Introduction to Business Ethics

Session- I

Ethics Quiz Have you ever

read someone elses mail or e-mail? claimed a full hour at work when you were really 20 minutes late? copied music or software without paying for it? taken a cash payment or tips and forgot to claim it for taxes?

High Profile Scandals in Business

WorldCom / Enron: Accounting Fraud Pfizer: Drug Overcharging New York Times: Plagiarism NBC: Faking the evidence Walkerton: Falsifying records Satyam: Cooking the books/ Fake statements Bearing Bank: False reporting of profits

Top U.S. Ethical Issues

Improper Accounting Practices Deceptive Sales/Marketing Practices Conflicts of Interest Lying on Reports/Falsifying Records Dishonesty with Customers Lack of Public Trust in Corporate America Bribes and Kickbacks Unfair Treatment of Employees/Customers Securities and/or Bank Fraud Discrimination Producing Low-quality or Unsafe Products 0%
Source: CMO Magazine, October 2004

10%

20%

30%

40%

50%

60%

Situations leading to Ethical problems

Case I When orders dropped in any manufacturing company, the supervisor is asked to terminate a few employees to save the costs. The supervisor knows that some of them though loyal, hardworking they have to be terminated to save his skin. He also knows it is unfair to terminate the employees and still he is helpless. Even if he is given two months termination to the company, he will not reveal his plans of termination to the employees to be terminated with a fear that employees would quit while still needed or not works as hard as they usually did after being told.

 The supervisor had to enforce all company rules and policies. For him, the ethical dilemma relates to two dimensions:
Personal Professional

Case II
A senior librarian who was very casual and negligent in his attitude, had to make one of his weak assistant a scapegoat at the end of the year when library inventory was checked and nearly 500 books were short. The senior librarian knew very well that his assistant is highly loyal, sincere and honest in his work and such a thing would not happen from him. However, the reason for books lost could not be found out by him and he had to put blame on his junior who is weak and innocent. Otherwise, he had to take full blame. He tool the decision of putting blame on his juniors rather than on himself.

Cases of high level of ethical performance

Johnson & Johnson protected its customer by recalling stocks of Tylenol capsules twice within 5 years period when poison was found in some Tylenol bottles . Parker Brothers voluntarily withdrew its all time best selling toy when it found that two children were chocked to death by swallowing some of its parts which they never anticipated. Even, in India, HMT, a reputed PSU withdrew all its milk separators supplied through its diary machinery unit, Aurangabad, when it found through its diary milk separators lid at the customers end flew off while running and hit the roof. No major accident took place, In spite of this, it had to withdraw all the separators supplied to the customer for rechecking and make design changes for sometime, so that same should not repeated. Later on, HMT replaced new separators to its customers. All this was done to get customer confidence in them.

 Every day, managers and business owners make business decisions based on what they believe to be right and wrong. Through their actions, they demonstrate to their employees what is and is not acceptable behavior and shape the moral standard of the organization. Ethics are a set of moral standards for judging whether something is right or wrong.

Changing concept of Business

The term business is commonly referred to the commercial activities achieved at making profit. But gradually there is a substantial change in the way in which people viewed the business. In the past primary objective of a business was profit maximization but the present perspectives on business objectives is not maximization of profit but increasing thrust on social responsibility .

Ethics Defined
Ethics is relating to morals, treating of moral questions, morally correct, honourable. It is the study of morals and moral choices. It focuses on standard, rules and codes of conduct that govern the behaviour of individuals and group. It is the science of morals; it is that branch of philosophy, which is concerned with human character and conduct. It is treatise on morals (capable of knowing right and wrong).

Meaning of Ethics..
Ethics refer to code of conduct that guides an individual while dealing in a situation. It relates to social rules that influences people to be honest in dealing with the other people. Ethics are the moral principles and values that govern the actions and decisions of an individual or group. They serve as guidelines on how to act rightly and justly when faced with moral dilemmas.

