Published on March 10, 2014
3/5/2014 Introduction to Business Ethics (Part 2 ) Moral standards Person learns morality from his or her very childhood and from family, friends, society, school etc. Many a times in business tractions, one may face the conflict between legal and moral righteousness. Prof. Shirufi Purohit Prof. Shirufi Purohit 1 Supporting example 2. Moral standards deal with subject matters that have serious implications in society, environment and workplace, irrespective of whether the implications are beneficial or harmful.( eg pesticide in cold drink) Moral standards are self-regulatory.( Indian law permitting pesticide should be change or company should withdraw product) 3. 4. Moral standards are self-inflicting.( if one fails in moral standard he would feel guilty about it) Level – I: Childhood Stages ◦ Punishment and obedience orientation ◦ Instrument and relativity orientation Level – II: Conventional Stages ◦ Interpersonal concordance orientation ◦ Law and order orientation 5 4 Levels of development of Moral understandingKohlberg Moral standards are based on impartial considerations.( benefit for all and not be benefit competitors in same case) 5. Prof. Shirufi Purohit Moral standards are not guided by the self-interest or other nonmoral standards and values.( celebrity who promoted for money) Prof. Shirufi Purohit Selling a refrigerator to a customer after customers inspection and satisfaction is legally right. But still if the product dose not function as specified by seller would be immoral. 3 CHARACTERISTICS OF MORAL STANDARDS 1. 2 Supporting example 2 An employee seeks leave of absence for a medical emergency at home , even when he is not entitled to immediate leave. If the boss does not sanction the leave, he is legally right- yet morally wrong. Prof. Shirufi Purohit Prof. Shirufi Purohit Level – III: Principled Stages ◦ Social contract orientation ◦ Universal ethical principles orientation Prof. Shirufi Purohit 6 1
3/5/2014 MORAL REASONING FOR ETHICS Cont… 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. 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; ◦ Identifying what constitutes ‘moral standards’ c) ◦ examining facts and figures concerning the policy, behaviour and actions under the specific situation; and 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. Distinct features of Moral or ethical reasoning: ◦ arriving at a moral judgment on the basis of rightness or wrongness of policy, behaviour or actions. Prof. Shirufi Purohit 7 Prof. Shirufi Purohit Moral reasoning 8 Supporting case Many a times individual genuinely believes that what they are doing is unbiased and morally justified but they fail to see the expectations of the society or fail to play a fair role. Prof. Shirufi Purohit A company adverse for a position.About 470 application reached the office, 278 candidates were round appropriate. In that 163 candidate were female and 115 were male. The company decide to call 100 candidates for interview ( 50 each of gender) 9 Prof. Shirufi Purohit 10 conclusion After interview company decided to select 25 candidates- 15 female and 10 male. When the list of selected candidate when to boss for final approval, he asked so many female candidate would not be comfortable to work in night shift. Hence the list was revised 20 Male and 5 Female were finally selected. Here the boss as an Individual was bias and morally wrong Her company is also in fault as its claim equal opportunity. Here the female candidate were not even asked whether they are willing to work for night shift or not and the list was change that was wrong.( 15 to 5). Prof. Shirufi Purohit 11 Prof. Shirufi Purohit 12 2
3/5/2014 example MORAL RESPONSIBILITY word responsibility means being legally or ethically accountable for 13 the welfare or care of another. ‘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. Child labor not paying minimum wage Discrimination in pay Harmful particulates in air Discharge of industrial effluents Prof. Shirufi Purohit Prof. Shirufi Purohit Supporting case Contradictory case If a seller cells air condition and if that is defective and cause inquire due to an electrical short circuit and fire thereof. But here the seller is not morally responsible for injury as long as he did not knowingly sell a defective product. Prof. Shirufi Purohit Driving a car without a license and meeting with an accident causing injury to a pedestrian. Here the driver knows hence here he is morally wrong and cannot deny his moral responsibility. 15 Supporting case 14 Prof. Shirufi Purohit 16 Result It was reported that the contaminate milk caused the death of 6 children and nearly 3 lakhs children fell sick after drinking milk that was intentionally laced with melamine a toxic compound that can give a fake positive on protein tests. Prof. Shirufi Purohit 17 Officers on the Sanlu Group were aware of the same but did not make it public. It was a case of serious food safety failure. Chinese court sentenced two men to death and the General Manager of the company to life imprisonment.The company has since gone bankrupt due to unethical scandal. Prof. Shirufi Purohit 18 3
