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Ethics consists of the standards of behavior that our society accepts.

Ethics is the discipline that examines ones moral standards or the moral standards
of society- It asks how these standards apply to our lives and whether these
standards are reasonable or unreasonable?- good or bad reasons
! person starts to do ethics when he or she takes the moral standards absorbed
from family" the society" the religion" from friends" coworkers and asks# $hat do
these standards imply for the situations in which I find myself?. %o these standards
really make sense?
Ethics is the study of moral standards" moral &udgements based on those standards
Business ethics is a form of applied ethics that examines ethical principles
and moral or ethical problems that arise in a business environment.
In the increasingly conscience-focused marketplaces of the '(st century" the
demand for more ethical business processes and actions )known as ethicism*
is increasing.
+usiness ethics can be both a normative and a descriptive discipline.
GROWING IMPORTANCE OF BUSINESS ETHICS
Ethics is a set of values and principles that we strongly believe and follow.
It is learning what is right or wrong, and then doing the right thing.
,he concept of business ethics has come to mean various things to various people"
but generally it-s coming to know what it right or wrong in the workplace and doing
what's right -- this is in regard to effects of products/services and in
relationships with stakeholders.
!fter a host of scams such as Enron, World.com etc" business ethics has assumed
a lot of importance. .ince everyone - be it an investor" customer or public view an
organi/ation with suspicion it is very important that the organization portrays an
ethical image.
(. Managerial Mischief 0 it includes illegal" unethical" or 1uestionable
practices of individual managers or organi/ations" as well as the causes of
such behaviors and remedies to eradicate them.
'. Moral Mazes 2path- it includes the numerous ethical problems that
managers must deal with on a daily basis" such as potential conflicts of
interest" wrongful use of resources" mismanagement of contracts and
agreements" etc
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3rigin of +usiness Ethics
+usiness ethics has come to be considered a management discipline"
especially since the birth of the social responsibility movement in the (456s.
!n increasing number of people asserted that because businesses were
making a profit from using our country-s resources" these businesses owed it
to our country to work to improve society. 7any researchers" business
schools and managers have recogni/ed this broader constituency" and in their
planning and operations have replaced the word 8stockholder8 with
8stakeholder"8 meaning to include employees" customers" suppliers and the
wider community.
,oday 469 of business schools teach business ethics. Ethics in the workplace can
be managed through use of codes of ethics" codes of conduct" roles of ethicists and
ethics committees" policies and procedures" procedures to resolve ethical dilemmas"
ethics training" etc.
BENEFITS/IMPORTANCE OF BUSINESS ETHICS
(. !ttention to business ethics has substantially improved society
'. Ethics programs help maintain a moral course in turbulent times
:. Ethics programs cultivate strong teamwork and productivity as they align
employee behaviors with those top priority ethical values preferred by leaders
of the organi/ation.
;. Ethics programs support employee growth and meaning. !ttention to ethics
in the workplace helps employees face reality" both good and bad -- in the
organi/ation and themselves. Employees feel full confidence they can admit
and deal with whatever comes their way
<overnment agencies including tax authorities develop trust in the
organisation and are reluctant to file cases against such company
.uch organisations get support in difficult times.
=egal compliance improves and hence penalties and fines are avoided.
Ethics and Values
Ethics is the study of the moral relationships with others.
>ompanies do not operate in a vacuum but rather are plunged in a universe of
relationships with multiple stakeholders.
$ith the globali/ation the scenario in which companies operate has become even
more complex" given the emergence of global groups of stakeholders.
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,he need for a company to behave ?ethically is described in terms of a
companys need to interact productively with its stakeholders. +usiness Ethics
means conducting all aspects of business and dealing with all stakeholders in an
ethical manner@
M!alit"
P!inci#les ! !ules $ %!al cnduct that #e#le use t decide &hat is
!i'ht ! &!n'
7orality is concerned with the social practices defining right and wrong.
Ethical theory and moral philosophies provide guidelines for &ustification of right
or wrong actions when settling human conflict.
Ao one moral philosophy is accepted by every one Bules of prudence promote
self-interest" doing what is prudent for oneself.
Bules of morality promote the interest of other people.
7orality and prudence should generally work hand-in-hand if a business is to
succeed.