 Reflection in a companys operations of the values and moral principles used in the communities in which they operate. Successful markets and corporate performance are founded on a commitment to basic ethical principles aligned as much as possible to the interests of individuals, corporations and society.

 Ethical standards may be expressed in a companys formal conduct requirements, or contained in generally stated principles that guide a companys preferred conduct or behavior. Most companies have put in place a code of ethics for its employees to conduct themselves in a particular manner while doing business. One of the major social challenge faced by business is to balance ethics and economics. Society wants business to be ethical and economically profitable at the same time .

Purpose of Ethics
Ethics are the guiding principles. Where the proposed business activity/ operation of the company borders on the unknown, the company needs to apply the ethics principle to decide on the project. Ethics help make relationships mutually pleasant and productive- imbibes a sense of community among members- a sense of belongingness to society

Business Ethics: What Does It Really Mean?

Ethics Today vs. The Past
Societys Expectations

Ethical Problem Actual Business Ethics

Ethical Problem

1950s

Time

Early 2000s

Business Ethics...
comprises principles and standards that guide behavior in the world of business is right or wrong, acceptable or unacceptable behavior with in the organization and it is determined by key stakeholders.

Why ethics matter in business

Ethics in business matter because there is much evidence to prove that unethical behaviour can cost a company its reputation, affect the share price and lower its profits. Commerce through corruption, administration through bribery and politics through blackmail has become rule rather than exception especially in India. These are nothing but degradation of values and professional ethics. Ethics and human values can save a soulless society from total death.

Business Ethics
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

Descriptive and Normative Ethics

Descriptive ethics is what is already being accepted as right or desirable or customary and the present working of an organization is judged in terms of prevailing ethical standards. Normative ethics disregard what at present is considered ethical and prescribe independently what the values or practices of an organization should be. It is basically prescription as it lays down, on some logical basis, what the operative standards should be for an organization.

 There can be a number of alternative normative ethical standards that a particular firm has before it to choose from. These could be one developed and advocated by management, owners, employees and media, public at large or the government. Normative standards depict what the different segment of society expect from the business. These expectations need not be the same, rather there may be elements of conflict which pose dilemmas for business decision making

Traditional and Extended Views of Business Ethics

Traditional view of business ethics is basically individualistic. It focuses individuals in the business organisation and for ethical lapses individuals are identifies, held responsible and dealt with. The lapses can be in form of embezzlement, dereliction of duty, misuse of official position, sexual harassment of another employee and the like. Individual lapses are identified in terms of established codes, rules, procedure and guidelines at the firm level and these norms, themselves , may not as such conform to ethical standards.

Extended View..
In the expanded view, ethical aspects of the proposed or planned actions at the firm level influence managerial decision making. At the various level of management hierarchy, employees are sensitized and motivated to take decisions keeping in view the ethical dimensions of the decisions. Thus, ethics become integral part of management strategy. The extent to which ethical considerations are involved in day to day managerial decision making would be determined by the philosophy of the top management. Integration of ethics into managerial decision making is termed as institutionalization of ethics.

Model of Ethics
Ethical guidance sources Leading to Our belief What is right Or wrong Our actions

Determine

Type I Ethics

Type II Ethics

 A person or organization is ethical if these relations ( combined together ) are strong and positive. Sources of ethical guidance should lead to our beliefs or convictions about what is right or wrong. People have responsibility to avail themselves of these sources of ethical guidance Individual should take care about what is right and wrong and not just be concerned with what is expedient.

 The strength of the relationship between what an individual or an organization believes to be moral and correct and what available sources of guidance suggest is morally correct is Type I ethics Example A student copies in the examination , though everyone condemns this practice. This student is unethical, but perhaps only in a type I (here student is believes it is acceptable to copy another student s paper in the examination)

 Simply having strong beliefs about what is right and wrong and basing them on the proper sources may have little relationship to what one does. Type II ethics is the strength of relationship between what one believes and how one behaves. Everyone would agree that to do what one considers wrong is unethical.

