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Business

ethics
DR. AARUSHI JAIN

MEANING
Ethics is a set of rules that define right and
wrong conduct.
Business ethics can be defined as written and
unwritten codes of principles and values that
govern decisions and actions within a
company. In the business world, the
organizations culture sets standards for
determining the difference between good and
bad decision making and behavior.

Introduction
Business Ethics
Publics interest in business ethics increased
during the last four decades
Publics interest in business ethics spurred by
the media

Business Ethics: What Does It Really Mean?


Business Ethics:Today vs. Earlier
Period
Expected and Actual Levels
of Business Ethics

Societys
Expectations
of Business
Ethics
Ethical
Problem
Actual
Business
Ethics

Ethical Problem

1950s

Time

Early 2000s

Introduction
Inventory of Ethical Issues in
Business

Employee-Employer Relations
Employer-Employee Relations
Company-Customer Relations
Company-Shareholder Relations
Company-Community/Public Interest

Introduction
Inventory of Ethical Issues in
Business

Employee-Employer Relations
Employer-Employee Relations
Company-Customer Relations
Company-Shareholder Relations
Company-Community/Public Interest

Business Ethics: What Does It


Really Mean?

Definitions
Ethics involves a discipline that examines

good or bad practices within the context of a


moral duty
Moral conduct is behavior that is right or
wrong
Business ethics include practices and
behaviors that are good or bad

Business Ethics: What Does It


Really Mean?

Two Key Branches of Ethics


Descriptive ethics involves describing,

characterizing and studying morality


What is

Normative ethics involves supplying and

justifying moral systems


What should be

Ethics and the Law


Law often represents an ethical minimum
Ethics often represents a standard that

exceeds the legal minimum


Frequent Overlap

Ethics

Law

ETHICS (Cont)
Ethics means norms for the conduct of people

in social groupings.
Ethics is derived from Greek Word Ethos
which means culture the prevalent
behaviour in the society. Thus, it is a code of
conduct which has social acceptance.

Example of Ethics
Tatas have been at the forefront in establishing

and financing various institutions of social and


national relevance like Tata Institute of
Fundamental Research, Tata Institute of Social
Sciences, Tata Cancer Hospital, IISc and so on.
Tatas have no legal commitment to invest such
huge sums in these esteemed centres of social
and national cause. And yet they do it out of
corporate ethics of considering it as their pay
back to society.

Making Ethical Judgments


Behavior or act
that has been
committed

compared with

Prevailing norms
of acceptability

Value judgments
and perceptions of
the observer

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Ethics, Economics, and Law

13

ETHICS
Owners/Shareholders - Expect good return on
their investment
Employees - Expect respect for their worth &
devoting their energies to firm
Customers - Expect reliable, safe product or
service at fair prices
Suppliers - Expect equitable relationship with
firm
Community - Expect businesses to be good
citizens in their community

WHY UNETHICAL BUSINESS?


One-Time Product Sale - The product sold is a one
time sale and the life cycle of the product is such that
it will be sold to many people before bad word of
mouth kills the product. An example of this might be
Tourist traps e.g. restaurants in tourist locations.
There is always another new customer coming along.
Durable Goods - The quality of the product is poor,
but does not show up for some time. During the
period of adequate performance, people continue to
buy. This tends to be an issue with durable products
like consumer electronics, equipment, housing, etc.

WHY UNETHICAL BEHAVIOR

Survival Instincts - A company when faced with


basic survival issues due to competitive pressures
of various kinds is most likely to set aside ethics.
Hubris/Greed - Perhaps the most remarkable
examples of unethical behaviour are the situations
where the senior management team is making
remarkably high amounts of money and they go
even further into excess. Example: In US, Adelphia
Communications (Founder John Rigas was found
guilty of siphoning off USD 2.3 billion from
company and has been jailed for 30 years) and
Tyco International (whose CEO Dennis Kozlowski
was found guilty of stealing over USD 150 million
from the company)

BUSINESS ETHICS
BUSINESS ETHICS
principles and standards that
determine acceptable conduct in
business organizations
ETHICAL ISSUE
an identifiable problem, situation, or
opportunity that requires a person to
choose from among several actions
that may be evaluated as right or
wrong, ethical or unethical

REASONS WHY SHOULD


ORGANIZATIONS BE ETHICAL
There are good business reasons for a
strong commitment to ethical values:
1. Ethical companies have been shown to
be more profitable.
2. Making ethical choices results in lower
stress for corporate managers and other
employees.
3. Our reputation, good or bad, endures.
4. Ethical behaviour enhances leadership.

3 Models of Management Ethics

Three Types Of Management Ethi

Moral

Amoral

Immoral

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Amoral vs. immoral


Immoralmeanscontrary to established
moral principles. Immoral actions are
corrupt,
unethical,
sinful,
or
just
wrong.Amoralmeans (1)neither moral
nor
immoral,or
(2)lacking
moral
sensibility.
So
whileimmoralandamoralmight share a
little common ground, there is a clear
distinction: immoral things are bad, and
amoral things are either neutral from a
moral perspective or simply removed from
moral considerations.

