A Project on ‘CHARACTER ETHICS’

Submitted BySwati Agrawal BBA gen. 3rd SEM 0351341708 Under the guidance of Dr. Nigar Fatima

Ideal Institute of Management and Technology

Affiliated to Guru Gobind Singh Indraprastha University (GGSIPU)

PREFACE
Initial in the one module of the project, which is allotted to me, “CHARACTER ETHICS” is covered in this project report. The report contains very nice and well arranged topics related to the subject “CHARACTER ETHICS”. The main contents of this project describes that ‘That what are ethics’, Code of Ethics’, ‘Business Ethics’ and many other topics which is countable in the “CHARACTER ETHICS”. The contains project a report description also of

At this level of understanding. inspiration and motivation have always played a key role in the success of any venture. ACKNOWLEDGEMENT Perseverance. Working on this project was a challenge and made us a bit filters in the beginning. Overall this reports my work like a guide for the subject “CHARACTER ETHICS”.“Business Ethics “which is very important for an organization to work fairly in an environment. it is often difficult to understand .

Hence.a wide spectrum of knowledge without advice felt proper . guidance we to take Dr. ANIL SHARMA our for principal the sir for his and inspiration. We also extend our sincere gratitude to MR. encouragement impetus obtained . and this opportunity to express our heart gratitude for NIGAR o’clock and this are FATIMA. her round enthusiastic commentaries project thankful to support which her made we for successful. making impossible look easy for us.

Introduction on Business Ethics 3. Comparing Business with environment 4. Introduction on Ethics 2. the course of our 1. Code of conduct 5.throughout project. Company’s profile .

guiding beliefs. A famous saying is there – .Introduction on Ethics The term ethics refers to value oriented decisions and behavior. corporate ethics. Ethics involved in such area must still refer to value – oriented decisions and behavior of individuals. community or people. medical ethics or legal ethics are used to indicate the particular area of application. Terms such as business ethics. ethics is considered as the study of morals behavior. It comes from the Greek word ‘Ethos’ which means character. Today. standards or ideals that pervade a group.

but in ethics he is wrong only if he thinks of doing so. Ethics refers to the body of moral principles governing a particular society or group and to the personnel moral percepts of an individual. From this point of view.“If a man violates some rules he is wrong according to law. It is normative and prescriptive.” Ethics is concerned with what is right and what is wrong in human behavior. Beach – “Ethics refers to asset of moral principles which should play a very significant role in guiding the conduct of managers and employees in the operation of any enterprise. not neutral.” According to Dale S. Some people subscribe to a utilitarian reference in determining what is right and what is wrong. there are few absolute standards and each issue must be .

The tem ‘ethics’ and ‘morals’ are often used interchangeably. . They indicate what people do. They are customs having a high degree of social acceptance. Moral refers to any generally accepted customs of conduct and right living in a society. But ethics is broader than morals.judged by studying its impact upon all affected parties. while ethics represent what people should do.

It deals with answering questions such as `what ought to be`. it is what you think is right or wrong. Ethics can be considered as moral philosophy. . Being "ethical" means trying to be reasonable and doing what you think is right 2. It deals with critical analysis of morality. Ethics searches a reasonable ground to our moral standards. not `what is`. Ethics are kind of like morals and common sense.Some Definitions of Ethics 1.

The science of moral obligation. or practice. By encyclopedia of Judaism . The moral obligation to render to the patient the best possible quality of dental service and to maintain an honest relationship with other members of the profession and mankind in general. By dental dictionary 4.3. Ethics is the science of morality or the systematic study of moral rules and principles. a system of moral principles. The term "morality" refers to rules which prescribe the way people ought to behave and principles which reflect what is ultimately good or desirable for human beings. quality.

right. Also the second-order study of the objectivity. The study of the concepts involved in practical reasoning: good. . see morality. or skepticisms that may attend claims made in these terms. choice. duty. For the kinds of problems encountered. freedom. obligation. Instead. rationality. the various rules of 6. see under the special terms. subjectivity. virtue. relativism. By philosophy dictionary There is no Buddhist term which exactly corresponds to ‘ethics’ as a branch of philosophy concerned with the analysis and evaluation of conduct in the way the subject is classified in the West. For a possible distinction between ethics and morality.5.

Moral principles may be viewed either as the standard of conduct that individuals have constructed for themselves or as the body of obligations and duties that a particular society requires of its members.moral conduct are subsumed under the rubric of śīla. . By Buddhism dictionary .The study and evaluation of human conduct in the light of moral principles. By Columbia encyclopedia 7. which denotes internalized moral virtue and its expression in practice as abstention from immoral conduct.

. • Existing norms and judgments may contain valuable insights but ethics sets out to criticize and test them in terms of ultimate norms. • It does not rest on feelings of approval or disapproval but in the careful examination of the reality around us.Features of Ethics • It contains principles of personnel and professional conduct.

There is need for a science of ethics in every human Endeavour. • What constitutes ethical behaviors in one society may be unethical in others. Even though law enshrines many ethical judgments. Law may permit things which are unethical.It is not a law. It criticizes law and customs to obtain more perfect rules for the conduct of life. • Ethics is involved in all human activities including business. • Values Values are convictions and a framework of philosophy of an .

Rokech’s Classification . Adaptive Process Values are even classified into various categories that are – 1. England’s Classification 4. Allport’s Values Classification 2. Learned Responses 3. Grave’s Classification 3. Social Phenomenon 5. ethical or unethical. Rokeach defines values as – “Values represent basic convictions that a specific mode of conduct is personally or socially preferable to an opposite mode of conduct” It has some characteristics like – 1. Part of culture 2.individual on the basis of which he judges what is good or bad. Gratifying Responses 6. Inculcated 4. desirable or undesirable.

3. political. Indian managers are more pragmatist than moralist. These researchers have used Allport –Vernom –Lindzey model. aesthetic and religious in that order. . social. Managers tend to have value orientation towards economic. sociocentric. There are generally some acceptable unethical practices in business. Various researchers have attempted to identify the value systems of Indian managers. 2. Managerial Values tend to be existential. theoretic. conformistic.Values System is even adopted by Indian Managers in their own way. tribalistic and egocentric. Graves’s model and England’s model. manipulative. The major findings are given below – 1.

Values provide guidance in determining the right versus the wrong. 5. They are our standards. Values and Morals Values are our fundamental beliefs. They are the principles we use to define what is right. Indian mangers give importance to various occupational values in the order to be free from supervision. Ethics. Another . good and just. Indian managers tend to money orientation during early days of their career and later shifts to matters like job satisfaction.In term of work values. 4. the good versus bad.

but only those beliefs that define importance. The moral concept of justice has one meaning concerned with developing . These values typically get their authority from something outside the individual – a higher authority. Morals are values that we attribute to a system of beliefs that help the individual define right versus wrong. In business world we often find ourselves avoiding framing our ethical choices in moral terms for fear that doing so might prove offensive to someone whose moral frame of reference might be different. good versus bad.way to characterize values is that they are what an individual believes to be having worth and importance to their life. Values do not encompass all beliefs.