Example
A student knows it is wrong to look at anothers examination answer sheet but does so. The student is being unethical in a type II sense.

What ethical performance means.

Ethical business performance means adhering to societys basic rules that define right and wrong behaviour. Business meets:
Public expectations Prevent social harm Protects itself from abuse by employees and other firms Preserves the dignity and integrity of individuals who work in business.

Remember Law and ethics are not identical. Ethical rules tend to be broader and more basic than laws, and general public wants business to act ethically as well lawfully.

Conventional Approach to Business Ethics

Conventional approach to business ethics involves comparing a decision or practice to prevailing societal norms

Decision or Practice Prevailing Norms

31

Sources of Ethical Norms

The Individual

Fellow Workers

Conscience

Regions of Country

Family

Profession

Ethical Behaviour
Friends Employer

The Law

Religious Beliefs

Society at Large

Sources of Ethics
1.Genetic Inheritance : the qualities of goodness is a product of genetic traits strengthened over time by the evolutionary process. 2. Religion : religious morality is clearly a primary focus in shaping our societal ethics.

3. Philosophical Systems : the quality of pleasure to be derived from an act is the essential measure of its goodness.
4. Cultural Experience : individual values are shaped in large measure by the norms of the society. 5. The legal system : laws represent a rough approximation of societys ethical standards.

Forces That Shape Managerial Ethics

Personal Ethics Organizational Culture

Beliefs and Values Moral Development Ethical Framework

Organizational Systems

Is Decision or Behavior Ethical and Socially Responsible?

Rituals, Ceremonies Stories, Heroes Language, Slogans Symbols Founder, History

External Stakeholders

Structure Policies, Rules Code of Ethics Reward System Selection, Training

Government Regulations Customers Special Interest Groups Global Market Forces

34

Characteristics of Business Ethics

Ethical decisions differ with individual perspective of different persons. Each person views the ethical question in terms of his or her own frame of reference. And this frame of reference is the persons own unique value system. Ethical decisions are not limited only to themselves, but affects a wide range of other situations as well. Similarly, unethical decisions do not end in themselves, but have widespread ramifications. Most ethical decisions involve a tradeoff between cost incurred and benefits received. Cost and benefits, profits and social responsibilities are different ends of a single spectrum. All cannot be maximized simultaneously

Characteristics of Business Ethics

The consequences of most ethical or unethical decisions are not clear. The only certainty is that somewhere, sometime, somehow, something positive will result from an ethical decision and something negative from unethical one. Every person is individually responsible for the ethical or unethical decision and action that he or she takes. Taking an ethical decision cannot be an impersonal activity as it involves the persons individual unique value system along with his moral standards. Ethical decisions are voluntary human actions. A person cannot escape his personal liability for his crimes citing force of circumstances or pressure.

Ethics will be different at different levels

At the basic level, it is about discipline, i.e.. To maintain punctuality, coming to work on time, behaving properly with superiors, colleagues and subordinates and not wasting time during working hours. At the top level, it is about commitment and Protecting the interests of the organization.

Value Definition
Basic convictions that a specific mode of conduct or end-state of existence is personally or socially preferable to an opposite or converse mode of conduct or end-state of existence.

Features.. Basic convictions about what is right and wrong. Influence ethical behaviour Values are developed in early years

Importance of Values
Provide understanding of the attitudes, motivation, and behaviors of individuals and cultures. Influence our perception of the world around us. Represent interpretations of right and wrong. Imply that some behaviors or outcomes are preferred over others.

Value System
A value system is a set of consistent ethic values (more specifically the personal and cultural values) and measures used for the purpose of ethical or ideological integrity. A well defined value system is a moral code. The value-related features that characterize particular people, groups and societies are not the individual value judgments that they hold but rather their value systems. A value system may be defined as an abstract collection of value judgments held by a person or a group regarding the various values involved in a phenomenon.