3 Models of Management Ethics


1. Moral ManagementConforms to high

standards of ethical behavior.


2. Immoral ManagementA style devoid of

ethical principles and active opposition to what


is ethical.
3.

Amoral Management
Intentional - does not consider ethical factors
Unintentional - casual or careless about

ethical considerations in business


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Developing Moral Judgment

6-23

What is Ethical Behavior?


In many situations lines between right and wrong are blurred.

Such situations can lead to ethical dilemmas.


When faced with ethical dilemmas, its important to consider
outcomes of the decision-making process. One way of dealing
with ethical dilemmas is by using the four way test to evaluate
decisions. This test involves asking four questions:

Is my decision a truthful one?

Is my decision fair to everyone affected?

Will it build goodwill for the organization?

Is the decision beneficial to all parties


who have a vested interest in the
outcome?

WHO IS RESPONSIBLE FOR


CREATING ETHICS IN AN
ORGANIZATION ?
A companys managers play an important role in

establishing its ethical tone.


If managers behave as if the only thing that
matters is profit, employees are likely to act in a like
manner.
The companys leaders are responsible for setting
standards for what is and is not acceptable
employee behavior.
Its vital for managers to play an active role in
creating a working environment where employees
are encouraged and rewarded for acting in an
ethical manner.

Other Factors Impacting Organizational Ethics


Corporate culture
Existence and application of a written code of ethics
Formal and informal policies and rules
Norms for acceptable behavior
Financial reward system
System for recognizing accomplishment
Company attitude toward employees
How employees are selected for promotions
Hiring practices
Applications of legal behavior
Degree to which professionalism is emphasized
The companys decision making processes
Behaviors and attitudes of the organizations

7 Principles of Admirable Business


Ethics
1.
2.
3.
4.
5.
6.
7.

Be Trustful
Keep An Open Mind
Meet Obligations
Have Clear Documents
Become Community Involved
Maintain Accounting Control
Be Respectful

Stakeholder Versus Shareholder

Shareholder Perspective
Those who approach

ethical decision making


from a shareholder
perspective focus on
making decisions that are
in the owners' best
interest. Decisions are
guided by a need to
maximize return on
investment for the
organizations
shareholders.

Stakeholder Perspective

Stakeholders may

include: employees,
suppliers, customers,
competitors, government
agencies, the news
media, community
residents and others. The
idea behind stakeholder
based ethical decision
making is to make sound
business decisions that
work for the good of all
affected parties

Overview of issues in business


ethics

Corporate social

responsibility
Fiduciary responsibility,
stakeholder concept v.
shareholder concept
Industrial espionage.

General business ethics


Ethics of human resource management
Ethics of sales and marketing
Ethics of production
Ethics of intellectual property,

knowledge and skills

IMPORTANCE OF ETHICS

IMPORTANCE OF BUSINESS ETHICS


Public expects business to exhibit high levels of

ethical performance and social responsibility.


Encouraging business firms and their
employees to behave ethically is to prevent
harm to society.
Promoting ethical behavior is to protect
business from abuse by unethical employees or
unethical competitors.
High ethical performance also protects the
individuals who work in business.

Coke & Pepsi in India

Today, more from the world of


product safety. This time the story
is about Coke and Pepsi, and
allegations that the versions of
their products manufactured in
India contain unacceptably high
levels of pesticides.
Worlds biggest brand names,
known for wooing customers
around the world, are facing a
credibility crisis in one of their
crucial emerging markets.

Developing Moral Judgment


External Sources of a
Managers Values
Religious values
Philosophical values
Cultural values
Legal values
Professional values

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Developing Moral Judgment


Internal Sources of a
Managers Values
Respect for the authority structure
Loyalty
Conformity
Performance
Results

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Elements of Moral Judgment


Moral imagination
Moral identification and ordering
Moral evaluation
Tolerance of moral disagreement and

ambiguity
Integration of managerial and moral
competence
A sense of moral obligation

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RELIGIOUS VIEWS
ON BUSINESS
ETHICS

SWAMI VIVEKANAND VIEWS ON


ETHICS
THE BASIS OF INDIAN
SUBJECTIVITY LIES IN
THE BELIEF OF GOD.
HE SUGGESTED THE
FUNDAMENTAL LAW OF
ETHICS
DONT INJURE
OTHERS, LOVE
EVERYONE AS YOUR
OWNSELF UNIVERSE IS
ONE

In order to win the game, you need to plan. To

plan information is imperative. Get it through


legal & ethical means.
In life and business
ETHICAL STANDARD MUST BE SET,
ETHICAL STANDARD MUST BE MET.

CONCLUSION
Ethics are important not only in
business but in all aspects of life
because it is an essential part of
the foundation on which of a
civilized society is build. A
business or society that lacks
ethical principles is bound to fail
sooner or later.

THANK YOU