Defining what is ethical is not an individual exercise. Ethics is the study of what we understand to be good and right behavior and how people make those judgments. When one’s action are not congruent with our moral values – our sense of right. if it were then one could have argued that what Hitler did was ethical since his action conformed to his definition of right. However.rational normative claims and theories. Ethics is not the only way to study morality. wrong or just. It asks how these moral standards apply to our lives and whether these standards are reasonable or unreasonable. The social sciences – . Ethics is the discipline that examines one’s moral standards or the moral standards of the society. good and just – we will view that are acting unethically.

such as anthropology, sociology and psychology – also study morality, but do so in a quite different way from the approach to morality that is characteristics of ethics. A descriptive study is one that does try to attain any conclusions about what things are truly good or bad.

Business Ethics
In business, ethics can be defined as the capacity to reflect on values in the corporate decision making process, to determine

how these values and decision affect various stakeholders groups, and to establish how managers can use these observations in day to day company management. Ethical managers strive for success within the confines of sound management practices that are characterized by fairness and justice. Business Ethics refers to the moral principles which should govern business activities. It provides a code of conduct for the managers. The purpose of business ethics is to guide managers and employees in performing their jobs. Ethics are concerned with what is right and what is wrong in human behavior. They lay down norms of human behavior by the business. A few examples of ethics are: 1. To charge fair prices.

2. To use fair weights for measurement of commodities. 3. To pay taxes to government. 4. To earn reasonable profits. 5. To give fair treatment to workers. The purpose of business ethics is to regulate both objectives of business and the means adopted to achieve these objectives. Ethics covers all possible areas of business ends and means must be justifiable as per norms of the society. A business is an integral part of the society. It is in fact, a trustee of the resources of the society. So the business must observe the ethical standards of the society while using the resources. If a business fails to observe the social norms it will loose its public image.

In the increasingly consciencefocused marketplaces of the 21st century, the demand for more ethical business processes and actions (known as ethics) is increasing Simultaneously, pressure is applied on industry to improve business ethics through new public initiatives and laws (e.g. higher UK road tax for higher-emission vehicles). Business ethics can be both a normative and a descriptive discipline. As a corporate practice and a career specialization, the field is primarily normative. In academia descriptive approaches are also taken. The range and quantity of business ethical issues reflects the degree to which business is perceived to be at odds with non-economic social values. Historically, interest in business ethics accelerated

social responsibility charters). For example. ethics codes. BP's "beyond petroleum" environmental tilt). corporations have redefined their core values in the light of business ethical considerations (e. .g.g. In some cases.dramatically during the 1980s and 1990s. today most major corporate websites lay emphasis on commitment to promoting non-economic social values under a variety of headings (e. both within major corporations and within academia.

but has a much broader coverage.Definition on business Ethics Business ethics is a form of applied ethics that examines ethical principles and moral or ethical problems that arise in a business environment. • Ethics co–exists with law. Ethics aims at perfection in the . Features of Business Ethics • It is an umbrella term which covers all business practices which are desirable from the point of view of the society.

• The concept of equity is implied in ethics. one of the aims of which is to determine the . General business ethics • This part of business ethics overlaps with the philosophy of business. • Business ethics emphasize making a businessman honest. just and responsible citizen. • It creates self imposed discipline on the part of managers. Thus it guides law markets to have perfect rules for human behaviors.conduct of life. It aims at fair and reasonable treatment to all.

If a company's main purpose is to maximize the returns to its shareholders. Issues regarding the moral rights and duties between a company and its shareholders: fiduciary responsibility.• • • fundamental purposes of a company. shareholder concept.[3] Corporate social responsibility or CSR: an umbrella term under which the ethical rights and duties existing between companies and society is debated. . hostile takeovers.g. then it could be seen as unethical for a company to consider the interests and rights of anyone else. industrial espionage. Ethical issues concerning relations between different companies: e. stakeholder concept v.

Law reform. Political contributions made by corporations.• • • • Leadership issues: corporate governance. Professional ethics Professional ethics covers the myriad practical ethical problems and phenomena which arise out of specific functional areas of companies or in relation to recognized business professions. such as the ethical debate over introducing a crime of corporate manslaughter. The misuse of corporate ethics policies as marketing instruments. .

misleading financial analysis.Ethics of information • accounting • • • Creative accounting. . Insider trading. securities fraud. bucket shops. Bribery. kickbacks. these practices may be anticompetitive or offend against the values of society. earnings management. forex scams: concerns (criminal) manipulation of the financial markets. Executive compensation: concerns excessive payments made to corporate CEO's and top management. and facilitation payments: while these may be in the (shortterm) interests of the company and its shareholders.

race. such as the rights and duties owed between employer and employee. weight and attractiveness. sexual harassment. strike breaking. Issues surrounding the representation of employees and the democratization of the workplace: union busting.Ethics of human management resource The ethics of human resource management (HRM) covers those ethical issues arising around the employer-employee relationship. • • • Discrimination issues include discrimination on the bases of age (ageism). Issues affecting the privacy of the employee: workplace . gender. See also: affirmative action. religion. disabilities.

Issues affecting the privacy of the employer: whistle-blowing.[4] indentured servitude. but where is the ethical line to be drawn? . Occupational safety and health. To some extent society regards this as acceptable. See also: privacy. drug testing. Ethics of marketing sales and Marketing which goes beyond the mere provision of information about (and access to) a product may seek to manipulate our values and behavior. employment law.• • • surveillance. Issues relating to the fairness of the employment contract and the balance of power between employer and employee: slavery.

viral marketing. Anti-competitive practices: these include but go beyond pricing tactics to cover issues such as manipulation of loyalty and supply chains. However. because marketing makes heavy use of media.Marketing ethics overlaps strongly with media ethics. pyramid scheme. shill. Specific marketing strategies: green wash. . planned obsolescence. See: anticompetitive practices. antitrust law. spam (electronic). subliminal messages. Content of advertisements: attack ads. sex in advertising. bait and switch. • • • • Pricing: price fixing. price discrimination. price skimming. media ethics is a much larger topic and extends outside business ethics.

. grey markets. Some of the more acute dilemmas in this area arise out of the fact that there is usually a degree of danger in any product or production process and it is difficult to define a degree of permissibility. or the degree of permissibility may depend on the changing state of preventative technologies or changing social perceptions of acceptable risk. Black markets. Ethics of production This area of business ethics deals with the duties of a company to ensure that products and production processes do not cause harm.• • products regarded as immoral or harmful Children and marketing: marketing in schools.

chemical manufacturing.• • • • Defective. mobile phone radiation and health. Ethical relations between the company and the environment: pollution. weapons. carbon emissions trading Ethical problems arising out of new technologies: genetically modified food. environmental ethics. alcohol. . bungee jumping). Product testing ethics: animal rights and animal testing. motor vehicles. addictive and inherently dangerous products and services (e.g. use of economically disadvantaged groups (such as students) as test objects. tobacco.

