2.

Business Ethics - some basic concepts

Many people think that Business and Ethics are two different concepts and are not inter-related Business is an economic activity based on Input and Output relationship Ethics is moral behavior of an individual and it determines what is right or wrong

Therefore Business and Ethics have nothing to do with each other. However, this does not stand to Logic

Business Ethics
Business is a part and parcel of human life and, society and business exist together Therefore business has to consider concepts and norms of good and bad developed by the society Norms of conduct which apply to common man has to be applied to the business

Business Ethics
BE Questions the morality of prevalent business practices and tries to assess and evaluate as to how far they are good and right BE Investigates the basic purpose of business and the fundamental duty of business towards the society BE Attempts to develop a self-monitoring mechanism to see that right kind of business practices prevail

Need for Business Ethics

Since business exits and operates within the society and is a part of the sub system, its function must contribute to the welfare of society (P&G, Infosys) To survive, excel and develop business must earn social sanction where it exists and functions(TATA,ITC) Business needs to remain Ethical for its own good Unethical actions and decisions yield result only in the short run (Bombay beer, Satyam)

Need for Business Ethics

TATA group an example of Ethical Business

If someone asks what holds the TATA group of companies together more than anything else, I would say it is our shared ideas and values which we have inherited from Jamshedji TATA
Once we got the people, the people shared our values and ideas. We left them free to act on their own. We encouraged them and gave them opportunities for leadership - J.R.D.TATA

Need for Business Ethics

To safeguard the interest of all stakeholders against unfair, unethical ways of dealing and exploitation To protect the following rights of consumers: Right to information Right to Safety Right to Choice Right to be heard

Need for Business Ethics

To develop or prescribe business code which provides ethical standards of suppliers, dealers, financiers and other related agencies To enable business to tackle social issues like ecology, environmental protection, consumerism, human dignity, and energy conservation To enable business to prepare and publish a code of ethics to boost confidence of all stakeholders

Principles of Business Ethics

Rule of Publicity:- People should be adequately informed about the nature, purpose & consequences of business dealings ( King fisher Airlines) Rule of Equivalent Price:- People receive the goods and services fully equivalent to the money paid (VFM) People should get the best return of their spending

There should be an element of mutual benefit Business gets the price of the Product Consumer get the satisfaction (Loyalty ladder)

The Rule of Conscience in Business

Decision of businessmen should be governed by the concern for the society, rather than selfish motives Service FIRST and Profit NEXT ( Gandhi & customer) Business should be just and human as well as efficient and dynamic Growth of the size of business must be accompanied by the growth of human values (Infosys, Microsoft ) Business should promote and support open and healthy competition

Egoism vs Altruism
EGOism: Advocates individual self interest as the

guiding principle of Business. I ought to act in the Interest of myself It states that an action is good if it produces results to maximize a persons self interest It also associates morality with self interest This theory has been criticized because it supports selfishness

Egoism vs Altruism
ALTRUISM is also known as Utilitarianism Advocates the concept of usefulness to others I ought to act in the interest of others Altruism is based on the following principles:Care Based Thinking Do what you want others to do for you Rule Based Thinking Follow your highest sense of Principles End Based Thinking Do what is best for the greatest number of people

Can Egoism be Altruism ?

Egoism tends to bring negative thoughts. But acting in the interest of yourself is not always selfish thing There is a thing called rational selfishness Doctors, social workers, humanitarians give up their time to improve the lives of less fortunate ones. They must have some self interest to carry on When someone helps a fellow human being because they enjoy the feeling it gives them, it is in fact altruism rather than egoism. The combination of the two is more realistic

Roles and Responsibilities of Entrepreneurs and Managers

Entrepreneur
An entrepreneur is a person who has possession of a new enterprise, venture or idea and assumes significant accountability for the inherent risks and the outcome Entrepreneur is one who undertakes an enterprise, especially a contractor acting as an intermediary between capital and labour

Manager
A person who identifies and achieves organizational objectives through the deployment of appropriate resources (activities, resources, information, people) A manager is a person responsible for planning, and directing the work of a group of individuals, monitoring their work and taking corrective action when necessary.

Roles and Responsibilities of Entrepreneurs and Managers

Protecting Companys Assets - tangible and intangible Behaviour towards Govt. Agencies Mgrs should not offer monetary or other gifts to any to obtain favours

Control Proper Checks and Balances Prevent of misuse of power Facilitate timely management of change Preempt and respond to change effectively

More transparency and accountability

Responsibilities towards stake holders

Any ethical organization has a responsibility to meet the needs of stakeholders Organizations must take decisions to see that stake holders enjoy the maximum benefit of that decision
e.g. in Marico, the members of Parachute oil discovered a harmless tint in the oil from one of its production lines. The company withdrew the batch from the market, shutdown production line, but kept the workers on pay roll and involved them in the investigation of the case. Shortly, workers located the cause, rectified it and resumed normal production.

Profit making an Objective with Ethical Dimension

Business Entities are designed to make profits. However, they shouldnt use unethical means to earn profit There is plenty of evidence that unethical behaviour can cost a company its reputation & reduce its stock price

On the other hand, the companies which are ethical, build trust among their stakeholders and community, and make good business in the long run (over subscribed P.issues)
Many scandals in the business had their origin in their total disregard to ETHICS ( Satyam, KFA)

Benefits from Business Ethics

It substantially improved society - Establishment of unions and other regulatory bodies have contributed to the development of the Society Discrimination and exploitation of employees reduced High Productivity and Strong Team Work It creates Strong Public Image - This leads to strong and continued loyalty of employees, consumers and general public Acts as an insurance(Future functions)