3/5/2014 Question ;- Is he morally responsible? Supporting case A car driver was continuously honking loudly near a children's hospital. Due to this shrill and loud noise from the car, one child patient- critically ill started crying loudly, got choked in the process and died before any emergency treatment could be extended at that time of the night. Prof. Shirufi Purohit 19 Answer Prof. Shirufi Purohit 20 Principles to establish Moral Responsibility Ignorance cannot be an excuse for such violation of rules( Silence Zone signboard at hospital) and thereby showing no respect for moral standard. 1. 2. Prof. Shirufi Purohit A tentative flow sheet for Ethical Judgement 21 Prof. Shirufi Purohit Moral standards vis-à-vis ethical standard 1. 2. 3. 4. Prof. Shirufi Purohit 23 22 Ignorance of fact or consequences.( eg Seller Refrigerator) Ignorance of moral standards.( unable to read sign board- No smoking in Chinese and smoking in that area. Moral standards are not absolute.( they may change with society, place an with maturity of person. Moral standards are based on impartial considerations without any self interest or bias Moral standards are self regulating and self inflicting Ethics on the other hand mean the logical study of morality of an action by searching the principles that nullify the action or justify it as fair and good. For example if a nursing home fails to admit a road accident victim for want of medical insurance coverage it would be unethical according to medical ethics. Prof. Shirufi Purohit 24 4
3/5/2014 Characteristics of ethics Honesty Transparency Legality Integrity Accountability Humanity Values Commitment Humility It is difficult to disentangle the two terms morality and ethics. They are like chicken and egg story – seeking debate which ne came first. Prof. Shirufi Purohit 25 Difference 1. 2. 3. 26 5 approaches to ethical standards Moral standards :- these are common rules for everybody in a society. Ethical standards :- these are rules ob behavior established through moral reasoning. Legal standards :- These are systems of punishments and incentives in a society or country for ensuring laws and regulations. Prof. Shirufi Purohit 1. 2. 3. 4. 5. 27 This means that the ethical action produces the greatest good and does the least harm to all those who are affected by it. Prof. Shirufi Purohit Utilitarian approach The rights approach The fairness or justice approach The virtue approach The common good approach Prof. Shirufi Purohit 28 2. The rights approach 1.The utilitarian approach Prof. Shirufi Purohit 29 Every living being has certain moral rights for example the opportunity to live, the right to privacy, the right to justice, not to be harmed, choice of actions. Prof. Shirufi Purohit 30 5
3/5/2014 4.The virtue approach 3.The fairness or justice approach Greek philosophers like Aristotle, that all equals should be treated equally. For example persons guilty of similar crime have to be treated equally for punishment, whether one is a common man and the other is a man of high position in the society. One should focus on values and well being of humans. Values like the truthfulness, honesty, integrity, generosity, fairness, prudence and self regulation. Prof. Shirufi Purohit 31 Prof. Shirufi Purohit 5. The common good approach 32 What is an Ethical Dilemma? 34 Welfare of everyone in the society. The purpose of common good approach is to spread the reach of benefits to as many as possible in the society. Example the work of charitable trusts, blood donation camps run by clubs and the corporate social responsibility ( CSR) activities of companies and business. Prof. Shirufi Purohit Examples… 35 1. 33 Prof. Shirufi Purohit Supporting Case( pg 34 to 35 ) Use of computer and reduction in job opportunity 3. Profitability and work load of worker 2. An ethical dilemma is a moral situation in which choice has to be made between two equally undesirable alternatives. That is a person failing to choose between right and wrong but between right and right. A business dilemma exists when an organizations decision maker faces a choice between two or more options that will have various impact on (a) organizations profitability and competitiveness (b) its stakeholder. Merger of two firms and reduction in employment opportunity. Conflict of person and his professional values e.g. Marketing guy bribing customer( Purchaser) to achieve his target. Ones values vs. perceived role of a task. E.g. To get environment pollution clearance certificate immediately you may have to bribe committee. 4. 5. Prof. Shirufi Purohit Prof. Shirufi Purohit 36 6
3/5/2014 Ethical dilemmas involves problem solving situations in which decision rules are always vague or in conflict. The outcome of an ethical decision cannot be predicted with any degree of accuracy or precision. We can not make sure that we have made a right decision Nor any one can tell us so. There is no magic formula or software available to reach at best decision. 