Ethics in Business

and
Corporate Governance

S K MANDAL
Developed by: Anubhuti Jain

CHAPTER 1
2

INTRODUCTION TO ETHICS
AND ITS APPLICATION TO
BUSINESS

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Ethics in Business and Corporate Governance

INTRODUCTION
3

Our acts or responses to a situation practically reflect

our feelings, thinking and judgment based on our moral
principles and values.
The ultimate aim of ethical behaviour and practice is to
feel satisfied (and not necessarily justified) about ones
conduct and behaviour or action and its outcome.
Acting in keeping with ones ethics involves making an
effort to know the possible consequences of ones
action and, then, to be sure that the action is to his or
her satisfaction.

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Ethics in Business and Corporate Governance

Ethics
4

Ethics is a system of moral principles and

attitude that guides our actions to be morally
correct, fair and just.
Ethics is about enforceable morality, justice and
fairness of conduct, actions and governance by
individuals,
institutions,
companies,
organisations, societies and governments.
However, ethics are not the law unto itself nor are
they instruments parallel to the laws of the land.
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Ethics in Business and Corporate Governance

Morality
5

Morality and morality

yardsticks of ethics.
Morality is the subject
investigates through a
reasoning.

of

actions

are

matter that
process of

the

ethics
moral

Moral standards include those norms that we

believe are morally right or wrong as well as the
value we place on subject matters that are
morally good or bad.
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Ethics in Business and Corporate Governance

CHARACTERISTICS OF MORAL
STANDARDS
6

Moral standards deal with subject matters that

have serious implications in society, environment
and workplace, irrespective of whether the
implications are beneficial or harmful.
Moral standards are self-regulatory.
Moral standards are not guided by the selfinterest or other non-moral standards and values.
Moral standards are based on impartial
considerations.
Moral standards are self-inflicting.

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Ethics in Business and Corporate Governance

Levels of development of Moral

understanding- Kohlberg
7

Level I: Childhood Stages

Punishment and obedience orientation
Instrument and relativity orientation
Level II: Conventional Stages
Interpersonal concordance orientation
Law and order orientation
Level III: Principled Stages
Social contract orientation
Universal ethical principles orientation

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Ethics in Business and Corporate Governance

MORAL REASONING FOR

ETHICS
8

Moral reasoning tries to logically place or project facts

and figures that help one to judge human behaviour,
institutional activities, policies, programmes, etc. as to
whether they are in accordance to, or in violation of,
acceptable moral standards.
Distinct features of Moral or ethical reasoning:
identifying what constitutes moral standards;
examining facts and figures concerning the policy,
behaviour and actions under the specific situation;
and
arriving at a moral judgment on the basis of rightness
or wrongness of policy, behaviour or actions.

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Ethics in Business and Corporate Governance

Cont
9

To decide if an action or policy is ethical, one has to

exercise moral reasoning by examining the factual
information with regard to morality of the action or
policy by analyzing:
a) the utility of the decision, rights and duties of the
individuals concerned with the decision;
b) if justice is being meted out by the decision;
c) the amount of care being shown to those who are
related and valued in the subject matter; and
d) the consistency of the decision with the past and
present.

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Ethics in Business and Corporate Governance

MORAL RESPONSIBILITY
10

Moral responsibility means owning responsibility

for doing something knowingly and deliberately that
had caused harm or injury to others.
Establishing moral responsibility has the connotation
of law or rules, in addition to its ethical implications.
If any one under the circumstances acted out of (a)
ignorance or (b) inability, he or she may be excused
of moral responsibility.
However, one cannot deliberately stay ignorant and
claim innocence for a wrongdoing be it as a person
or company.

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Ethics in Business and Corporate Governance

Principles to establish Moral Responsibility

11

Ignorance of fact or consequences.

Ignorance of moral standards.

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Ethics in Business and Corporate Governance

A tentative flow sheet for Ethical Judgement

12

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Ethics in Business and Corporate Governance

HOW ETHICS WORKS IN

BUSINESS
13

Ethics, in business practices, are reflected through

the display of feelings, reasoning, deliberations and
actions of individuals in the business.
Business organisations have the moral responsibility
to ensure that their policies, practices and behaviour
(of its members) are fulfilling legal as well as moral
standards of the society and the country.
A companys actions and behaviour have to be
equally moral and responsible as that of an
individual, so as to ensure right direction and no
wrongdoing or harm to the society, employees,
investors, suppliers, etc. all of who are a part of the
business and are interested in its beneficial
objectives/outcomes.
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Ethics in Business and Corporate Governance

Cont
14

With respect to business operations to

establish if an action has been moral and
ethical - at least two aspects of business
have to be considered: (a) purpose of
business; and (b) how and who takes
decisions for the business.
Most aspects of ethics and moral behaviour
in business arise from the concept of rights,
justice and fairness of deals with respect to
its various stakeholders.
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Ethics in Business and Corporate Governance