• • Patent infringement. attempts to assert ownership and ethical disputes over ownership arise. Nor is it obvious that has the greater rights to an idea: the company who trained the employee or the employee themselves? The country in which the plant grew or the company which discovered and developed the plant's medicinal potential? As a result. knowledge and skills Knowledge and skills are valuable but not easily "own able" as objects. . Misuse of the intellectual property systems to stifle competition: patent misuse. copyright infringement. trademark infringement.Ethics of intellectual property.

patent troll. The practice of employing all the most talented people in a specific field. international . submarine patent. Bioprospecting (ethical) and biopiracy (unethical). Business intelligence and industrial espionage. in order to prevent any competitors employing them. Even the notion of intellectual property itself has been criticized on ethical grounds: see intellectual property.• • • • • copyright misuse. International business ethics While business ethics emerged as a field in the 1970s. regardless of need. Employee raiding: the practice of attracting key employees away from a competitor to take unfair advantage of the knowledge or skills they may possess.

e. Comparison of business ethical traditions from various religious perspectives. .business ethics did not emerge until the late 1990s.g. Issues and subfields include: • • • • The search for universal values as a basis for international commercial behavior. Other. Theoretical issues such as cultural relativity of ethical values receive more emphasis in this field. older issues can be grouped here as well. Comparison of business ethical traditions in different countries. looking back on the international developments of that decade.[5] Many new practical issues arose out of the international context of business. Ethical issues arising out of international business transactions.

is .g. Ethics of economic systems This vaguely defined area.g. the fair trade movement.• • • • bioprospecting and biopiracy in the pharmaceutical industry.e. The way in which multinationals take advantage of international differences. such as outsourcing production (e. The permissibility of international commerce with pariah states. perhaps not part of but only related to business ethics. call centers) to low-wage countries. clothes) and services (e. Varying global standards .g. transfer pricing. Issues such as globalization and cultural imperialism. the use of child labor.

where business ethicists venture into the fields of political economy and political philosophy. For example. Very often. Conflicting interests Business ethics can be examined from various perspectives. situations arise in which there is conflict between one and more of the parties. The work of John Rawls and Robert Nozick are both notable contributors. a particular outcome might be good . including the perspective of the employee. and society as a whole. the commercial enterprise. focusing on the rights and wrongs of various systems for the distribution of economic benefits. such that serving the interest of one party is a detriment to the other(s).

its shareholders. whereas. For example. Thus. only those activities that increase profitability and shareholder value should be encouraged. . society.g. or vice versa. or in the case of a publicly-traded concern.for the employee.. Ethical issues approaches and Philosophers and others disagree about the purpose of a business ethic in society. Henry Sedgwick) see the principal role of ethics as the harmonization and reconciliation of conflicting interests. some suggest that the principal purpose of a business is to maximize returns to its owners. under this view. Some ethicists (e. it would be bad for the company.

loss of licensure. or company reputation. and that these duties consist of more than simply obeying the law. However. Some believe that the only companies that are likely to survive in a competitive marketplace are those that place profit maximization above everything else. They believe a business has moral . because the consequences of failing to do so could be very costly in fines. The noted economist Milton Friedman was a leading proponent of this view. Other theorists contend that a business has moral duties that extend well beyond serving the interests of its owners or stockholders. some point out that self-interest would still require a business to obey the law and adhere to basic moral rules.because any others function as a tax on profits.

or even society as a whole. which is largely due to John Rawls' A Theory of Justice. people who have an interest in the conduct of the business. Some theorists have adapted social contract theory to business. and some would suggest that this includes even rights of governance. and employees and other stakeholders are given voice over a company's operations. This approach has become especially popular subsequent to the revival of contract theory in political philosophy.responsibilities to so-called stakeholders. whereby companies become quasi-democratic associations. . They would say that stakeholders have certain rights with regard to how the business operates. which might include employees. the local community. vendors. customers.

which they call Integrative Social Contracts Theory. and. namely. ii) micro-principles formulated by actual agreements among the interested parties. an aspect of the "quality movement" that emerged in the 1980s.and the advent of the consensusoriented approach to solving business problems. using a combination of i) macro-principles that all rational people would agree upon as universal principles. that a business is someone's property . They posit that conflicting interests are best resolved by formulating a "fair agreement" between the parties. Professors Thomas Donaldson and Thomas Dunfee proposed a version of contract theory for business. Critics say the proponents of contract theories miss a central point.

United States law forbids companies from paying bribes either domestically or overseas. Ethical issues can arise when companies must comply with multiple and sometimes conflicting legal or cultural standards. for example. accepted way of doing business. in other parts of the world. or should it follow the less stringent laws of the developing country in which it does business? To illustrate. as in the case of multinational companies that operate in countries with varying practices. Similar problems can occur with regard to child labor. however. ought a company to obey the laws of its home country. bribery is a customary. employee .and not a mini-state or a means of distributing social justice. The question arises.

discrimination. It is claimed that in a competitive business environment. work hours. many companies have formulated internal policies pertaining to the ethical conduct of employees. and environmental protection laws. It is sometimes claimed that a Gresham's law of ethics applies in which bad ethical practices drive out good ethical practices. highlygeneralized language (typically . Corporate ethics policies As part of more comprehensive compliance and ethics programs. These policies can be simple exhortations in broad. wages. those companies that survive are the ones that recognize that their only role is to maximize profits.safety.

They are generally meant to identify the company's expectations of workers and to offer guidance on handling some of the more common ethical problems that might arise in the course of doing business. or they can be more detailed policies. which often include discussion of the company's policies. An increasing number of companies also requires employees to attend seminars regarding business conduct. specific case studies. consistency in application. and the avoidance of ethical disasters. containing specific behavioral requirements (typically called corporate ethics codes).called a corporate ethics statement). and legal . It is hoped that having such a policy will lead to greater ethical awareness.

and that they are mainly to limit the company's legal liability. Some companies even require their employees to sign agreements stating that they will abide by the company's rules of conduct. Others believe that corporate ethics policies are primarily rooted in utilitarian concerns. the .requirements. Many companies are assessing the environmental factors that can lead employees to engage in unethical conduct. Some claim that ethical problems are better dealt with by depending upon employees to use their own judgment. or to curry public favor by giving the appearance of being a good corporate citizen. Not everyone supports corporate policies that govern ethical conduct. Ideally.

most ethicists would suggest that an ethics policy should be: • Given the unequivocal support of top management. . at worst. and. To be successful. it is merely a marketing tool. by both word and example. the company can claim that the problem would not have arisen if the employee had only followed the code properly? Sometimes there is disconnection between the company's code of ethics and the company's actual practices. Thus.company will avoid a lawsuit because its employees will follow the rules. Should a lawsuit occur. at best. whether or not such conduct is explicitly sanctioned by management. this makes the policy duplicitous.