37 Supporting Case 38 Prof. Shirufi Purohit 39 A newly established private educational institution for vocational courses proposed to air a 10-second advertisement at a peak time on a popular TV channel in a metro claiming “enrollment in the institution automatically guarantees 100% jobs in government offices.” The proposal has put the account manager of TV channel in to a dilemma whether to accept the advertisement- accepting the advertisement means supporting and promoting wrong information and refusing the same means loss of revenue to the channel. Prof. Shirufi Purohit The TV channel was more concerned with the consequences of their actions that might mislead many poor students to pay heavy fees to enroll in the course with false commitment. Supporting Case The mother of a brain-dead boy request the hospital where the boy was admitted after an accident to withdraw the life support fro the patients and allow him to die in natural course. The reason keeping the boy alive in brain dead condition will cost massive amount of expenses that the family can not bear it. Besides, it is worthless to keep him alive in a brain dead condition. Prof. Shirufi Purohit 41 Dilemma before hospital - which alternative to choose.. Both are not only equally bad but also against professional ethics and law. Prof. Shirufi Purohit 40 Structure of ethical dilemma 42 Same dying child example Either Doing what is morally right Even if they provides life support can they force the women to pay for the money, without her consent. Results in bad outcome or bad effect Either Doing what is morally wrong Results in good outcome or good effect Prof. Shirufi Purohit Prof. Shirufi Purohit 7
3/5/2014 Principles of Personal Ethics Common analytical steps in resolving ethical dilemmas Personal ethics refer to the application of values in everything one does. Principles of personal ethics include: 1. 2. 3. 4. 5. Identify moral issues Analyze the issues- who will be benefited who will be harm. Examine options or alternative ( honesty, fairness equality, and dignity) Examine the options in the light of the principles of ethics. Make the final decision Prof. Shirufi Purohit 2. 3. 4. 5. 6. 7. 8. 43 Principles of Professional Ethics Concern for the well being of others; Respect for the autonomy of others; Trustworthiness and honesty; Willing compliance to law; Basic justice: being fair; Refusing to take unfair advantage; Benevolence: doing good; and Preventing harm to any creature. 1. Prof. Shirufi Purohit 44 Nature of Ethics The basic principles people are expected to follow in their professional career are the following: 1. The concept of ethics deals with human beings only. Only human beings are endorsed with the freedom of choice. The study of ethics has become a set of systematic knowledge 1. Impartiality: neutrality; 2. Trustworthiness and honesty; 3. Openness: Full Disclosure; 3. The science of ethics is a normative science. 4. Confidentiality: Trust; 4. It deals with human conduct which is voluntary & not 5. Due Diligence: Duty of care; 6. Fidelity to professional responsibilities; and 7. Avoiding potential or apparent conflict of interest 2. about moral behavior & conduct;- field of social science. coerced by persons. It is basically an area dealing with moral Prof. Shirufi Purohit judgment regarding voluntary human conduct 45 Why have a code of ethics? Or Objectives of Ethics Prof. Shirufi Purohit What is Business Ethics? 1. 46 Makes evaluative assessment about what is moral & immoral It deals with the study of the problems arising in the relationship between the field of business & its management. “business ethics is the art & discipline of applying ethical principles to examine & solve complex moral dilemmas” 2. To define acceptable behavior 3. Makes judgment upon human behavior based on these standards & norms 4. To establish a framework for professional behavior and responsibilities 5. To provide a benchmark for self-evaluation It is based on the principle of integrity and fairness and concentrates on the benefits to the stakeholders, both internal and external. Stakeholder includes those individuals and groups without which the organization does not have an existence. It includes shareholders, creditors, employees, customers, dealers, vendors, government and the society. Prof. Shirufi Purohit 47 Prof. Shirufi Purohit 48 8
3/5/2014 Code of Conduct and Ethics for Managers What is not Business Ethics? Ethics is different from religion Ethics is not synonymous with law Ethical standards are different from cultural traits Ethics is different from feelings. Prof. Shirufi Purohit Managers must observe the following ethical values while performing their duties: 49 Importance and Need for Business Ethics Prof. Shirufi Purohit 50 Reasons for occurrence of ethical problems A business organization competes in the global market on its own internal strength, in particular, on the strength of its human Personal Gain Clash of personal values & business goals Competitive Pressure on profit resource, and on the goodwill of its stakeholders. Integrity Impartiality Responsiveness to public interest Accountability Honesty Transparency Integrity The value-based management and ethics that an organization uses in its governance enables it to establish productive relationship with its internal customers, and lasting business relationship with its external customers. Business needs to function as a responsible citizen Prof. Shirufi Purohit 51 52 Distinction between Values and Ethics Values and Ethics in Business Prof. Shirufi Purohit A value is a view of life and judgment of what is desirable. Values Business ethics relates to issues of “what is right” and “what is wrong” while doing business. What values are to individuals, ethics are to business. Ethics Business ethics operates as a system of values, relating business goals and techniques to meet specific human ends Prof. Shirufi Purohit 53 Personal in nature (e.g.. a belief in providing customer satisfaction and being a good paymaster) Generalized value system (egg. avoiding discrimination in recruitment and adopting fair business practices). Prof. Shirufi Purohit 54 9