Pu(lic)s a'enc" $! t!anslatin' %!alit" int e*#licit scial 'uidelines
and #!actices and $! sti#ulatin' #unish%ents $! $$enses
7anagers will evaluate the moral dimensions of a decision before making it. ,he
moral yardsticks used to evaluate a decision consist of the moral standards of a
societys culture. +usiness ethics involve the use of moral standards when
making decisions.
7oral standards consist of specific moral norms and general moral principle
moral norms prohibit certain types of behaviour such as lying" stealing and killing.
moral principles provide more general guidelines for behavior and are applicable
to decision
M!alit" and +a& , I
.ocieties can pass laws that prohibit people from doing things that are morally
acceptable.
.ocieties can pass laws that re1uire people to do things that are morally
unacceptable.
.omething that is immoral is not necessarily illegal" and something that is
illegal is not necessarily immoral.
?,he law is not the repository of our moral standards and values" even when
the law is directly concerned with moral problems.
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M!alit" and +e'alit" II
?! law-abiding person is not necessarily morally sensitive or virtuous" and
from the fact that an act is legally acceptable it does not follow that this act is
morally acceptable.
=egal rights derive from political institutions and must be distinguished from
moral rights since they do not have to be based on moral rights to be
grounded or understood.
7oral rights exist independently of" and form a basis for critici/ing and
&ustifying" legal rights.
M!alit" -. +a&
.tatutory law v. case law
.tatutory laws are >entral 2 state statutes and their accompanying
administrative regulations.
>ase laws are &udge-made laws that establish influential precedents
that provide material for reflection on both legal and moral 1uestions.
7orality and ethics begin where the law is unclear or not defined
>onsciences#
Cary from person to person and time to time.
!re altered by circumstance" religious belief" life experiences" and training.
!re not consistent from day to day
7oral &ustification must then be based on a source external to conscience itself.
A##!aches t the Stud" $ M!alit"
%escriptive approach - provides a factual description and explanation of moral
behavior and beliefs" as performed by !nthropologists" .ociologists" and
Distorians.
Beferred to as the scientific study of ethics.
>onceptual approach - analy/es meanings of central terms in ethics such as right"
obligation" &ustice" good" virtue" and responsibility.
Erescriptive approach - attempts to formulate and defend basic moral norms or
standards by determining what ought to be done versus what is being done.
Beferred to as normative ethics
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Relati-is%
!n ethical theory that claims right and wrong is sub&ectively determined by each
culture
$hat is good is socially accepted and what is bad is socially unacceptable in
a given culture.
,here is no such thing as universal truth in ethics" there are only the various
cultural codes and nothing more.
!n argument against relativism#
,here are some basic moral principles that all societies will have in
common" because those rules are necessary for society to exist.
E'is%
! moral theory that contends all choices either involve or should involve self-
promotion as their sole ob&ective
Ps"chl'ical E'is%
Everyone is always motivated to act in his or her own perceived self-interest.
! main argument against psychological egoism is that there may be no purely
altruistic moral motivation to help other people unless there is personal gain.
Ethical E'is%
,he only valid standard of conduct is the obligation to promote one-s own well being
above everyone else-s.
Ethical egoists believe that people should not be their brothers keeper" because
people do not completely understand the true needs of others.
Its every man for him in this world
Business Ethics as C%#etiti-e Ad-anta'e $! C%#anies in the Gl(ali/atin
E!a
<lobali/ation has brought about greater involvement with ethical
considerations and most importantly achieving competitive advantage through
business ethics.
<lobali/ation and business ethics are linked as they affect a companys ability
to commit to its shareholders" in particular to external investors" and preserve
the trust needed for further investment and growth.
0Ethics $ Scandal1 Ve!sus 0Ethics $ St!ate'"1
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It is increasingly important for companies to deal with ethics as a corporate
strategy that" if uni1uely implemented" could achieve competitive advantage
for the company rather than waiting to react to possible ethical issues of
importance to the targeted stakeholders.
It is the necessity of being ethically proactive company rather than being
ethically reactive company.
Business Ethics as C%#etiti-e Ad-anta'e
!s the speed of comparable tangible assets ac1uisition accelerates and the pace
of imitation 1uickens" firms that want to sustain distinctive global competitive
advantages need to protect" exploit and enhance their uni1ue intangible assets"
particularly integrity )building firms of integrity is the hidden logic of business
ethics*.