Doable. One of the catalysts for the creation of this new role was a series of fraud. with periodic reinforcement. corruption and abuse scandals that afflicted the . Ethics officers Ethics officers (sometimes called "compliance" or "business conduct officers") have been appointed formally by organizations since the mid1980s.something employees can both understand and perform...• • • • • Explained in writing and orally. Monitored by top management. Backed up by clearly stated consequences in the case of disobedience.. Remain neutral and nonsexist. with routine inspections for compliance and improvement.

was founded at the Center for Business Ethics(at Bentley College.100 members) and was soon established as an independent organization.S. a pan-industry initiative to promote and ensure ethical business practices. This led to the creation of the Defense Industry Initiative (DII). The membership grew rapidly (the ECOA now has over 1. defense industry at that time. . MA) as a professional association for those responsible for managing organizations' efforts to achieve ethical best practices. In 1991. Waltham. the Ethics & Compliance Officer Association (ECOA) -originally the Ethics Officer Association (EOA)-. The DII set an early benchmark for ethics management in corporations.U.

even small and medium-sized companies have begun to appoint ethics officers. WorldCom and Tyco). Although intended to assist judges with sentencing. the influence in helping to establish best practices has been farreaching. In the wake of numerous corporate scandals between 200104 (affecting large corporations like Enron. They often report to the Chief Executive Officer and . which set standards that organizations (large or small.Another critical factor in the decisions of companies to appoint ethics/compliance officers was the passing of the Federal Sentencing Guidelines for Organizations in 1991. commercial and non-commercial) had to follow to obtain a reduction in sentence if they should be convicted of a federal offense.

which was enacted in reaction to the above scandals. The effectiveness of ethics officers in the marketplace is not clear. If the appointment is made primarily as a reaction to legislative requirements. This trend is partly due to the Sarbanes-Oxley Act in the United States. A related trend is the introduction of risk assessment officers that monitor how shareholders' investments might be affected by the company's decisions. making recommendations regarding the company's ethical policies. They are particularly interested in uncovering or preventing unethical and illegal actions. and disseminating information to employees. one might expect the efficacy to be .are responsible for assessing the ethical implications of the company's activities.

this is because ethical business practices result from a corporate culture that consistently places value on ethical behavior. The mere establishment of a position to oversee ethics will most likely be insufficient to inculcate ethical behavior: a more systemic programmed with consistent support from general management will be necessary. at least. The foundation for ethical behavior goes well beyond corporate culture and the policies of any given company. over the short term. the other institutions that affect an individual. a culture and climate that usually emanates from the top of the organization. the competitive business environment the . for it also depends greatly upon an individual's early moral training. In part.minimal.

indeed. . religious and cultural perspectives have a strong influence on the conduct of business and the creation of business values.company is in and. associated with the avoidance of charging interest on loans. Examples include: • Islamic banking. Particularly in Asia and the Middle East. society as a whole. Religious views on business ethics The historical and global importance of religious views on business ethics is sometimes underestimated in standard introductions to business ethics.

that the ethical operation of a private business is possible -.• • Traditional Confucian disapproval of the profitseeking motive. political. (who contend that "business ethics" is an oxymoron) do so by definition outside of the domain of business ethics proper. and ethical underpinnings of business and economics.[7] Quaker testimony on fair dealing Related disciplines Business ethics should be distinguished from the philosophy of business. . such as libertarian socialists. the branch of philosophy that deals with the philosophical.those who dispute that premise. Business ethics operates on the premise. for example.

the role of self interest. theories of individualism vs. and natural rights. collectivism. It asks who gains and who loses from economic activity.The philosophy of business also deals with questions such as what. free will among participants in the marketplace. which is economic analysis from political and historical perspectives. especially property rights. Business ethics is also related to political economy. business management theory. in relation to the business enterprise. the requirements of social justice. and is the . Political economy deals with the distributive consequences of economic actions. are the social responsibilities of a business. invisible hand theories. if any.

which are central ethical issues Relationship between business .resultant distribution fair or just.

In fact values are considered the language of ethics. depending upon whether they conform to. immoral or amoral. Values . cultural and national values. go against or are different towards certain norms of morality. Ethics are interrelated with values. Ethics in business emanate from the values of top management which are in turn shaped by social.ethics and managerial values Ethics refers to the entire body of moral values that society attaches to the actions of human being. The value judgments do have ethical content when they are linked with the element of morality. Values can be moral. But ethics represent only moral values.

Unethical behaviors constitutes of 1.help to establish proper relationship between ends and means. Using co. 4. property for personal use. 2. 3. Bribing public officials to obtain undue favors. And in absence of sound value system. . If the management of a business is pursuing sound values. the management of a business may be tempted to pursue unethical business practices. and it will follow those business practices that are ethical and socially justifiable. Keeping two sets of books to evade taxes. Using false claims in advertisements.

6. income tax etc. 3.5. Overlooking safety violations to get the job done. • Against Government 1. 7.elected as directors. . Smuggling of goods. Revealing confidential information or trade secrets to competitors. Evasion of excise duty. poor lightning. Lack of safety measures for workers. Paying salaries lower than those fixed by the government to the employees. Artificially inflating profits to get re. Poor working conditions like dirty water. 2. 2. sales tax. Unethical Business Practices • Against Employees 1.

2. Sale of products injurious to public health like charas. 5. . Sale of duplicate products under popular brand names. Adulteration of goods like mixing of papaya seed with black pepper. Offering bribes to government officials and politicians for getting favors. 6. Sale of spurious goods 3. • Against consumers and society 1. Deceptive advertisements and false claims in advertisements. Pollution of environment.3. 4. heroine.

Unethical or questionable practices Examples: 1. Bribery .Conceptual model Business ethics Business Ethics of Managerial Moral problems that Beliefs manager face in decision making Managerial beliefs concerning: 1. Illegal acts 2. Fraud.

Accepting Gifts 3. Treatment of problem employees 5. Dumping of pesticides Micro level problems: 1. Confidentiality of company 4. Fairness in performance appraisal 2. Confronting expense account Levels of Ethical Decisions in business Level 4 Individual Level 3 Internal policy Level 2 Stakeholders .2.

. ethical questions about the basic institutions in society are asked. 1. 2. 4. Societal level Stakeholders level Internal policy Individual Level Societal Level: At this level.Level 1 Society 1. 3. These represent an ongoing debate among major competing institutions including business.

Individual Level: At this questions level. So also questions of motivation techniques.2. Here they ask about how they deal with external groups. suppliers etc. Internal Policy Level: At this level we ask questions about the nature of enterprise relations with employee both managers and workers. Stakeholders Level: In a business enterprise include employees. should a company inform its customers about the potential dangers of its product? 3. work rules etc. 4. For example. are involved at this level. leadership roles. we concerning ask how .

they set the tone of ethical behavior of business at higher levels. .individual person should treat one another within the firm. These questions deal with day to day issues of life in any enterprise but in the ultimate analysis.

Need and Importance of Business Ethics More important is the fact that today a businessman is pressurized by various environmental factors to follow a business practice which is ethical from society’s point of view irrespective of its impact on business profits. Environmental Pressures: As apart of overall economic system. a business organization is pressurized by various environmental factors to act credibly and behave ethically. Thus a business . Such a significance of business ethics is attributable to following reasons: 1.

Like any other member of the society business people also believe that ethical business .enterprise may have no option but to desist from undesirable trade practices like hoarding and profiteering due to pressure from consumer forums. That is if business enterprise follows business practices. it will lead to higher profits and prosperity in the long run. Enlightened self interest: Today’s businessman firmly believes that business ethics are in their own self interest. 2. 3. Moral consciousness: It would not be an exaggeration to say that most business people behave ethically because of their moral consciousness.

Legal Requirements: In almost every sphere of business activity laws have been enacted which declare certain business practices. 4.conduct is good business as well as good citizenship. obedience to such laws is ethical. In short. Elements of business ethics .

