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8/9/2019 BECG Concept

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BECG Business Ethics

Chapter 1


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What is business?

Business an activity performed with profit

motive

People find fault with profit motive is it

ethical


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What is the contribution of business

to the society? Employment

Provide products and services to society

with efficiency Wealth creation

Innovation


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Can society manage without

business entities? Communism Utopian environment

They failed sustain themselves

Capitalism proved to be successful


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Business and Society

Business is a necessary But we need to

ensure that it fulfills its responsibilities for

which it is functioning


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Stakeholders

Stake interest, claim, share

Stakeholder- individual or group that has

one or more of the various kinds of stakesin the business

Who are the stakeholders of Business ?


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Stakeholders

Shareholders and investors

Employees and Managers

Customers

Suppliers and other business partners Local community

Government

Social Pressure groups

Media Trade bodies

Competitors


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Morality

What is Morality?

Morality standards that an individual or agroup has about what is right and wrong,

or good and evil


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Moral Standard

When will you call a standard as moral standard ?

Deals with matters which has serious

implications for the human beings

Cannot be established or changed by any

authoritative bodies

Preferred over other values including self-

interest Based on impartial considerations

Associated with emotions


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Ethics

Then, what is ethics?

Morality is a fieldMoral standards may give conflicting options

Ethics a discipline that examines howmoral standards apply to our lives

It answers the question of whether the moralstandards are reasonable and supportedby good reasons right or wrong


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Ethics

Ethics Ethikos (Greek word) Character

or Custom

Other topics also deal with MoralitySocial Science, Psychology


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Where did these ethical standards

come from?Religion

All religions talk more or less in similar toneabout ethical standards


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Golden Rule of Ethics

"Treat others only as you consent to being

treated in the same situation."

GR forbids this combination:

I do something to another person.

I'm unwilling that this be done to me in thesame situation.


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Golden Rule in Religions

Hinduism This is the sum of duty; do naught onto otherswhat you would not have them do unto you(Mahabharata, 5: 1517))

Judaism What is hateful to you, do not do to your

neighbor. (Talmud, Shabbat 31a; Tobit 4:15)Christianity Therefore all things whatsoever ye would

that men should do to you do ye even so to them(Matthew 7:12)

Buddhism-Hurt not others with that which pains yourself

(Udanavarga 5:18)Islam - "None of you is a believer until he wishes for hisbrother what he wishes for himself." (40 Hadith of An-Nawawi 13 )


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Religion does not clarify everything about

ethical rules.


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Ethical relativism

Societal requirements also determine

(Ethical relativism)

Sacking employees in US and India Abortion Japan and Europe

Birth control measures among the Muslims

in Turkey and Iran


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Why ethics in Business

Why study ethics in business ?

Individuals need to follow ethical standards

but what about corporations?Two views about business and ethics


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Business and Ethics

Unitarian View

Business activities are part of the ethical system

Separatist view

Adam Smith Business need not worry about

ethics- The invisible hand will ensure that

Milton Friedman Business should concentrate onproduction and distribution of goods. Its the duty

of the government to focus on social problems


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Business and Ethics

Global business Frauds

Barings, Enron,WorldCom, Global

Crossing, Arthur Andersen, Parmalet,Refco,

Indian Business Frauds

Cooperative Banks, DSQ Software, GTB,CRB Scam, Satyam


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Modern theories of ethics

I - Teleological Theories1. Egoism

2. Utilitarianism

II - Deontological Theories

1. Universalism

2. Principle of Rights

Principle of Justice

III - Virtue ethics

Principle of Care


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Teleological Theories

MoralWorth of Actions determined by its

Consequences

Egoism - Jeremy Bentham (1748-1832),

Utilitarianism - John Stuart Mill (1806-1873)


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Utilitarianism

Greatest happiness for greatest number of

people

Maximization of good and minimization of evil

Only the ends are important and not the means

An action is morally right if the net benefits

(utility) over costs are greatest compared with

the net benefits of all other possible choices Cost- Benefit Analysis


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Issues with Utilitarianism

Problem of measurement

Problem with rights and justice


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Teleological theories In Business

Egoism a corporation ought to do whateveris in the corporations best interest (which is

also the best interest of its shareholders) Utilitarianism one ought to seek to produce

the greatest possible balance of good overevil, or the least possible balance of evil over

good, for all who will be affected by onesactions the stakeholder versus stockholderapproach to management decision-making


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Deontological Theories

MoralWorth of an action determined by right

duties, not consequences


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Universalism

Immanuel Kant (1724-1804)