3/5/2014 Why should Businesses act Ethically? Why should Businesses act Ethically? (contd.) The reasons for an organization to be ethical include: The reasons for an organization to be ethical include: 1. To protect its own interest, so that the public will have trust in it. 6. To protect themselves from abuse from unethical employees and competitors, 2. To keep its commitment to society to act ethically, 7. To protect their own reputations 3. To meet stakeholder expectations. 8. To protect their own employees, and 4. To build trust with key stakeholder groups, 9. To create an environment in which workers can act in ways consistent with their values. 5. To prevent harm to the general public, Prof. Shirufi Purohit 55 Prof. Shirufi Purohit How Corporations Observe Ethics in their Organizations? Sources of Ethics 56 Genetic Inheritance Religion Codes of conduct Legal system 1. Publish in-house codes of ethics to be strictly followed by all their associates 2. Employ people with a reputation for high standards of ethical behavior at the top levels 3. Incorporate consideration of ethics into performance reviews. 4. Give rewards for ethical behavior. 5. SEBI , CII and such other organizations representing corporations, issue codes of best practices and enjoin their members to observe them. 6. IIMs and highly rated B-schools give extensive and intensive instruction in business ethics, corporate social responsibility and corporate governance as part of their curriculum. Prof. Shirufi Purohit 57 7. Conduct an Ethics Audit Benefits from Managing Ethics in Workplace Mark Pastin provides the following characteristics of ethical organizations: Attention to Business Ethics improves Society 1. 2. Ethical practice contributes towards high productivity and strong team work At ease while interacting with diverse internal and external stakeholder groups. 2. Obsessed with fairness. 3. Changing situations require ethical education 3. Assuming personal responsibility for actions of the organization. 4. Ethical practices create strong public image 4. See their activities in terms of purpose. 5. Strong ethical practices act as an insurance Prof. Shirufi Purohit 58 Characteristics of an Ethical Organisation The many benefits that arise from managing ethics in the workplace are: 1. Prof. Shirufi Purohit 59 Prof. Shirufi Purohit 60 10
3/5/2014 In short… CORPORATE GOVERNANCE and management of companies. Corporate governance is a set of processes, policies, regulations, rules, customs and laws governing the way a corporation should be directed, administered and controlled to maximize the efforts of its Corporate governance is a set of rules that governs the administration defined as “the system by which companies are directed and controlled”. employees and the resulting gains for all stakeholders. Stakeholders include shareholders or promoters, board of directors, management, financiers, employees, customers, vendors, society, community, government, etc. Prof. Shirufi Purohit 61 From the ethics point of view, the aim of corporate 1. setting ethical standards and rules in the governance should be to ensure that certain moral company, standards are maintained while dealing with the 2. accountability of actions, internal systems & administration, product policy & safety, marketing, customer 62 Important issues relating to ethics that corporate governance must focus on, are: ETHICS AND CORPORATE GOVERNANCE Prof. Shirufi Purohit care, 3. managing the trusts, and order 4. managing procurement & social responsibility, else the economic efficiency without compromising ethical principles and values. business can suffer, due to loss of reputation, brand image, profitability or financial penalty Prof. Shirufi Purohit 63 ETHICS AND CORPORATE GOVERNANCE (Conti…) Prof. Shirufi Purohit Four Pillars of Corporate Governance To achieve good corporate governance, the following ethical aspects must be ensured: 2. Protection of interests of other stakeholders 3. Role and responsibilities of the board 4. Disclosure and transparency 2. Fairness Transparency Independence Integrity and ethical behaviour 5. Accountability 4. Rights and equitable treatment of shareholders 1. 3. 1. Prof. Shirufi Purohit 64 65 Prof. Shirufi Purohit 66 11
3/5/2014 1. Accountability 2. Fairness Ensure that management is accountable to the Board Ensure that the Board is accountable to shareholders Protect Shareholders rights Treat all shareholders including minorities, equitably Prof. Shirufi Purohit Provide effective redress for violations 67 3.Transparency Prof. Shirufi Purohit 68 4. Independence Prof. Shirufi Purohit 69 Procedures and structures are in place so as to minimize, or avoid completely conflicts of interest Ensure timely, accurate disclosure on all material matters, including the financial situation, performance, ownership and corporate governance Independent Directors and Advisers i.e. free from the influence of others Prof. Shirufi Purohit 70 Why Corporate Governance? Better access to external finance Improved company performance – sustainability Reduced risk of corporate crisis and scandals Thank You All Prof. Shirufi Purohit 71 Prof. Shirufi Purohit 72 12
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