There are six major elements that are essential ethical judgments: 1.Business Managers must come to appreciate the key elements that comprise making ethical judgments. Identification and It refers to the ability to judge the relevance or non relevance of ethical factors in decision making situations. In addition to their identification. . ethical issues must be ranked. Ethical Ordering: 2. Ethical Imagination: Developing ethical imagination means being sensitive to ethical issues in business decision making and the ability to identify those situations where people are likely to be detrimentally effected by decision making.

3. basis of weighing those factors and the ability to make out the likely ethical as well as economic outcomes of a decision. groups and communities should be woven into the fabric of managerial decision making. Sense of Ethical Obligation: This refers to the intuitive or learned understanding that ethical fibers – a concern for fairness. . 4. justice and due process to people. Ethical Evaluation: To evaluate ethical factors business persons have to develop clear principles.

Accordingly. ethical business conduct is that which is socially moral. Social Factors – Ethics are basically concerned with social morality.Determinants of Business Ethics 1. In other words. it is the social .

3. Political Factors – Business Ethics are also influenced by the ideology and philosophy of . 2. In general Business ethics assume liberal character with the development in economic spheres. religion etc. And the sources of these cultural values are historical heritages. particularly business activities. 4. family system.values. norms. Economic Factors – The level of economic development also influences the nature and spread of business ethics. traditions and customs. Cultural Factors – The code of conduct for individuals as well as organizations develops under constant influence of cultural values.

Implications for Business Ethics . attitudes of managers and superior subordinate relations have great impact on ethical perception.the political party in power. 5. Through appropriate legislative measures government enforces business ethics and regulates the behavior of business firms. Organizational Factors – like philosophy and policy of the firms.

business ethics is difficult to manage.When the mechanism of moral disengagement are at work in corporations. . APPROACHES TO BUSINESS ETHICS When business people speak about “business ethics” they usually mean one of three things: (1) avoid breaking the criminal law in one’s work-related activity. especially when the sanctioning practices are surreptitious and the responsibility for policies is diffused. Numerous exonerative strategies can be enlisted to disengage social and moral sanctions from detrimental practices with a low sense of personal accountability.

Anytime an employee might stray from the straight and narrow path of acceptable conduct. In theory. the experts would guide him back. Businesses are especially concerned with these three things since they involve loss of money and company reputation. Perhaps . Obviously this solution would be a financial disaster if carried out in practice since it would cost a business more in attorney and public relations fees than they would save from proper employee conduct.(2) avoid action that may result in civil law suits against the company. a business could address these three concerns by assigning corporate attorneys and public relations experts to escort employees on their daily activities. and (3) avoid actions that are bad for the company image.

businesses turn to philosophers to instruct employees on becoming “moral.000 years philosophers have systematically addressed the issue of right and wrong conduct. it is not likely that philosophers can teach anyone to be ethical. even if philosophers could teach morality.reluctantly.” For over 2. The job of teaching morality rests squarely on the shoulders of parents and one’s early social environment. philosophers can teach employees a basic understanding of morality will keep them out of trouble. it is too late to change the moral predispositions of an adult. Also. their recommendations are not always the most financially efficient. Presumably. then. Although being moral may save a . By the time philosophers enter the picture. However.

. In most issues of business ethics. and humane working conditions. truthful advertising. To understand what is at stake. We cannot easily resolve this tension between the ethical interests of the money-minded businessperson and the idealminded philosopher.company from some legal and public relations nightmares. This may be more than a tightbudgeted business bargained for. A morally responsible company must pay special attention to product safety. environmental impact. we will look at three different ways of deriving standards of business ethics. scrupulous marketing. ideal moral principles will be checked by economic viability. morality in business is also costly.

The weak version is often expressed in the dictum that good ethics results in good business. it may . There are both weak and strong versions of this approach.Deriving Business Ethics from the Profit Motive Some businesspeople argue that there is a symbiotic relation between ethics and business in which ethics naturally emerges from a profit-oriented business. which simply means that moral businesses practices are profitable. For example. it is profitable to make safe products since this will reduce product liability lawsuits. Similarly.

has problems. short-term profits will dictate the decisions of many companies simply as a matter of survival. As more and more businesses compete for the same market. takes this approach. Hartley's book. Business Ethics.be in the best financial interests of businesses to respect employee privacy. . however. many moral business practices will have an economic advantage only in the long run. 1993). This provides little incentive for businesses that are designed to exclusively to seek short-term profits. This weak version. Using 20 case studies as illustrations. since this will improve morale and thus improve work efficiency. First. Robert F. Hartley argues that the long-term best interests of businesses are served by seeking a trusting relation with the public (Hartley.

In a different market. this might be the case with retaining older workers who are inefficient. For example. some moral business practices may not be economically viable even in the long run. Third. any overlap that exists between morality and profit is both limited and incidental. as opposed to replacing them with younger and more efficient workers. and most importantly. Thus. the same practices might not be economically viable. the profit motive will in fact bring .Second. in a competitive and free market. The strong version of this profit approach takes a reverse strategy and maintains that. those moral business practices that are good for business depend upon what at that time will produce a profit.

Proponents of this view. which is the converse of the above dictum. That is. argue that this would happen in the United States if the government would allow a truly competitive and free market. consumers may opt for . if customers demand safe products. or workers demand privacy. since it assumes that consumers or workers will demand the morally proper thing. the strong version can be expressed in the dictum that good business results in good ethics. But this strong view also has problems. such as Milton Friedman.about a morally proper environment. In fact. then they will buy from or work for only those businesses that meet their demands. Since this view maintains that the drive for profit will create morality. Businesses that do not heed these demands will not survive.

not every moral business practice will simply emerge from the profit principle as suggested by either the weak or strong views. which is morally irresponsible. For example. Similarly. consumers might prefer a cheaper car without air bags. In short. Business Ethics Restricted to Following the Law . workers may forego demands of privacy at work if they are compensated with high enough wages.less safe products if they know they will be saving money. even though doing so places their own lives and the lives of their passengers at greater risk.

therefore. stealing. It is.A second approach to business ethics is that moral obligations in business are restricted to what the law requires. such as determining what counts as responsible marketing or adequate privacy in the workplace. such as with laws against killing. we will find opposing positions on our supra-legal moral obligations. Moral principles beyond what the law requires – or supra-legal principles -.appear to be optional since philosophers dispute about their validity and society wavers about its acceptance. or reckless endangerment. unreasonable to expect businesses to perform duties . The most universal aspects of Western morality have already been put into our legal system. harassment. For any specific issue under consideration. fraud.

particularly for relief aid.about which there is so much disagreement and which appear to be optional. Islam. and restrictions on charging interest for certain types of loans. The unreasonableness of such a moral requirement in our society becomes all the more evident when we consider societies that do have a strong external source of morality. prohibitions against sleeping partners that collect unearned money. Similarly. in Muslim countries that are not necessarily ruled by Islamic law. for example. there is a strong source of external morality that would be binding on Muslim businesses apart from what their laws would require. Confucianism . Thus. contains a broad range of moral requirements such as an alms mandate.

it is reasonable to expect their businesses to maintain a respect for elders even if it is not part of the legal system. supra-legal moral obligations in our society appear to be optional. in Chinese and other Confucian societies. In Western culture.has a strong emphasis on filial piety. In short. we lack a counterpart to an external source of morality as is present in Muslim or Confucian societies. it is unreasonable to expect business people to be obligated . and. Even within Christianity. or at least in the United States. thus. the diversity of denominations and beliefs prevents it from being a homogeneous source of Christian values. One reason is because of our cultural pluralism and the presence of a wide range of belief systems. without a widely recognized system of ethics that is external to the law.