Value Systems
Within a value system, value judgments do not exist independently of each other; they are interrelated through interactions and conflicts. The conflicts that exist between quality judgments and economic interests are very real examples.

Personal and communal

One or more people can hold a value system. Likewise, a value system can apply to either one person or many. A personal value system is held by and applied to one individual only. A communal or cultural value system is held by and applied to a community/group/society. Some communal value systems are reflected in the form of legal codes or law.

Terminal & Instrumental Values

Desirable end-states of existence; the goals that a person would like to achieve during his or her lifetime. Preferable modes of behavior or means of achieving ones terminal values.

Terminal Values

Instrumental Values

Values, Loyalty, and Ethical Behavior

Ethical Values and Behaviors of Leaders

Ethical Climate in the Organization

Universal or Core Ethical Values

Trustworthiness, respect, responsibility, fairness, caring, and citizenship are six core ethical values. Using core ethical values as the basis for ethical thinking can help detect situations where we focus so hard on upholding one value that we sacrifice another e.g. we are loyal to friends and so do not always tell the truth about their actions.

Trustworthiness
Trustworthiness concerns a variety of behavioral qualities honesty, integrity, reliability and loyalty.

Honesty There is no more fundamental ethical value than honesty. We associate honesty with people of honour, and we admire and trust those who are honest. Honesty in communications is about intent to convey the truth as best we know it and to avoid communicating in a way likely to mislead or deceive. There are three dimensions: 1. Truthfulness truthfulness means not intentionally misrepresenting a fact (lying). Intent is the crucial distinction between truthfulness and truth itself. Being wrong is not the same thing as being a liar, although honest mistakes can still damage trust. 2. Sincerity/non-deception a sincere person does not act, say half-truths, or stay silent with the intention of creating beliefs or leaving impressions that are untrue or misleading. 3. Frankness In relationships involving trust, honesty may also require us to volunteer information that another person needs to know.

 Honesty in conduct prohibits stealing, cheating, fraud, and trickery. Cheating is not only dishonest but takes advantage of those who are not cheating. Its a violation of trust and fairness. Not all lies are unethical, even though all lies are dishonest. Occasionally dishonesty is ethically justifiable, such as when the police lie in undercover operations or when one lies to criminals or terrorists to save lives. But occasions for ethically sanctioned lying are rare - eg saving a life. Integrity There are no differences in the way an ethical person makes decisions from situation to situation - no difference in the way they act at work and at home, in public and alone. The person of integrity takes time for self-reflection so that the events, crises and the necessities of the day do not determine the course of their moral life. They stay in control.

Reliability When we make promises or commitments to people our ethical duties go beyond legal obligations. The ethical dimension of promise-keeping imposes the responsibility of making all reasonable efforts to fulfill our commitments. It is also important to: 1. Avoid bad-faith excuses Honourable people don't rationalize noncompliance or create justifications for escaping commitments.

2. Avoid unwise commitments Before making a promise consider carefully whether you are willing and likely to keep it. Think about unknown or future events that could make it difficult, undesirable or impossible to keep your commitment. Sometimes, all we can do is promise to do our best. 3. Avoid unclear commitments Since others will expect you to live up to what they think you have promised to do, be sure that, when you make a promise, the other person understands what you are committing to do.

Loyalty Loyalty is about promoting and protecting the interests of certain people, organizations or affiliations. Some relationships husband-wife, employeremployee, citizen-country create an expectation of loyalty. Prioritizing Loyalties. Because so many individuals and groups make loyalty claims on us, it is often impossible to honor them all simultaneously. Consequently, we must rank our loyalty obligations in some rational fashion. In our personal lives, for example, its perfectly reasonable, and ethical, to look out for the interests of our children, parents and spouses even if we have to subordinate our obligations to other children, neighbors, or coworkers in doing so. Safeguarding Confidential Information. Loyalty requires us to keep secrets or information learned in confidence. Avoiding Conflicting Interests. Employees and public servants have an additional responsibility to make all professional decisions on merit not personal interests. Their goal is to maintain the trust of the public.

