BUSINESS ETHICS BY BASAVARAJ KADAMUDIMATHA

Business ethicsNature, purpose and scope of ethicsImportance of ethics and moral standardsRelevance of valuesSecular vs. spiritual values in management

By Basavaraj Kadamudimatha

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Business ethics


‘A business that makes nothing but money is a

poor business.’

Henry Ford

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The concept comes from the Greek word “ethos” that means both an individual’s character and a community’s culture.

Business ethics involves adhering to legal, regulatory, professional and company standards, keeping promises and commitments and abiding by general principles like fairness, truth, honesty and respect.


The institute of global ethics defines ethics as

‘obedience to the unenforceable.’


The maxims such as “business is business” or principles like ‘caveat emptor’ (let the buyer beware) fall for short of public expectation.

Businesses are under pressure to define their standards and codes of practice.


Ethics are moral guidelines which govern good behaviourSo behaving ethically is doing what is morally rightBehaving ethically in business is widely regarded as good business practice.

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An important distinction to remember is that behaving ethically is not quite the same thing as behaving lawfully:

Ethics are about what is right and what is wrong

Law is about what is lawful and what is unlawful

Business ethics/ Dr. Pooja Sharma

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Ethics constitutes desirable conduct in a particular set of social circumstances.

Business ethics are that functions which leads to choosing right decision at right time which leads for the welfare of not only business owners but also society, consumers, stakeholders and its employees.


There are three approaches to studying business ethics-◦Descriptive- describing practices, moral codes

and beliefs

◦Prescriptive- an attempt to formulate and defend basic moral norms

◦Conceptual study- analyzing central ethical terms such as right, good, an attempt to distinguish what is moral and what is immoral.


Proponents of moral relativism believes that the bulk of moral rules are culture-specific. In other words things are right or wrong in a particular context.


Business ethics has a five part structure:

1. The specification of moral judgment2. Moral judgment and the moral standard3. Justification of moral judgment4. Logical reasoning and moral judgment5. Moral judgment and moral responsibility

Nature of business ethics


Requirements for moral judgments

Moral judgment should be◦ Logical- our goals should be able to support our

moral judgments with reason and evidence.

◦ Based on facts- must collect as much relevant information as possible for making them.

◦ Based on acceptable moral principles-


The ethics movement has grown most strongly in the USA because the risk of being penalized by the courts for unethical behavior is greatest there.


Initial approaches were heavily based on “compliance”, the creation of rules and systems that people and companies had to follow. But rules are hard to draft and can quickly become out of date.

This has led to the evolution of the belief that although some level of compliance will always be necessary, it is more important to instill ethical values into the corporate body and the employees that inhabit it.


To do this successfully businesses must have a vision about why they exist and which ought to be shared by every one connected with the company.

They must also have shared beliefs about acceptable standards of behavior.


Unethical behavior can cost a company its reputation and hard cash and reduce its stock price.

Whereas, ethical companies are most likely to build trust among their shareholders, employees, customers and wider community and thus surely is good for business.


What is right in one place may be wrong in another because the only criterion for distinguishing right from wrong is the moral system of the society in which the act occurs.

For e.g., abortion is condemned as immoral in catholic Ireland but

is practiced as a morally neutral form of birth control in Japan.

Ethical relativism

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Many immoral moralities have been adopted, tolerated or even encouraged by the moral system of one society or another.

Albert Carr argues that business has its own norms and rules that differ from those of the rest of society.

There are number of things that we normally think of as wrong are really permissible in business context.


• Conscious misstatement and concealment of pertinent facts in negotiation.

• Lying about one’s age on a resume.• Deceptive packaging• Overcharging of electricity uses.

Hence business has its own moral standards and business actions should be evaluated only by those standards.


In the earliest period of human history, men lived in herds and were totally dependent for their survival on the group of herd, and hence what was good for the herd was good for its members. Also known as instinctive morality.

Herd morality and conventional morality


When men graduated from nomadic stage to the agricultural stage, his struggle for existence became less harsh, he found some leisure to think and social life begin to take shape.

But here too, the iron grip of social rules and regulations held complete sway over the individual.


When we claim to be highly civilized, the majority of us follow the rules of conduct regarded as good and avoid those regarded as bad.

This certainly ensures smooth functioning of the society and simplifies problems of the individual.


The question is ‘why do we call a particular conduct ‘good’ and another ‘bad’.

Is ‘good’ a fact like tables and chairs? If so a conduct called good by one should be regarded as good by others.


Ethics is essentially a social phenomenon. That which is approved by the group or society is ethical and conduct frowned upon by the group is bad or immoral.