Beyond the law we find that the moral obligations of businesses are contextually bound by subgroups. In these cases. and fair hiring and firing practices. the unifying moral force of businesses within our diverse society is the law itself. safe working conditions. product safety. In fact.to principles which appear to be optional. In our culturally pluralistic society. the individual businesses may be bound by the obligations of their subgroups. the only business-related moral obligations that are majority-endorsed by our national social group are those obligations that are already contained in the law. These include a range of guidelines for honesty in advertising. such as with a business that is operated by traditional Muslims or environmental activists. .

If a business does not belong to any subgroup. which includes the following: • Social Mission -.but such obligations are contingent upon one's association with these social subgroups. Corporations that assume an obligation beyond the law. the obligations within those subgroups are not binding on those outside the subgroups. And. take on responsibilities that most outsiders would designate as optional.To operate the company in a way that actively recognizes the central role that . either in their corporate codes or in practice. clearly. and these obligations are in the law. A good example is found in the mission statement of Ben & Jerry's Ice Cream. then its only moral obligations will be those within the context of society at large.

"because we believe that most American corporations overpay top management. national.business plays in the structure of society by initiating innovative ways to improve the quality of life of a broad community -." they explain. "We do this." In spite of the merits of this pay scale policy. the highest paid employees of Ben & Jerry's would not earn more than seven times more than the lowest paid full-time employees. In .and because everyone who works at Ben & Jerry's is a major contributor to our success. Consistent with this mission. and would not be a binding obligation.local. and underpay entry-level employees -. and international. it clearly lacks majority endorsement in our national social group.

Strictly following this legal approach to business ethics may indeed prompt businesses to do the right thing. even in the best legal context. the law will lag behind our moral condemnation of certain unscrupulous. Nevertheless. For example. there are two key problems with restricting morality solely to what the law requires. it is not even binding on Ben & Jerry’s itself since. in the past. First. in recent years. as prescribed by law. Now government regulations prohibit any . Ben & Jerry’s had to abandon its own ideal pay scale in an effort to attract a CEO with the right skills to expand their company. yet legal business practices.fact. drug companies could make exaggerated claims about the miraculous curative properties of their products.

The situation may be different for some developing countries with less sophisticated laws and regulatory agencies. there will be a period of time when a business practice will be deemed immoral. Thus. prior to the enactment of a law.exaggerated claims. A second problem with the lawbased approach is that. yet the practice will be legal. at best. it applies only to countries such as our own whose business-related laws are morally conscientious. technology. . This would be a continuing problem since changes in products. and marketing strategies would soon present new questionable practices that would not be addressed by existing legislation.

and is expressed most clearly in the following from a well known business ethics essay: Proper ethical behavior exists on a plane above the law.Deriving Business Ethics from General Moral Obligations The third approach to business ethics is that morality must be introduced as a factor that is external from both the profit motive and the law. The law . This is the approach taken by most philosophers who write on business ethics.

Five fairly broad moral principles suggested by philosophers are as follows: • • • • Harm principle: businesses should avoid causing unwarranted harm." 1983) The most convenient way to explore this approach is to consider the supra-legal moral principles that philosophers commonly offer. Fairness principle: business should be fair in all of their practices. "Business Ethics: A Manager's Primer. Human rights principle: businesses should respect human rights.merely specifies the lowest common denominator of acceptable behavior. Autonomy principle: businesses should not infringe . (Gene Laczniak.

These principles do not tell us specifically what counts as harm. the problem with these principles is that they are too general. But. Veracity principle: businesses should not be deceptive in their practices. Does all damage to the environment constitute harm? Does it violate an employee's right to privacy if an employer places hidden surveillance cameras in an employee lounge area? Does child-oriented advertising mislead children and thus violate the principle of veracity? . or a violation of human rights.• on the rationally reflective choices of people. The attraction of these principles is that they appeal to universal moral notions that no one would reasonably reject. unfairness.

stockholders. or the community. they broadly mandate against harm. they will be difficult to apply to concrete situations and consequently not give clear guidance in complex situations.The above principles are abstract in nature. Because they are abstract. workers. The recent stakeholder approach to business ethics attempts to do this systematically. That is. and broadly endorse autonomy. It may be expressed in the following: • Stakeholder principle: businesses should consider all stakeholders' interests that are affected by a business practice. . An alternative approach is to forget the abstract. and focus instead on concrete situations that affect the particular interests of consumers.

Alternatively. including employees. and communities. customers. But this approach is limited since proponents of this view give us no clear formula for how to prioritize the various interests once we map them out. Accordingly. the stakeholder approach to business ethics emphasizes that we should map out of the various parties affected by a business practice.A stakeholder is any party affected by a business practice. suppliers. creditors. should the stockholders' interests have . competitors. governments. Should all stakeholders' interests be treated equally – from the largest stockholder down to the garbage man who empties the factory dumpster? Probably no defenders of the stakeholder approach would advocate treating all interests equally.

special priority? If we take this route, then the stakeholder principle is merely a revision of the profit principle. Another way of looking at concrete moral obligations in business is to list them issue by issue. This is the strategy behind corporate codes of ethics that address specific topics such as confidentiality of corporate information, conflicts of interest, bribes, and political contributions. Consider the following issues from Johnson and Johnson's Credo: We are responsible to our employees, the men and women who work with us throughout the world. Everyone must be considered as an individual. We must respect their dignity and recognize their merit. They must have a sense of security in their

jobs. Compensation must be fair and adequate, and working conditions clean, orderly and safe. We must be mindful of ways to help our employees fulfill their family responsibilities. Although corporate codes of ethics are often viewed cynically as attempts to foster good public relations or to reduce legal liability, a corporate code of ethics is a reasonable model for understanding how we should articulate moral principles and introduce them into business practice. The practical advantage of this approach is that it directly stipulates the morality of certain action types, without becoming ensnared in the problem of deriving particular actions from more abstract principles, such as the harm principle. But, the limitation of the corporate code

model is that the principles offered will appear to be merely rules of prudence or good manners unless we can establish their distinctly moral character. And this requires relying on more general principles of ethic described above, which, we’ve seen, comes with its own set of problems.

Conclusion
We’ve looked at three approaches to business ethics, and we’ve seen that all three have limitations. If we hope to find an approach to business ethics that is free from conceptual problems, we will not likely find any. Ethics is a complex subject and its history is filled with diverse theories that are systematically refuted by rival theories. So, we should expect to find controversies when applying ethics to the specific practices of business. However, following any of the above three approaches to business ethics will bring us closer to acceptable moral behavior than we might otherwise

be. we can learn by example what we should not do. it also helps to examine stories of businesses that have been morally irresponsible. or unsafe products. Close attention to one’s profit motive and the moral interests of consumers might in fact generate some morally responsible business decisions. environmental irresponsibility. In addition to the above three approaches to business ethics. In gray areas of moral controversy that are not adequately addressed profit motives and the law. . we can turn for guidance to a variety of general and specific moral principles. By citing specific cases deceptive advertising. We can indeed find additional moral guidance by looking at the laws that apply specifically to businesses.

which we can view as warning signs of unethical conduct. Study Questions for “Approaches to Business Ethics” Introduction (1) What three things do business people usually mean by “business ethics”? (2) Why can’t philosophers “teach” people to be ethical? Deriving Business Ethics from the Profit Motive (3) What is the weak version of theory that connects business ethics to the profit motive? (4) What are problems with the weak version? (5) What is the strong version of theory that connects business ethics to the profit motive? . insensitive. or reckless attitudes of businesses.Such cases often reveal blatantly crude.