?+ehavior that is trusting" trustworthy" and cooperative" not opportunistic" will
give the firm a competitive advantage.
.ustainable global competitive advantage occurs when a company
implements a value-creating strategy which other companies are unable to
imitate.
For example" a company with superior business leadership skills in enhancing
integrity capacity increases its reputation capital with multiple stakeholders
and positions itself for competitive advantage@
+usiness ethics as competitive advantage involves effective building of
relationships with a companys stakeholders based on its integrity that
maintains such relationships.
!n integrity approach to business can yield strengthened competitiveness# it
facilitates the delivery of 1uality products in an honest" reliable way. ,his
approach can enhance work life by making the workplace more fun and
challenging. It can improve relationships with stakeholders and can instill a
more positive mindset that fosters creativity and innovations among the
stakeholders.
,he purpose of ethics is to enhance our lives and our relationships both inside
and outside of the organi/ation ,he metaphor of a game sees competition in
business as an exciting game" in which each competitor strives to achieve
excellence" satisfy customers" and succeed as a result.
,he motive in this type of game is not to drive out the competition" but to work
hard" play by the rules of the game" and do ones best in order to succeed
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Business Ethics And N!%ati-e Phils#h"
7anagers will evaluate the moral dimensions of a decision before making it.
,he moral yardsticks used to evaluate a decision consist of the moral
standards of a societys culture.
+usiness ethics involve the use of moral standards when making decisions.
7oral standards consist of specific moral norms and general moral principle moral
norms prohibit certain types of behaviour such as lying" stealing and killing. 7oral
principles provide more general guidelines for behavior and are applicable to
decision
The!ies $ Business Ethics
2. Inte'!ati-e Scial Cnt!acts The!"
It is a normative theory of business ethics and it allows for moral diversity among
various cultures while maintaining certain universal norms.
! social contract is an informal agreement regarding behavioural norms that are
developed from shared goals beliefs and attitudes of groups of people. >orporations
enhance the welfare of society through the satisfaction of consumer and interest of
workers by leveraging corporationsG special advantages.
,his is the moral foundationH .ocial >ontract also serves as a tool to measure the
performance of productive organisations. $hen such organisations fulfill the terms of
the contract" they are morally &ustified. $hen they do not" they should be
condemned. Dyper norms are universal and impose certain conditions on all
business" when they do not" they should be condemned.
Dyper- norms are universal and impose certain conditions on all business activity.
,he macro-social contract functions at the global level provided specific conditions
under which micro- -social contracts may be developed. 7icro-social contracts are
community contracts developed to guide business activity. ,he essential elements of
.ocial >ontracts ,heory are shown#
H3PER NORMS
(. Eersonal freedom
'. Ehysical security
:. Eolitical participation
; . Informed consent
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I. 3wnership of property
5. Bight to subsistence
J. E1ual dignity to all humans.
Mac! Scial Cnt!act
(. 7oral free space
'. Free consent with right to exist
:. >ompatible with hyper norms
;. Eriority levels.
Mic! Scial Cnt!act
Individual Aorms
(. %o not lie in negotiations
'. Donour all contracts
:. <ive &ob preference to natives
;. <ive contract preference to local suppliers
I. Erovide a safe work place
A##licatin $ h"#e! n!%s
Dype norms are universal norms that are e1ually applicable to all persons
worldwide.
Dyper norms provide the basis for evaluating all other norms. ,hey stand for
the basic principles that are fundamental to human existence" e.g. human
rights"
3wnership of property" right to live etc
7acro-social contract provides global norms )hyper norms*
7icro-social contracts provide community norms.
4. MORA+ REASONING THEORIES
7oral reasoning deals with determining rightness of the acts. It tells about
what individuals or institutions ought to do. 7oral theories deal with two
components#
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I. ,heory of value or theory of good# It decides about what is good or valuable.
,hough it does not make this explicit" it focuses on properties that we want to
be realised in our actions. ,hese properties may be compliance with law of
nature. Duman freedom" social solidarity or a combination of one or more of
them.