Does this not prove that morality means following rules prescribed by the elders or majority of society?


For e.g., At the beginning of the battle of Kurukshetra, Arjuna asked Sri krishna to take him before the army of Kauravas. He was overwhelmed by the idea of killing his kith and kin and was on the point of fleeing the battlefield.

He could not determine what is his duty and what is good for him.


A normative science seeks to determine norms, ideals, standards or values.

There are three ideals of human life viz., Truth, Beauty and Goodness. They correspond to three aspects of our experience – thinking, feeling and willing.

Ethics as a normative science


Ethics is concerned not with human conduct as it is but as it ought to be. It passes judgments of value upon human actions with reference to the moral ideal.

Moral judgments are not descriptive but prescriptive, they state what we ought to do, not what we actually do.


All types of behaviour or conduct of men do not come under the purview of ethics.

E.g., an office employee going to a bank to deposit a large office sum. On the way he is shot at by certain miscreants, is slightly wounded and the money is snatched from him by those miscreants.

Postulates of ethics


1. Freedom of will of the agent or doer is fundamental postulate of morality. Such events that do not follow from the free will of the doer, do not form the subject matter of moral judgments.


Exceptions are: Instinctive action- A man fleeing from a

dangerous animal is behaving under the influence of the instinct of self preservation.

Reflex action – when we withdraw our hand when it touches a very hot object.


Ideo motor action- A spectator watching a footballer about to kick ball into the net, himself kicks the man standing in front of him.

Accidents – breaking one’s leg as a result of slipping on a banana skin.


2. Reason – only persons with a properly developed rational faculty, i.e., with the power of distinguishing good from bad are to be held responsible for their voluntary actions.

For e.g., A boy of eight sets fire to a hut and causes considerable loss of property.


3. Personality – the unity and continuity of the mental life of a person.

The consequences of actions come after the deeds are done. Sometimes, there is considerable time gap between an action and its result.

For e.g., a man commits a crime and during the course of his trial, is found to be insane, he is not punished for his crime.


Apart from voluntary actions, habitual actions also come under the scope of moral judgment.

For e.g., a smoker tries hard to give up smoking, but he does not succeed. This is more of a psychological problem, how can he be held morally responsible?


A voluntary action is not a simple event. It has three stages –

◦ The mental stage◦ The bodily stage◦ The external stage of consequences

For e.g., quenching thirst by water.


The motive is the fuel for the intent. The motive is the reason why someone is going to do something, the intent is what they desire the outcome of that something to be.

Motive is the fountain from which the actions spring, whereas intent is the goal to which they are directed.

Motive or intention?


In short intention = motive + means adopted

To actually do good to my friend, I need to adopt proper means then only the result will be satisfactory.

E.g., A surgeon performs an operation with utmost care to cure a patient; but in spite of that the patient dies.


The means adopted for realizing the motive must be good.

For e.g., motive of passing exam is good, but adopting unfair means to do that is not good.

Hence the morality of an action depends not merely on the motive but also on the means adopted.


The term intention is used in a wide sense which includes:

◦ Immediate and remote intention◦ Direct and indirect intention◦ Conscious and unconscious intention◦ Formal and material intention


Examples:

Two person trying to save a man from drowning, one is policeman.

Helping a beggar.

A politician adopting various measures to strengthen his hold on power.


Importance of ethics and moral standards


Ethical behavior is essential for long term success in business, both from micro and macro perspective.

Importance of ethics in business


The market system leads to a more efficient way of allocating resources and the conditions required are:

1. The right to own and control private property.

2. Freedom of choice in buying and selling goods and services.

3. The availability of perfect information regarding these goods and services.


Bribery – reduces freedom of choice by changing the conditions under which the decision is made. Greater appeal is created by enhancing the personal gain associated with the choice by addition of unearned income.

Coercive acts – threats that prevent a seller from dealing with certain customers.

Macro perspective – unethical behavior


Deceptive information – creates false impressions and leads buyers to select goods and services that provide less satisfaction. Delivering products and services below the promised quality also distorts the system.

Theft – losses due to theft may be made up via larger profit margins that increase prices.


Unfair discrimination – results in the purchase of services from less capable people or sale to less capable people.


Ethics is closely associated with trust. In order to develop trust, behavior must be ethical.

Trust in a business setting reduces costs, makes life more pleasant and improves efficiency.

Macro perspective – ethics and trust


Two norms are to be honored in all situations:

1. Commitments are to be honored in almost all situations.

2. One ought to produce a good product and stand by it.


Trust involves three fundamental elements –

◦ Predictability◦ Dependability◦ Faith

Need for trust arises when one faces some type of risk. Thus trust, is a risk reducing mechanism.