(8) Why is it unreasonable to expect businesses to follow supra-legal moral principles? (9) What are some supra-legal moral principles that are binding in Muslim countries? (10) What are the problems with restricting business ethics to what the law requires? Deriving Business Ethics from General Moral Obligations (11) Give an example of a broad moral principle suggested by philosophers. (12) What is the problem with deriving business ethics from broad moral principles? (13) What is a stakeholder? .(6) What are problems with this? Business Ethics Restricted to Following the Law (7) Define “supra-legal” principle.

(14) What is the problem with articulating good business behavior in corporate codes of ethics? Conclusion (15) What are some benefits of all three approaches to business ethics? (16) What can we learn by looking at case studies in business ethics? DOING BUSINESS IN FOREIGN COUNTRIES .

though.The moral challenge for businesses here in the United States it difficult enough when balancing one’s profit interests against the needs of employees. consumers. In developed countries. and multinationals are tempted to lower their standards when situations permit. In this chapter we will look at three areas of moral concern for multinationals: bribery. With third world host countries. the moral expectations often more lax. The moral challenge is even more intense for multinational companies who need to live up to moral expectations both in the US and in host foreign countries. influencing foreign . governments and special interest groups. the moral expectations of the host country are as stringent as our own.

agrees to be paid to act as dictated by an interested party. and exploiting third world countries. Although bribery of government officials also takes place in the United States. and there is a feeling that it is normal practice to bribe government officials.When we think of moral dilemmas that multinationals face we usually think of the pressure on companies to bribe government officials in third world countries. By contrast. such as a government offical. rather than .governments. it is rare and severely punished. We may succinctly define a bribery as condition in which a person. bribery happens with greater frequency in third world countries. Bribery in Third World Countries .

or legal system. organization. even if the act itself is never performed and the payment is never made.doing what is required of him in his official employment. We need to distinguish bribery from extortion. even if the . It is also central that the person being bribed implicitly agreed to abide by the rules of his government. which is where an official requires payment to perform his otherwise normal duties. For example an agent of the FDA may extort a company by approving of a product that passes approval standards anyway. which includes neither implicit nor explicit agreements. We also need to distinguish bribery from gift giving. Extortion has a victim. whereas bribery has no victim. What is central to the notion of a bribe is that an agreement is made.

To avoid doing wrong. In some occupations. gift giving in foreign countries is often part of a needed business ceremony. Further. established codes often forbid gifts since it is too important to risk losing impartiality through gift giving. there are strictly . Although few business people publicly defend bribing officials in third world countries. and sometimes genuine friendships are formed that involves exchanging gifts. An official may accept a gift innocently. there is a common attitude within multination organizations that condones bribery on several grounds. such as law enforcement.giver intends the gift as an inducement. First. the receiver of a gift needs to be confident that he remains impartial in conducting his official duties.

financial considerations. . Often foreign government officials are so corrupt that it is virtually impossible to do business without playing by the unspoken rules. In a truly capitalistic environment. especially if the institution itself is in question. Thus. then US firms will be at a competitive disadvantage and will ultimately lose to foreign business. Payoffs can prevent delays that might otherwise throw a company into financial ruin. we need an even playing field. there’s nothing morally wrong with participating in bribery. there are practical considerations owing to what appears to be the universal nature of bribery in third world countries. Second. such as a government like Nazi Germany. and if foreign businesses engage in bribery and US firms do not.

Under US law. Americans in particular are naïve about his. if caught bribing. in middle east countries. a company may be subject to a 1 million dollar . the Foreign Corrupt Practices Act of 1977 establishes that. although bribery is more common in some foreign countries than in the United States. The US government also takes oversees bribery seriously. Bribery is in fact outlawed in every country around the world and. American companies are involved in bribery scandals twice as often companies from other countries.Both the financial and practical arguments above reflect a naïve view of doing business in third world countries. as seen from the fact that. law enforcement officials in those countries do take bribery violations seriously and punish offenders.

and executives may be subject to $10. it is reasonably clear that the legal penalties of international bribery outweigh the possible business benefits. A major US defense contractor. which in the 1970s was caught offering a quarter of a billion dollars in bribes overseas.fine. Lockheed fell on hard times for both economic and technological reasons. The US government commissioned the company to design a hybrid aircraft. In any event. A dramatic example of bribery naivete involves the Lockheed Corporation.000 in fines and five years in prison. These penalties are so severe that critics contend that it restricts ordinary well-intentioned business activity because of the fear business people might have of entering a gray area of activity that is actually legal. but. after .

one crashed. They tried to move into the commercial jet aircraft market by making planes with engines built by Rolls Royce. and Lockheed lost 300 million in canceled orders. They believed that the solution to their financial woes was to expand their oversees sales. To get the contracts. which meant opening their . Japan. As a consequence. they requested a loan of 200 million dollars from the US government. they made a series of payoffs to middlemen from various countries. they lost money on the projects. Still on the verge of bankruptcy. the government canceled orders. Saudi Arabia. Italy. Rolls Royce went bankrupt. Iran. and Spain. including the Netherlands. Lockheed received other contracts based on bids that they made that were far lower than the cost of producing the project.

Government investigators discovered the extent of Lockheed’s bribery. governmental subsidies. big businesses have an intimate relation with governments. Whether in the US or in foreign countries. Influencing. and access to natural resources. Businesses lobby for fewer regulations. lighter taxes.records for scrutiny. to avoid compromising national defense the US government chose not to cancel its contracts with Lockheed. Businesses also depend on . Endorsing. However. and Opposing Foreign Governments. They also discovered that Lockheed offered bribes that totaled 10 times more than the bribes made by other US companies. Lockheed’s chairman and president were forced to resign.

government offices. By doing so. Multinationals often locate in countries with repressive right wing governments since these tend to be more politically stable. which would otherwise not be supported by socially conscious people. when a US company sets up base in a foreign country. sometimes multinationals find themselves in left wing countries that are hostile to the business’s capitalistic interests. At the other end of the spectrum. such as law enforcement agencies. and transportation networks. In these cases. they implicitly support these governments. So. its interaction with government creates the possibility for unpleasant situations. the business might be tempted to oppose or even . court systems. permit offices.

undermine that government. An example of the first extreme – businesses endorsing right wing governments – is the presence of American multinationals in South Africa. Between these two extremes. The white Apartheid government at the time endorsed a policy of what amounted to institutionalized slavery of its black citizens. there is the normal course of doing business in developing countries. irrespective of the benefit that local people derive from that government’s left-wing policies. especially during the 1970s and 1980s. which involves the normal lobbying efforts that we have here in the US. This involves at least attempting to influence governments of third world countries. Although .