'. ,heory of the right# It does not tell about which properties are valuable tells
about what individuals and institutions should do by responding to valuable
properties.
ased on the a!ove, there are two kinds of moral theories"
I. >onse1uentialist or teleological theories
'. Aon-conse1uentialist or non-teleological2deontological ,heories
$hile teleology is the ethics of ends and conse1uences" deontology is the
ethics of duty and obligations.
5. Telel'ical The!ies
,eleological ethics deals with conse1uentialism. It is associated with utilitarianism"
ethical egoism and other goal based approaches to conse1uentialism.
,hese theories emphasis on goals and ends in determining moral 1uality of conduct
and character. It refers to the rightness of actions or moral Kvalues of character. It
uses ends and goals to &ustify virtues and actions.
?,eleological theories hold that rightness or wrongness of action is always
determined by its tendency to produce certain conse1uences which are intrinsically
good or bad. ,o assert that right actions are those that have the best
conse1uences. ,hey give priority to Kgood over Kright. !ccording to them" all actions
that maximi/e the good are right actions. $hat is good is independent of what is
right.
,eleological theories provide different views on what is good that should be
promoted. !ccording to egoistic theories" good is the good of the person who is
acting. !ccording to universalistic theories" <ood is the good of all those who are
affected by an action. Ltilitarianism or universalistic is the best known teleological
theory. Meremy +entham" Mohan .tuart 7ill and Denry .edgwick were the famous
utilitarianists who asserted that actions should be &udged on the basis of the amount
of pleasure they produce on all those who are affected by those action
Features of ,eleological ,heories
I. It gives priority to what is Kgood over what is Kright. <ood is the purpose or
goal of human actions. Duman actions should bring greatest happiness for
greatest number of people.
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'. !ll actions that contribute to Kgood are moral actions. !n action that brings
happiness for the greatest number of people" is a right action
:. Besults or conse1uences determine the rightnessH or wrongness of moral
actions.
3ne of the important teleological theories is that of conse1uentialism.
>onse1uentialism" thus" focuses on best conse1uences of our actions for all
concerned. It holds that makes an action right or wrong is its conse1uences only.
,his theory became popular in the (N
th
century.
F!%s $ Cnse6uentialis% 7Cnse6uential The!ies8
2. The!" $ ethical e'is%9 In this form of conse1uentialism"the desired is the
long-term self-interest 6f f the individual. It claims that whi(e making a moral
decision one should consider the long term self 0interest of the decision. .hort-term
.hort-tenn self.interest" if any" should be sacrificed for sake of long-term self-interest.
G !n action is morally right if the conse1uences of that action are more favourable
than unfavourable. 3nly to the agent performing that action.
4. Utilita!ianis%9 In this form of conse1uentialism" the desired end is not long-term
self-interest of the individual but" it is greatest happiness to the greatest number. !ny
action that brings greatest happiness to the greatest number of people is a desirable
action and should be performed. !dvocates of this thinking are Meremy +entham
and Mohn .tuart 7ill.
:. Utilita!ian The!ies $ Business Ethics
a. +enthams !pproach
+entham advocates adopting an action that brings happiness or pleasure to the
community rather than an individual. De &udges pleasure by 1uantity.
One actin is (ette! than the the! i$; it (!in's %!e ha##iness ! #leasu!e
than the the!. He sa"s that #leasu!e can (e %easu!ed (" its intensit";
du!atin; ce!taint" ! unce!taint".
In dete!%inin' &hethe! an actin is %!al ! nt; the <intentin $ the de!= and
<cnsciusness $ cnse6uences= need t (e ta>en int accunt.
>onse1uences can be both primary and secondary. For example" non payment of
tax by K! resulting in loss to the .tate revenue is primary conse1uence of !s action.
If this leads to nonpayment of tax by others also causing mere harm to .tate
exche1uer" !s action is assumed to have secondary conse1uences which are" in
fact" doing more harm to .tate exche1uer.
Limitations of Benthams Approach
+enthams theory has the following limitations#
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(. !ll actions are not followed by pleasures. ! soldiers action to &oin army is
because of his ideals and not pleasant conse1uences.
