What is ETHIC ?....

A few years ago, sociologist Raymond

Baumhart asked business people,
"What does ethics mean to you?"
Among their replies were the
following:
 "Ethics has to do with what my feelings
tell me is right or wrong.“
 "Ethics has to do with my religious
beliefs.“
 "Being ethical is doing what the law
requires.“
 "Ethics consists of the standards of
behavior our society accepts.“
 "I don't know what the word means."
These replies might be typical of our own. The meaning of
"ethics" is hard to pin down, and the views many
people have about ethics are shaky.
Like Baumhart's first respondent, many
people tend to equate ethics with
their feelings. But being ethical is
clearly not a matter of following one's
feelings. A person following his or her
feelings may recoil from doing what is
right. In fact, feelings frequently
deviate from what is ethical.
Nor should one identify ethics with religion.
Most religions, of course, advocate high
ethical standards. Yet if ethics were
confined to religion, then ethics would
apply only to religious people. But ethics
applies as much to the behavior of the
atheist as to that of the saint. Religion can
set high ethical standards and can provide
intense motivations for ethical behavior.
Ethics, however, cannot be confined to
religion nor is it the same as religion.
Being ethical is also not the same as
following the law. The law often
incorporates ethical standards to which
most citizens subscribe. But laws, like
feelings, can deviate from what is ethical.
Our own pre-Civil War slavery laws and
the apartheid laws of present-day South
Africa are grotesquely obvious examples
of laws that deviate from what is ethical.
Finally, being ethical is not the same as
doing "whatever society accepts." In
any society, most people accept
standards that are, in fact, ethical.
But standards of behavior in society
can deviate from what is ethical. An
entire society can become ethically
corrupt. Nazi Germany is a good
example of a morally corrupt society.
 Moreover, if being ethical were doing
"whatever society accepts," then to find
out what is ethical, one would have to
find out what society accepts. To decide
what I should think about corruption, for
example, I would have to take a survey
of American society and then conform
my beliefs to whatever society accepts.
But no one ever tries to decide an
ethical issue by doing a survey.
 Further, the lack of social consensus
on many issues makes it impossible
to equate ethics with whatever
society accepts. If being ethical were
doing whatever society accepts, one
would have to find an agreement on
issues which does not, in fact, exist.
Ethics is two things.
First, ethics refers to well based
standards of right and wrong that
prescribe what humans ought to do,
usually in terms of rights, obligations,
benefits to society, fairness, or specific
virtues. Ethics, for example, refers to
those standards that impose the
reasonable obligations to refrain from
stealing, murder, assault, slander, and
fraud
 Ethical standards also include those that
enjoin virtues of honesty, compassion,
and loyalty. And, ethical standards
include standards relating to rights, such
as the right to life, the right to freedom
from injury, and the right to privacy.
Such standards are adequate standards
of ethics because they are supported by
consistent and well founded reasons.
Secondly, ethics refers to the study and
development of one's ethical
standards.
As mentioned above, feelings, laws, and
social norms can deviate from what is
ethical. So it is necessary to constantly
examine one's standards to ensure
that they are reasonable and well-
founded.
Ethics also means, then, the
continuous effort of studying our
own moral beliefs and our moral
conduct, and striving to ensure
that we, and the institutions we
help to shape, live up to
standards that are reasonable
and solidly-based.
What is Ethics and Morality?
 Ethos (Greek) and Mores (Latin) are
terms having to do with “custom,”
”habit,” and “behavior.
 Ethics is the study of morality.
 (a) What is morality?
 (b) What is the study of morality?
 Ethics:
 Study of morality
 Branch of Philosophy
 Morality
 System of Rules
 Rules of conduct
 What is business ethics?


Ethics – study of what is good and evil, right
and wrong, and just and unjust
 Business ethics - study of what is good and
evil, right and wrong, and just and unjust in
business
 Principles and standards that guide behavior
 Discussions of business ethics frequently
emphasize unclear situations
 However, applying clear guidelines resolves
the majority of them
Determinants of Business Ethics
 Individual factors
 Organizational factors/relationships
 Organizational culture
 Ethical climate
 Opportunity/environment
 What encourages or discourages
unethical behavior?
Why be concerned with ethics?