RESPECT
Respect is about honoring the essential worth and dignity of all people, including oneself. We are morally obligated to treat everyone with respect, regardless of who they are and what they have done. We have a responsibility to be the best we can be in all situations, even when dealing with unpleasant people. Respect focuses on: Civility, Courtesy and Decency - A respectful person is a good listener. The respectful person treats others with consideration, conforming to accepted notions of taste and propriety, and doesnt resort to intimidation, coercion or violence except in extraordinary and limited situations to teach discipline, maintain order or achieve social justice. Tolerance - An ethical person accepts individual differences and beliefs and judges others only on their character.

RESPONSIBILITY
It means being accountable for what we do and who we are. It also means recognizing that what we do, and what we dont do, matters. Accountability An accountable person is not a victim and doesnt shift blame or claim credit for the work of others. Pursuit of Excellence The pursuit of excellence has an ethical dimension when others rely upon our knowledge, ability or willingness to perform tasks safely and effectively. Diligence. Responsible people are reliable, careful, prepared and informed. Perseverance. Responsible people finish what they start, overcoming rather than surrendering to obstacles and excuses. Continuous Improvement. Responsible people look for ways to do their work better. Self-Restraint Responsible people exercise self-control, restraining passions and appetites (such as lust, hatred, gluttony, greed and fear). They delay gratification if necessary and never feel its necessary to "win at any cost."

FAIRNESS
Fairness is a tricky concept. Disagreeing parties tend to maintain that there is only one fair position - their own. But while some situations and decisions are clearly unfair, fairness usually refers to a range of morally justifiable outcomes rather than discovery of one fair answer. Process A fair person uses open and unbiased processes for gathering and evaluating information necessary to make decisions. Fair people do not wait for the truth to come to them; they seek out relevant information and conflicting perspectives before making important decisions. Impartiality Decisions should be unbiased without favouritism or prejudice. Equity It is important not to take advantage of the weakness, disadvantage or ignorance of others. Fairness requires that an individual, company, or society correct mistakes, promptly and voluntarily.

CARING
Caring is the heart of ethics. It is scarcely possible to be truly ethical and not genuinely concerned with the welfare others. That is because ethics is ultimately about our responsibilities toward other people.

CITIZENSHIP
The concept of citizenship includes how we ought to behave as part of a community. The good citizen knows the laws and obeys them - but they also volunteer and stay informed on the issues of the day. Citizens do more than their "fair" share to make society work, now and for future generations. Citizenship can have many expressions, such as conserving resources, recycling, using public transportation and cleaning up litter.

Creating the Ethical Imperative

Written code of ethics Employee commitment Employee training Discipline process Full disclosure Building expectations Resolution process conflict management

THE INFOSYS MODEL

A formal code of business conduct and ethics. To be signed and adhered to by employees. Action against any employee for violation thereof.

General standards of conduct Management of conflicts of interest Prohibition of exploitation of corporate opportunities Protection of companys confidential information Obligations under securities laws Use of assets An entire section on responsibilities to customers and stakeholders.

Factors affecting ethical behaviour

Factors Influencing Ethics

Individual Organizational Environmental

Factors influencing ethical behavior include:

The person
Family influences, religious values, personal standards, and

personal needs.
The organization
Supervisory behavior, peer group norms and behavior, and

policy statements and written rules.

The environment
Government laws and regulations, societal norms and

values, and competitive climate in an industry

 Individual business ethics are shaped by personal choices and the environments in which we live and work. In addition, the laws of our society are guideposts for choosing between right and wrong. Justice influences individual business ethics. Justice is what is considered fair according to the prevailing standards of society. One of the philosophies that may influence choices between right and wrong is utilitarianism, which focuses on the consequences of an action taken by a person or organization. The notion that people should act so as to generate the greatest good for the greatest number is derived from utilitarianism. However, when an action affects the majority adversely, it is morally wrong.