'. De" more or less talks of 1uantitative pleasures. 7any 1ualitative factors that
affect moral actions are not taken into account
(. Mill=s A##!ach t Utilita!ianis%
M... 7ill" a political thinker" published his work KLtilitarianism in (N5:"
(. De said that pleasures differ in 1uantity as well as 1uality. .ome pleasures
are more desirable than others. 7an should pursue those actions whose
pleasures are noble and dignified. De said" ?It is better to be a human being
dissatisfied than a pig satisfied.
De views morality as internal and not external. 7orality regards pleasures and
pains of others and not &ust ones own self. It is the desire to be in unity with
others.
,he principle of utility as outlined by Mohn .tuart 7ill is that one is obligated
morally to produce the greatest good for the greatest number. 7ill identified
the good with utility. In calculating whether an action is right or wrong one
needs to pro&ect the total conse1uences for good or ill and determine the
actions in which it is optimised according to situation.
?. @entl'" The!" $ Ethics
@entl'" is a the!" $ ethics ad-cated ("
Phils#he!s such as Aant; Rss and Bhn Ra&ls
,his theory considers actions to be right or wrong regardless of their
conse1uences.
!ctions that have moral values are rightH whether or not they are good. If
telling lies is morally wrongH it remains wrong even if it brings happiness to
same people.
!ctions are" thus" right or wrong depending on whether they are morally right
or wrong" Irrespective of their conse1uences. $hat is Kright has priority over
what is Kgood.
%eontology is derived from the <reek word Kdeon" which means obligation or
duty. It stresses on what is obligatory and what one ought to do" whether or
not it is good to do so.
.peaking truth may not bring good to some but" one must speak the truth as it
is the moral duty of each good to some but" one must speak the truth.
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,here are two approaches to deontology#
(. Act dentl'"- For example# KIn this not break my promise is an
obligation that represents act deontology.
4. Rule dentl'"- It claims that obligations and moral duties can be
generalised. For example" Kwe must always keep our promises is all
obligation that represents rule deontology. ,hese values" actions or duties
are fundamental and do not depend upon circumstances of particular
situations. !ctions are performed according to to rules and not
circumstances. Oant.
Aant sa"s ,hat result and conse1uences should not guide our actions. 3ur
actions should follow the moral law.
Acc!din' t Rss" we should all follow our moral duties regardless of their
conse1uences. 3ne moral principle can be sacrificed only for another moral
principle#
Bhan Ra.&ls says that fairness is prior to goodness. Fairness of societys
rules is more important than conse1uences of their rules.
Deontology at a Glance
(. Bightness or wrongness of an action is determined by its morality and not
its conse1uences.
' Erominent thinkers are Oant" - Boss and Bawls
:. ,hey give priority to Kright over. <ood.
;. Bight action may not necessarily maxi miss the good.
I. Bight actions may" or may not " bring happiness.
5. ,hey are the theories of ethics duty and obligation.
Telel'ical The!ies at a 'lance
Bightness or wrongness of an action is determined by its conse1uences.
Erominent thinkers are +entham and M... 7ill
,hey give priority to Kgood over Kright.
Bight action is that which maximises the good.
Bight actions bring happiness to individuals performing the action )egoist theory*
or happiness to greatest number of people )utili(arianism* .
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,hey are the theories of ethics that deal with goals and end results of
actions.
C. Ri'hts D @uties The!ies $ Business Ethics
,he outcome of a specific decision is irrelevant and what matters is whether
the decision is ethical. ,he rules provide the guide to ethical decision-making.
Lnlike rule utilitarianism" these rules are based on reason" not conse1uences.
Bights P %uties )Aon-conse1uentialist* principles are either Bights Erinciples
or Mustice Erinciples.
2. Ri'hts P!inci#les
Bights principles grant a person certain moral or human rights by virtue of being a
human being. ,hese rights are closely associated with duties. It is ones duty not
to violate the rights of others &ust as Kit is the duty of others not to violate his
rights.
,he development of moral rights is generally attributed to Immanuel Oant
)(J';-(N6;*"
De argues that an action is morally right only if you would be willing to have
everyone act the same way in a similar situation.
Oants second principle Gstates" K!ct so that you treat humanity" whether in
your own person" or in that of another" always as an end and never as a
means only. Eeople should never be treated only as a means to an end but as
ends themselves. ,hus when using people to accomplish your purpose" you
have a duty to respect them as human beings.
