ethical Issues in Various Countries

• Japan• France and Germany• China