Business Ethics & Corporate Governance

Dr. Mousumi Sengupta hr.msgnsg@gmail.com

What is Ethics??
The word ethics is derived from Latin word ethicus and Greek word ethikos. Ethics are moral guidelines which govern good behaviour So behaving ethically is doing what is morally right A system of moral principles Our Ethical compass

Concepts of Ethics
Ethical subjectivism the morally correct decision often depends on the circumstances of a person making it.
Ethical relativism there is no universal set of principles by which morality may be judged. Consequentialism it consists of two ideas:
the concept of value maximization of value.

Ethics of virtue it emphasizes the role of individual traits.

Relationship between business & ethics

Unitarian view of ethics business is a part of moral ethics. If businesses want to exist, survive and flourish in the log run, morality and ethics cannot be separated from the operation of business. Separatist view of ethics Adam Smith proposed that businesses in order to flourish, should concentrate on its goal, i.e.; profit maximization. Integration view of ethics Talcott Parsons proposed that ethical behavior and business should be integrated or combined in a new area called Business Ethics. Business has right to make profit but at the same time, it should discharge social obligations.

Ethical theories
Metaethics Normative ethics
Teleological ethical theory Deontological ethical theory Virtue ethics

Applied ethics

Ethical theories
Metaethics
it deals with the gamut of ethical issues. It is defined as the study of the origin and meaning of ethical concepts. It questions whether the moral values exist independently of humans or they are simply human conventions Psychological issues that deal with psychological basis of the moral action Linguistic issue that deal with the meaning of key moral terms we use. Axe even angels will fall !!!

Ethical theories
Normative ethics
It implies something that guides or controls It guides human conduct. We should treat others the same way we want others to treat us. Livon Hair Gain

Three normative theories

Teleological ethical theories thinking rationally about ends. An action is morally correct if the consequence of the action are more favorable. It is also called as Consequentialist theories. Deontological ethical theory focuses on certain fundamental duties that we have as human being Virtue ethics focuses on character development

Ethical nature of an organization

Theory of corporate moral excellence ethical companies are based on moral values. Ethics and stakeholder theory - ethical companies pay attention to the needs and rights of stakeholders Ethics and corporate governance - ethical companies adopt governance practices

Theory of corporate moral excellence

Culture is based on values
Espoused values Values in practice Espoused values refer to a companys statements, credos and code of ethics. They describe the organizations purpose and ethical perspective. Espoused values may differ from values in practice, depending on situations.

 Hoffman classified corporate culture into three types:

Basic values attitudes and beliefs of the organization Organizational goals, policies, structure, strategies that are shaped by the values and beliefs prevalent in the organization Organizational procedures and processes

Ethics and Corporate Code

It referred to the policy statements that lay down a companys ethical standards. They are designed to govern the conduct of the employees, clarify the strategy, clearer communication, etc. CEO, board of directors, legal department, consultants and top management formulate the code.

Common format for Corporate Code

Compliance code corporate credos Management philosophy statements Special documents Circulated letters Compliance certificate Purchase orders

Johnson and Johnson credo says, "We believe our primary responsibility is to the doctors, nurses and patients, mothers and all others who use our products and services
Tata credo says 'give back to the people what you have earned from them'. Wal-Mart, established the Three Basic Beliefs as the company's credo: - Respect for the Individual - Service to our Customers - Strive for Excellence