A person should choose to act if and only if

he/she would be willing to have everyperson on earth in that same situation

exactly that same way

Means are also equally important along

with ends


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Issues with Universalism

Not clear in certain situations


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Principle of Rights

Everybody have certain rights

Actions should respect the rights

Means are important than endsRights cannot be overridden by Utility


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Problems with rights theory

Conflict among rights

Positive and Negative rights

Who or what defines the Positive Rights


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Principle of Justice

Fair treatment to each person

Distributive JusticeRetributive Justice

Compensatory Justice


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Distributive Justice

Different people put forth claims on societys

benefits and burdens and all claims cannot

be satisfied


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Egalitarianism Justice as Equality

Every person should be given exactly equal

shares of societys or a groups benefitsand burdens

But human beings are not equal in their

ability, talent and requirements

Political equality and economic equality


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Capitalism Justice based on Contribution

Benefits should be distributed according to

the contribution the individual makes to asociety, a task, a group or an exchange

How do you measure contribution?


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Whether it is based on Effort or

Productivity or Value in the market


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Socialism Justice based on needs and abilities

Work burdens should be distributed according to

peoples abilities, and benefits should be

distributed according to peoples needs

Louis Blanc (1811-1882) and then Karl Marx

(1818-1883) , Lenin (1870-1924)

Is it possible? Will people accept it?


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Family Structure

Communists attempted to build familyculture at the societal level


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Issues

Without any connection between level of

work and the compensation who will work?

Violates the individual rights


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Justice as fairness : John Rawls (1921-2002)

Each person has an equal right to the mostextensive basic liberties compatible with similar

liberties for allSocial and economic inequalities are arranged so

that they are both

To the greatest benefit of the least advantaged

persons and Attached to offices and positions open to all

under conditions of fair equality of opportunity


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Retributive Justice

Justice of punishing persons for wrong doing

1. Person being punished actually did

wrong2. The wrong doing must have been

committed knowingly

3. Punishment should be proportional to thewrong


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Compensatory Justice

Justice of restoring to a person what the

person lost when he or she was wronged

by someone else


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Ethics of Care

Obligation to exercise special care toward

those particular persons with whom we

have valuable close relationships


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Virtue Ethics

Ethical behavior is not enough

It is an alternative to theories of Ethics

Aristotle

Both Kantian and utilitarian systems try to provideguiding principles for actions that allow a person todecide how to behave in any given situation.

Virtue ethics, by contrast, focuses on what makes agood person, rather than what makes a good action


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Ethics and Law

Statues laws created by the legislativebodies

IPC, Company law, Factories Act

Regulations

Enacted by boards and agencies subjectedto the statutory power always

subordinate to the lawConstitutional Law- Foundation of the legal

system


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Law

Law- Consistent set of universal rules that

are widely published, accepted and

enforced. It also defines the requirement

that one must act or must not act in a

given situation


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Law

Consistent Degree of firmness

Universal applicable to all

Published Available in written form Accepted Everybody should accept it

Enforced mechanism to enforce


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Law and Moral Standards

Law is based on moral code to a greater

extent

An action can be legal but morally wrongAn action can be moral but illegal

Law has other considerations Sovereignty,Bringing order in the society etc


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Formulation of Law

Individual Process

Group Process

Society Process Political Process


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Individual Process

Individual have norms, beliefs and Values

Norms Expected behavior

Belief about the ethical standards to befollowed

Values- priorities that person establishes

for his/her norms


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Morality, Law and Economic

considerations

On many issues Moral, legal and economic

consideration suggest different paths

resulting in conflicts in decision making.

The case of Tiruppur


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Pollution Problems in Tiruppur

Legally

Close down the dying and bleaching units

Economically

Dont close down as Triuppur can grow in post-

quota regime. Develop some other center

parallelly to ensure a long term replacement

MorallyDilemma Closing down will lead to job lose

continuing will spoil agricultural activities


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Applying Ethical theories to

Business

Unitarian View Business entities are part of the

society hence they need to adopt ethical

practices

But how to apply ethical standards to Businessentities?

To apply to the organization as a whole Citi bank

in 1992 Scam- Ford Pinto - who is responsible

Or to the individuals who are responsible for it

Enron


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Application of Ethical theories in

Business

Theory of Corporate Moral Excellence

Ethics and Stakeholders theory

Ethics and Corporate Governance


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Theory of Corporate Moral

Excellence

Corporations have two sets of values

Espoused Values

Values in Practice

Differences between the above two will

result in violation of ethical norms


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Theory of Corporate Moral

Excellence

How to overcome the problems?

1. Values, attitudes and beliefs

2. Shape mission, policies, structure andstrategies based on values (Culture

should reflect the values)

3. Organizational procedures and process

should facilitate the values


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Ethics and Stakeholders theory

Act in a responsible manner by paying

attention to the needs and rights of the

primary stakeholders


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Ethics and Corporate Governance

Code of Conduct

Managers are working for Stakeholders not

for personal gains (except the salary)

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