 Laws are insufficient and do not cover

all aspects or gray areas of a problem
 Free-market and regulated-market
mechanisms do not effectively inform
owners and managers about how to
respond to complex crises
ETHICAL BEHAVIOR
 Ethical behavior is that which is
morally accepted as "good" and
"right" as opposed to "bad" or
"wrong" in a particular setting.
 At organizational level, the ethical
failures occurs because the norms are
not properly designed. Ethical failure
are essentially control failures. While
internal auditing can check frauds and
misappropriates the ethical
misconduct can be checked only
through properly designed norms and
standards.
Maciariello and Kirby provide a
cybernetic model of instituting ethics
program in organisations:
 Decide the desired state
set the ethical goals in terms of
compliance with all laws. Translate
the ethical goals in terms of code of
conduct and ethics policies.
 Measure the current state
Find the current state of compliance of
laws, find the deviations from the
code of conduct. In essence, conduct
an ‘ ethical audit’.
 Initiate remedial action
Investigate the alleged violations and
initiate a remedial action to ensure
that the loose ends are tightened and
to prevent reoccurrence of unethical
practices, issue proper warning
signals to prevent unethical behavior.
It is better to foster ethical behavior
than to police ,catch and punish
unethical behavior.
Those indulging in unethical behavior
may need ‘ ethics counseling’ for
moral and ethical correction.
WHY INDIVIDUALS AND ORGANIZATIONS
INDULGE IN UNETHICAL CONDUCT AND
PRACTICES?

 The overall environment is one of

corruption and moray decay, leading
to legitimization of unethical behavior
on the part of citizens. This is a
macro level problem that should be
tackled by the enlightened citizens of
the nation through a collective voice
and collective choice.
 The effective management of ethical
issues requires that organizations
ensure that their managers and
employees know how to deal with
ethical issues in their everyday work
lives. Therefore, organizational
members must first understand some
of the underlying reasons for the
occurrence of unethical practices.
 Some common rationalizations used to justify
unethical behavior are easily derived from
Gellerman (1986):
 Pretending the behavior is not really unethical
or illegal.
 Excusing the behavior by saying it's really in the
organization's or your best interest.
 Assuming the behavior is okay because no one
else would ever be expected to find out about it.
 Expecting your superiors to support and protect
you if anything should go wrong.
Some Surveys

 International Survey of more than 300

companies worldwide – top ethical issues

– Employee conflict of interest 91%,

– Inappropriate gifts 91%,
– Sexual Harassment 91%,
– Unauthorized Payments 85%
 Wall Street J survey of 1400 working women

-Managers lying, expense-account abuses,

taking credit for other’s work
Surveys - Incidence of unethical behaviors
in areas (from a Wall Street Journal survey):

 – Government: 66%
 – Sales 51%
 – Law 40%
 – Media 38%
 – Finance 33%
 – Medicine 21%
 – Banking 18%
 – Manufacturing 14%
Common examples

 Individual values and the company

– Receiving or offering kickbacks
– Stealing from the company
– Padding expense accounts to obtain
reimbursements for questionable business
expenses
– Divulging confidential information or trade
secrets
– Using company property and materials for
personal use
– Conflict of interest
Language of Ethical Lapse

 Everybody else does it

– Not a valid choice – specially if law is
being broken
 If we don’t do it, someone else will
 That’s the way it has always been
done
 We’ll wait until the lawyers tell us it’s
wrong
– What’s legal may not be ethical
 It doesn’t really hurt anyone
 The system is unfair
The nature of ethical decisions –
Complex and Difficult

 Managers confront facts and

values when making decisions
 Knowledge of consequences are
limited
 Existence of multiple
constituencies conflicts of interest
 Multiple constituencies can also
use ethical arguments to justify
their position
The cost of unethical business
practices?

In all cases, companies had to pay fines

or are suffering bad publicity
 But unethical behaviors hurt
organizations financially also.
Conclusion

 Nature of ethical problems

– Ethical standards change over time
– Human reasoning is imperfect
– Ethical standards and principles are not
always adequate to resolve conflicts
- Which theory should be used?
– Each approach has strengths and
weaknesses
– Need to look at situation and apply best
analysis/judgment