1. Trust in supplier relations – purchases move from a series of discrete transactions to an on going buyer seller relationship which is called an exchange relationship, which is based on trust between both parties that each will honor his commitments.

2. It also provides several benefits to the buyer. The buyer gets a dependable source of supply, during the period of shortages also.


2. Trust in customer relations – a salesman earn customer’s trust by being dependable, honest, competent and customer oriented.

Customers who trust suppliers are more likely to stay with them.


3. Trust in employee relations – a climate of trust provides:

◦ Improved communication◦ Greater predictability ◦ Dependability and confidence among

employees◦ Reduction in employee turnover◦ Openness and willingness to listen and accept

criticism◦ Reduction of friction among employees


The following factors promote trust:

◦ Open communications◦ Giving workers a greater share in decision

making.◦ Sharing of critical information◦ Trust based sharing of perceptions and feelings


Moral standards are the yardsticks of business ethics. They provide the basis for deciding whether an act is right or wrong.

Moral standards consist of specific moral norms and general moral principles.

Moral standards


Business ethics is the process of evaluating decisions, either pre or post, with respect to the moral standards of society’s culture.

Moral norms prohibit certain types of behaviour such as lying, stealing and killing.

Moral principles provide more general guidelines for behaviour and are applicable to decision situations.


Integrative social contracts theory is used for evaluating the ethical dimension of decisions.

It is a normative theory of business ethics and it allows for moral diversity among various cultures while maintaining certain universal norms.


S.No. Hypernorms Universal

1 Personal freedom

2 Physical security

3 Political participation

4 Informed consent

5 Ownership of property

6 Right to subsistence

7 Equal dignity to all humans

Essential elements of social contract theory


S.No.

Macro social contract Globally based

1 Moral free space

2 Free consent with right to exist

3 Compatible with Hypernorms

4 Priority levels


S.No.

Micro social contractIndividual norms

Community based

1 Do not lie in negotiations

2 Honor all contracts

3 Give job preference to natives

4 Give contract preference to local suppliers

5 Provide a safe workplace


Relevance of values


The word ‘value’ is derived from a French word, ‘Valoir’ which means the worth, merit, usefulness or importance of a thing.

Values are prescriptive belief which depicts what is good and what is bad.

Value


Values

Beliefs

Perceptions

Attitudes

Behaviour & Personality


Allport described a value as “a belief upon which one acts by preference.” When we place importance on something that we cherish we are valuing that trait, ideal, or characteristic.

Values describe what managers try to achieve through work and how to behave.


Values may be based on rules and are referred to as deontological or rule based belief;

or values may be based on the perceived outcomes and are referred to as teleological beliefs.


Values are the core of personality and are a powerful force affecting behaviour.

Values contain a judgmental element in that they carry an individual’s ideas as to what is right or wrong.

Values are not fixed, they change over time.

Features of values


Values have both content and intensity attributes. The content attribute indicates that a mode of conduct of existence is important. The intensity attributes specifies how important it is.

Many values are relatively stable and enduring.


Genetic source Environmental source Influence of superiors Media

Values describe what managers try to achieve through work and how to behave.

Value formulation


Values should be in alignment with the business goals, and mission and vision statements, otherwise there is bound to be organizational conflict.

Values will also help you in finding your purpose in life.

Values lay the foundation for the understanding of perception, attitudes and motivation of people.

Importance of values in business


Values help you get and stay motivated.

Values relate to our purpose in life and are used as guiding principles, to make your life easier.

Values provide you with a strong foundation; a method for living your life to it’s fullest.


Corporate culture: an effective value system creates a strong corporate culture which is necessary for high performance.

Guide to action: serves as social guides to decision making and actions to be taken in business.


Objective standards: serves as norms against which the conduct of businessmen and their performance can be judged.

Social responsibility: help to persuade businessmen to discharge their social responsibilities.


Judgment and guided actions which are based on individual’s beliefs or convections. Every organisation has its own beliefs and convictions.

A manager’s values determine the managerial functions he performs.

Value based management


A manager’s value system plays a significant role in the performance appraisal of his subordinates.

The job of planning, organizing and controlling the behaviour of employees should be compatible with managerial values.


Value orientations of managers underlie managerial behavior. The importance are as follows:

Managerial effectiveness based on value based management can solve problems harassing the economy in country.

Selfless action purifies our mind. Purer mind concentrate and mediate to approach divinity or perfection.

Importance of value based management


Proper use of valuable human and material resources offered by the earth.

Promotes work culture, self discipline and consciousness among the employees.