 The philosophy that says people should meet their obligations and duties when analyzing an ethical dilemma is called deontology. This means that a person will follow his/her obligations because upholding ones duty is what is considered ethically correct. Individuals and groups have certain rights that exist under certain conditions regardless of any external circumstances. These rights serve as guides when making individual ethical decisions.

Legal rights include

freedom of religion, speech and assembly Protection from improper arrest, searches and seizures Proper access to counsel, confrontation of witnesses Cross-examination in criminal prosecutions Right to privacy in many matters Rights applied without regard to race, color, creed, gender, or ability

Developing an Internal Ethical Environment

It is a long term process in business An ethical environment is not only a social responsibility but also a requirement to generate goodwill assets which have their own returns in financial as well as non- financial forms. An firm enjoying goodwill and reputation is able to attract talented human resources, borrow more cheaply and on good credit terms from the market and enter into business contracts more easily as compared to others. It even enjoys a better government , public and consumer support.

Developing contd.
Developing an ethical environment requires a sustained effort and a key role of Top management. There are four major sources from where the ethical values are derived- religion, philosophical system, cultural experience and the legal system. These values are derived both at individual and corporate level.

 Personal ethical values are a great contributor to the corporate ethical values. Most professionally managed organizations make efforts to preserve an ethical climate through long- term ethical programmes in order to maintain goodwill assets and protect them against avoidable litigations.

Salient Features of Corporate ethical programme

The main features of a business ethical programme are as follows: Top Management Commitment Ethical code Communication System Enforcement

Top Management Commitment

It is an indispensable component of an ethical programme. Role of top management is provide continuous leadership in establishing and maintaining internal ethical environment. To encourage the adoption of ethical practices by others, top managements often institute a system of incentives and rewards.

Ethical Code
Nearly all corporate organizations known for ethical practices have a well- published code of ethics. The code describes the principles and rules of conduct and behaviour and lists the practices that are desired and that are prohibited.

Communication System
It is essential to have good communication system between management and other employees. Communication is both downstream ( from management to employees) to communicate messages concerning ethical practices and upstream from employees to managers to provide feedback.

Enforcement
Enforcement of ethical standards is required as all the employees may not voluntarily adopt such standards. Corporation keen to maintain an internal ethical environment institute systems of both incentives and disincentives to encourage the employees to adopt recommended rules of conduct. These measures are designed both to prevent the malpractices and punish the wrongdoers.

Ethical Issues

Relations between Business Ethics and Social Responsibility

Business Ethics: The moral principles and standards that define acceptable conduct in business Social Responsibility: A businesss obligation to maximize its positive impact and minimize its negative impact on society

The Pyramid of Ethics and Social Responsibility

Three Major Ethical Issue Categories

1. Conflicts of interest 2. Dishonesty & Dishonest Communications 3. Business relationships

 Individuals make a difference Development of individual ethics:

The New Ethical Environment

Stages of Moral and Ethical Development

2-79

The New Ethical Environment

Common Business Ethical Challenges

2-80

 On-the-Job Ethical Dilemmas

Conflict of Interestsituation in which a business decision may be influenced for personal gain. Honesty and Integritytelling the truth and adhering to deeply felt ethical principles in business decisions.

2-81

 On-the-Job Ethical Dilemmas

Loyalty vs. Truthbusinesspeople expect their employees to be loyal and truthful. But ethical conflicts may arise. Whistle blowingemployees disclosure to government authorities or the media of illegal, immoral, or unethical practices in the organization.

2-82

THE NEW ETHICAL ENVIRONMENT

High profile investigations and arrests in headlines. Vast majority of businesses ethical. New corporate officers charged with deterring wrongdoing and ensuring ethical standards.

1.Conflict of Interest
A conflict of interest exits when a person must choose whether to advance his or her own personal interests or those of others. To avoid conflict of interest, employees must be able to separate their personal financial interests from their business dealings.