Oant considered this categorical imperative to be a moral law. It is an
unconditional law to all G ,o Oant" they Kare absolute duties and a moral act is
performed out of duty only.
<erald >avanaugh has cited six rights that are basic to business activity.
,hese include#
(. =ife and safety"
'. ,ruthfulness"
:. Erivacy"
;. Freedom of conscience"
I. Free speech"
5. Erivate property
T& Basic Ri'hts
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! #siti-e !i'ht# ! right to receive something.
,he right to well-being is a positive right. ,o honor a positive right ?someone has to
provide something. For instance" providing health care when the well-being of a
person is affected by illness or in&ury.
! ne'ati-e !i'ht # ! right not to be interfered with.
,he right to liberty is a negative right" the right not to have ones freedom interfered
with. It is negative because ?no one has to do anything to honor it. ,hus one has
the negative right to refuse treatment" and forcing treatment on someone who
declines it would be to violate his or her autonomy.
The The!ies $ Bustice
!ssociated with issues of rights" fairness" and Quality
! &ustice act respects your rights. ! &ust act treats you fairly. Erinciples of
&ustice may be divided into three types-
@ist!i(uti-e Eustice
Betributive &ustice and compensatory &ustice
@ist!i(uti-e Bustice
.ociety has many benefits and burdens that must be distributed among its
members G +enefits include income" wealth" &obs" education and leisure.
+urdens include work" taxes and social and civic obligations. ,he allocation of
benefits and burdens raises 1uestions of distributive &ustice. !llocation can
be made on the basis of#
)a* (. E1ual shares to each person"
)b* '. +ased on need"
)c* :* +ased on effort"
)d* ;. +ased on merit"
)e* I. +ased on social contribution.
7ost proponents agree that e1uals should be treated e1ually and une1ual should be
treated une1ually in proportion to the degree of their ine1uality. ,his ine1uality must
be based on relative differences among the parties. ,his concept is referred to as
the formal principle of &ustice
7(8 Ret!i(uti-e Bustice
Betributive &ustice is concerned with retribution or punishment for wrongdoing.
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,he 1uestions are when it &ust to punish someone is and what should be the
nature punishment.
!ccording to !ristotle" a person is morally responsible G for his actions unless
he has been forced to take.
,hat action or is ignorant of the acts negative conse1uences.
! person should not be held responsible If he is unable to halt the
wrongdoing due to personal inade1uacy or powerful external forces. Must
punishment must also fit the crime.
,he severity of punishment should be in proportion to the magnitude of the
crime.
c8 C%#ensat!" Bustice9
>ompensatory &ustice is concerned with compensating the party in&ured by the
wrongful act.
7ost people agree that the in&ured party should be returned to the condition
that existed before the in&ury.
,his includes necessary medical treatment and services and goods that are
needed to rectify the in&ury.
,he compensation should be e1ual to the loss suffered by the in&ured party.
Dowever" problems occur when it is not possible to provide complete
compensation" for example" a life lost cannot be restored.
E'is%
.elf-centered form of ethics
,wo forms of ethical egoism# individual and universal
Indi-idual ethical e'is%
Mudges actions only by their effects on ones interests
Lsually re&ected by moral philosophers as a defensible basis of
ethics
Uni-e!sal ethical e'is%
>an include the interests of others when assessing ones
actions
.till self-centered# pursuing pleasure and avoiding pain
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?Enlightened self-interest. >onsiders the interests of others
because the person wants others to do the same toward him or
her
3b&ections raised by moral philosophers
%oes not resolve conflicts in peoples interests
3ne party would always have the pursuit of his or her interests blocked
A %!al the!" that cntends all chices eithe! in-l-e ! shuld in-l-e sel$F
#!%tin as thei! sle (Eecti-e
Ps"chl'ical E'is%
Everyone is always motivated to act in his or her own perceived self-interest.
! main argument against psychological egoism is that there may be no purely
altruistic moral motivation to help other people unless there is personal gain.
Ethical E'is%
,he only valid standard of conduct is the obligation to promote one-s own well being
above everyone else-s.
Ethical egoists believe that people should not be their brothers keeper" because
people do not completely understand the true needs of others.