Helps in bringing human harmony and happiness in the organization.


It cares for its people. People are protected from unwanted stress and strains, unrest and loneliness.

Helps in reducing conflicts and disputes. This enhances reputation and goodwill of the organization.


These are personal convictions about life-long goals (terminal values) and modes of conduct (instrumental values).

Types of values


INSTRUMENTAL VALUES

Instrumental Values are core values, permanent in nature, comprise personal characteristics and character traits.


Cheerfulness Ambition Love Cleanliness Self-Control Capability Courage Politeness Honesty

Imagination Independence Intellect Broad-

Mindedness Logic Obedience Helpfulness Responsibility Forgiveness

INSTRUMENTAL VALUES


TERMINAL VALUES

In our personal lives, Terminal Values are those things that we can work towards or we think are most important and we feel are most desirable – terminal values are desirable states of existence.


True Friendship Mature Love Self-Respect Happiness Inner Harmony Equality Freedom Pleasure An Exciting Life

Social Recognition Wisdom Salvation Family Security National Security A Sense of

Accomplishment A World of Beauty A Comfortable Life

TERMINAL VALUES


Secular versus Spiritual values in management


Secularism is the doctrine that morality should be based solely with regard to the well-being of mankind in the present life to the exclusion of all considerations drawn from belief in God.

Secularism means non-religious. The secular values are based on facts and science.

Secularism


Secularism means being materialism and task oriented for managers.

Secularism is a professional value which completely ignores the difference of caste, color, religion, culture etc.


Main features:

Primary emphasis on the material and cultural improvement of human being.

Concern for this world and its improvement.

Maximize the profit without discriminating work force.


Responsibility towards society: One should take maximum efforts for the well being of society.

Professionalism: decision should not be on the basis of religion, caste, colour etc.

Secular values lay emphasis on brother hood of man and unity of the world.


Under this the management acted as handmade of profit and motto was more and more money at any cost. Hence we got external growth at the cost of internal growth.

Some consequences of management by secularism are as follows:

Secularism and management


Workers are demoralized

Labor management conflict is rampant.

Human welfare is neglected

Wealth is accumulated

Main objective of management is to earn money at any cost.


Spiritual means religious one or the people who believe in religion.

They behave that work and religion are two side of a coin.

Human values are based on spiritualism. They act as base for thoughts, actions, skills and behaviour and will mould character.

Spiritualism


Main features: Divine qualities: such as respect for elders,

belief in giving than taking, satisfaction etc.

Work is worship: one should work with more confidence, loyalty, dedication, responsibility and motivation.

Self disciplined: helps in proper usage of our time, energy and other resources.


Belief in religion: spiritual people believe in religion.


The quality of work life in an organization is greatly influenced by the spiritual and ethical values prevalent in the organization.

There is no clash between secularism and spiritualism.

Spiritualism shows the goal and secularism supplies the tools.

Spiritualism and management


SECULAR Vs SPIRITUAL VALUES IN MANGEMENT

Secular It refers to the worldly

thoughts and philosophies as reproduced by management Gurus.

Find its way from maslows need hierarchy and culminate till most modern thoughts on management.

Spiritual It refers to the insights

thrown on management by Vedas and Upanishad or by spiritual Gurus.

Find its base from Vedas and Upanishads with special reference to Gita.


Secular Treat management

values as a science.

Treat management values as an evolutionary concept.

Views on values are not generally ethical by nature.

Spiritual Treat management

values as a philosophy.

Believe sources like Bhagvad Gita, as a ready reckoner of value based management.

Ethical or moral in its true sense.


Secular Contribution of Indian

thoughts is comparatively poor.

As propounded by management experts lack any ideals.

Spiritual Contribution of Indian

thoughts has magnificent theories.

Have divinity as the ideal to be portrayed.


Worship of Tulsi

Spiritualism: we do worship tulsi by giving water or by lighting a lamp in the plant of tulsi.

Secularism: believes that lighting a lamp in tulsi kills insects, and tulsi also has medicinal value as it cures cough and cold.

Examples


Giving Argh to Sun

Spiritualism: it is a spiritual value.

Secularism: believes that when we give argh to Sun, our eye sights will also become good.


Touching feet of elders

Spiritualism: we get blessing by touching feet of elders.

Secularism: believes that blood circulation is maintained by it.


Secular practices with human dignity, human morality and human value will alone bring bright future for India.

The country should have common law which is applicable to all cities.

There should be no privileges based on religion or faith.

BUSINESS ETHICS BY BASAVARAJ KADAMUDIMATHA

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Transcript of BUSINESS ETHICS BY BASAVARAJ KADAMUDIMATHA