2. Dishonesty
Is all dishonesty wrong? Ex: Girlfriend tells you she loves her new dress, but asks: Does this make me look fat?

General Forms of Dishonesty

Lying with intent to deceive Car salesman tells customer SUV gets 50 mpg Why is salesman lying? Omitting the truth with intent to deceive Car company knows their SUV flips easily does not tell anyone or do anything Why not do something?

3. Business Relationships
Businesspeople must be ethical toward their customers, suppliers, and others in their workplace. Managers have special responsibility regarding setting an ethical tone If manager is dishonest OR allows/rewards dishonesty

Major Corporate Stakeholders

5 Ps of ethical decision making

Priority

Principles

People

Possibilities

Problem

Framework for ethical decision making

Problem
What exactly is the ethical issues? What are the relevant facts?

Possibilities
What are the alternatives open to us?

People
Who are the stakeholders? For each alternatives what are the likely consequences- and risk for respective stakeholders?

Principles
What do we owe the various stakeholders What are various laws, industry standards, professional codes, organizational norms , accepted ethical principles and personal integrity?

Priority
Which alternative(s) most reasonably balance(s) competing obligations? Which one(s) would be most defensible publicly?

Four views of ethical behavior

Views on Ethical behaviour

Utilitarian view of ethicsgreatest good to the

greatest number of people. Individualism view of ethicsprimary commitment is to ones long-term self-interests. Moral-rights view of ethicsrespects the fundamental rights of all people. Justice view of ethicsfair and impartial treatment of people according to rules and standards.

Factors affecting ethical behaviour in business

Public Awareness Laws and Statutory controls. MRTP, FEMA , Consumer Protection Act, Environment Protection Act etc. Government Policies Active role of communication media Birth of consumerism Business Education and Professionalisation. Efforts by Business Associations- FICCI, ASSCOCHEM, CII etc. Development of buyers market

Factors contd
Awareness of social responsibility Public disclosure Inspiration from Leaders Pressure from top executives

Measures / techniques to improve ethics in business

There are number of measures to motivate the businessman for ethical conduct in business. These measures are classified into following categories: Institutional Level Government Level Social and Religious Level

Institutional Level
Ethical Code of conduct Ethics Committee Ethics Specialists Social Audit Ethical Training Exemplary conduct Transparency in working Appointment of professionals Penalties

Government Level
Clear cut policies and working procedures Removal of excessive control Enactment and enforcement of laws Strict penalty provisions Political discipline

Social and Religious Level

Social boycott of unethical acts Efforts by business associations Efforts by social service institutions Preaching by religious preachers

Individual Ethics in Organisation

Ethics are an individuals personal beliefs about whether a behaviour, action, or decision is right or wrong. Three important implications of the definition are: First, ethics are defined in the context of the individuals people have ethics, organisations do not. Second, what constitutes ethical behavior varies from one person to another.

 Third, although ethical behaviour is in the eye of the beholder, it usually refers to behaviour that conforms to generally accepted social norms.

Managerial Ethics
Are the standards of behaviour that guide individual manager in their work. There are three areas of special concern for managerial ethics: Relationship of the firm to the employees Relationship of the employees to the firm Relationship of the firm to other economic agent. Managers need to approach each set of relationships from an ethical and moral prescriptive

How the organisation treats its employees

Hiring and Firing Rules Wages and working conditions Privacy

How Employees treat the organisation

Conflict of Interest
Occur when a decision potentially benefits the individual to the possible detriment of the organisation

Secrecy Honesty and expense accounts

How the Organisations treats with economic agents

Customers Competitors Stockholders Suppliers Dealers Unions

Ethics in an Organisation Context

It is vital to note that ethical or unethical actions by particular managers do not occur in a vacuum. Indeed, most often occur in an organizational context that is conducive to them. Actions of peer managers and top managers, as well as the organization's culture, all contribute to the ethical context of the organisation.

Code of Ethics
A code of ethics is a formal statement of the companys values concerning ethics and social issues. It communicates to employees what the company stands for. Codes of ethics tend to exit in two types: principle based statements and policy based statements.

A code of ethics.
A formal expression of your ethical commitments and responsibilities Tells the world what the organisation considers its obligations to be Tells staff what you expect of them Guides them in what to do when they face ethical dilemmas Helps ensure that employee behaviour is consistent within the organisations values

Why have a code of ethics?

To define acceptable behavior To promote high standards of practice To provide a benchmark for self-evaluation To establish a framework for professional behavior and responsibilities

As a mark of occupational maturity

Principle based Statements

principle based statements are designed to affect corporate culture; they define fundamental values and contain general language about company responsibilities, quality of products and treatment of employees. General statements are often called corporate credos. Example: Johnson & Johnsons The Credo and Hewlett- Packards The HP Way

Policy Based Statements

Generally outline the procedure to be used in specific ethical situations. These situations include marketing practice, conflicts of interest, observance of laws, proprietary information, political gifts and equal opportunities. Example : Boeings Business Conduct Guidelines and Nortons Norton Policy on Business Ethics.

 Code of ethics state the values or behaviour that are expected and those that will not be tolerated, backed up by managements action. When top management supports and enforces these codes of ethics, including rewards for compliance and discipline for violation, ethics codes can uplift a companys ethical climate. When top management doesnt support them, ethics codes are worth little more than the paper on which theyre written.

A Code of Ethics Content May Address the following:

Honesty Adherence to the law Product safety and quality Health and safety in the workplace Conflicts of interest Employment practices Staffing and marketing practices Financial reporting Pricing, billing, and contracting Trading in securities/using confidential information Acquiring and using information about competitors Security Payments to obtain bonuses Protection of the environment

How Organizations Shape Ethical Conduct

Structure of an Ethical Environment

2-113

 Ethical Awareness
Code of Conducta formal statement that defines how the organization expects and requires employees to resolve ethical questions.

Ethical Reasoning
Codes of conduct cannot detail a solution for every ethical situation. So corporations provide training in ethical reasoning.

2-114

 Ethical Action
Helping employees recognize and reason through ethical problems and turning them into ethical actions.

Ethical Leadership
Executives must demonstrate ethical behavior in their actions.

2-115

Three Factors that Influence Business Ethics

 Whistle blowing occurs when an employee exposes an employers wrongdoing to outsiders, such as the media or government regulatory agencies. However, more companies are establishing programs to encourage employees to report illegal or unethical practices internally so that they can take steps to remedy problems before they result in legal action or generate negative publicity. Unfortunately, whistleblowers are often treated negatively in organizations.

Important Ethical principles that a business should follow

Do not deceive or cheat the customers by selling substandard or defective products by under measurement or any other means. Example Textile merchants in general clear the defective stock under the guise of discounts.

 Do not report to hoarding, black marketing or profiteering. EXAMPLE: Management of theaters sell the tickets for higher prices during the initial days of release of a film starred by a crazy hero and heroine.

 Do not destroy or distort competition. Treasure sincerity and accuracy in advertising, labeling and packaging. Do not furnish the image of competitors by unfair practices. EXAMPLE: Publishing false information about competitors, bribing the retailers etc.

 Make accurate business records so that transparency to the share holders can be achieved. Pay taxes and discharge other obligation promptly. Do not form castle agreements, even informal, to control production, prices etc to the common detriment. Example
cellular network providers will be in informal castle agreements to control the traffic.

 Refrain from secret kick backs or pay logs to customers, suppliers, administrators, politicians etc. Ensure payment of fair wages and fair treatment to the internal customers as well as external customers and share holders.

Reading Books
Managing values and beliefs in organisationsTom McEwan- Financial Times & Prentice Hall Business Ethics ( A Stakeholders and Issues Management Approach) Joseph W. Weiss Thomson, South- Western Business Ethics C.S.V Murthy APH Publishing House