restricted in their speech.S. the white Afrikaners controlled the vast majority of the country’s economic wealth. and it is God’s plan to divide people into groups. called for complete divestment of American business interests from South Africa. U. at minimum US businesses in South Africa needed to be sensitive to the oppressed condition of the blacks. The harshest critics. jobs. The white Afrikaners justified their Apartheid policy by arguing that it was God's plan that Afrikaners are in Africa. US multinationals all recognized the inherently immoral nature of the Apartheid government and that. Politically.constituting less than 10% of the country’s population. Blacks were segregated. and constantly under threat from white policing forces. though. business in . and movements.

such as those the make police weapons. Also. and divestment would cripple the South African economy. Companies whose products directly benefit both can go either way. More moderate critics maintained that companies whose products directly benefit the government should divest. However.South Africa offered legitimacy to the Apartheid government. Economically. For example. companies whose products directly benefit Blacks should not divest. the Polaroid Company chose to leave South Africa since they could not control the flow of their product into . whatever helped South Africa's economy helped Apartheid. American companies in South Africa had a history of civil rights abuses towards blacks.

In this vein. US presence in South African would bolster its economy. However. The Apartheid government was making some progress toward racial integration. such as use in passbook pictures that regulated the movement of the black South Africans. firms could be bought elsewhere. Further.government hands. an . other businesses argued that continued American involvement in South Africa was actually a good thing. with little or no economic clout since all products made by U. and improve education. Leon Sullivan. which would be good for blacks since it would reduce overall unemployment and inflation. Severing ties with South Africa would at best be a symbolic act.S. and American companies would be vital sources of peaceful change.

At the other extreme. and work facilities. (1) nonsegregation in eating. we noted that problems also emerge when American businesses locate in countries with left-wing countries of communist leanings that are hostile to capitalist ventures. recreation. A . (5) more blacks in management. restroom. schooling. and health.Afro-American on General Motors board of directors. transportation. The situation of South Africa illustrates what can happen when American businesses set up camp in countries with oppressive rightwing governments. recommended several principles for operating in South Africa. They are. and (6) improving employees lives outside work. including housing. (4) training programs for blacks. (3) equal pay. (2) equal employment practices.

and indicating a desire to take control of privately owned Chilean telephone companies because of their inefficiency. a government might buy controlling shares of private companies. but politically stable politically. The South American country of Chile was poor.vivid illustration of this is International Telephone and Telegraph’s interference in the Chilean government during the 1970s. First. including Chile. A presidential candidate named Salvador Allende campaigned on a communist platform. with 350. emphasizing the issue of land reform. a government might nationalize or . ITT was the 8th largest fortune 500 company.000 employees in 80 countries. Government acquisition policies work two ways. At the time. paying them at a fair market price. Alternatively.

Allende was elected anyway. Some of ITT’s property was even bombed in protest. The scandal surfaced. and in retaliation. however. he nationalized ITT’s Chilean property. as happened with private businesses in Cuba and Peru during their communist takeovers. Allende was assassinated shortly . Allende did not nationalize other firms.simply take ownership of the company with no compensation. ITT feared the worst and tried to stop Allende from being elected. even though some had to sell the government shares of its stock. and critics world wide attacked ITT for interfering in the activity of a foreign government. part of which involved an offer of 1 million dollars to the CIA for support.

itself. Exploiting Countries - Third World Critics frequently accuse multinational corporations of exploiting the resources and workers of third world countries.after.S. which diminishes the amount of good land that the . People around the world see the United States as an economic imperialist. The actions of American multinationals in foreign markets have a direct effect on the image on the U. The situation is made worse when multinationals coerce foreign governments especially in Third World countries. ready to gobble up the resources of small foreign countries. Agricultural businesses often take the best land and use it for export crops. and ITT later sued for losses.

. Manufacturing and service industries introduce poverty to many areas by attracting more people to a factory than they can employ. which often results in disaster. developing countries have little hope of relying on them for future security once they are used up. yet these businesses benefit by bringing in local money. Mining industries exploit the wealth of the country for only a few rich landowners. which suggest a double standard of labor value. They typically pay much less to third world employees than to Americans. Since many of these natural resources are in finite supply. Drug companies and hazardous chemical industries take advantage of more lax safety regulations. Banks and financial institutions do not hire the local people.locals can use for their own food needs.

The city is geographically divided between rich and poor sections. then they attract the best workers. Also. one of India’s poorest and least developed states.000 people. Indian . Bhopal is the capital of Madhya Pradesh. With a population of 700. a pesticide factory owned by Union Carbide in Bhopal India exploded killing 2.500 people and injuring and additional 300. Two cases illustrate the disastrous effects of exploiting third world countries.000 people. which hurts employers in surrounding businesses.If they pay wages to third world employees that are higher than what indigenous businesses can pay. Although it was a multinational. all of the above types of businesses destroy the local culture by introducing an American climate. with the factory located in the poor section. In 1984.

For his reason. and Indians operated the plant. Although the Indian factory had safety features to prevent disasters. instead the refrigeration unit was not working and it was at room temperature. Larger tanks are economically efficient since they hold more gas. The active ingredient for the pesticide was stored in 600 gallon tanks. The tank that exploded in the Indian plant was supposed to be refrigerated to zero degrees centigrade.investors owned almost half of the shares of the Indian plant. but they pose greater risks in case of a tank leak. The size of the tanks themselves was a problem. The temperature . several of the safety systems were not functioning. regulations in Germany required a similar Union Carbide plant in that company to restrict its tank size to 100 gallons.

A fog of the gas drifted through the streets of Bhopol. The explosion started when someone added water to a 600 gallon tank of the chemical. The Indian government quickly arrested plant managers and eventually spent 40 million on various disaster relief projects. the gas scrubber was shut off. and the tank blew up. and a flare tower was out of service. killing people on the spots that they stood. Long term medical problems for the survivors included respiratory ailments and neurological damage. perhaps done as an act of sabotage by a disgruntled employee.alarm was shut down. which was supposed to neutralize escaped gas. Union Carbide Stock plummeted . which was supposed to burn escaped gas. The temperature in the tank rose in a chain reaction.

and should not give cost cutting the highest priority. The tragic lesson is that multinational should follow U. Union Carbide’s laissezfaire policy of decentralizing subsidiaries was not appropriate in matters of safety. Union Carbide sales were also impacted for several years. safety standards worldwide. The company eventually paid half a billion dollars to victims. the tragedy raised serious questions about the parent company’s views on safety in third world countries.S. Although the US parent company acted quickly and compassionately to the disaster. A second case illustrating exploitation in third world countries concerns the tobacco . Even though Indians ran the Bhopal plant.with losses totaling almost a billion-dollars.

industry. tobacco companies buy . Almost all developed countries have tobacco legislation. and less than half the third world countries do. tobacco tar levels have decreased. Without restrictions to cigarette production. As deceptive and uncaring as they have been in the US. for example. In developed countries. cigarette companies expand the bounds of third world markets with no thought of the health hazards they create for consumers. Information about the atrocious activities of US tobacco companies over the years is continually being made public. they are even worse in third world countries. which is partly the result of cigarette companies’ heavy lobbying efforts. but in third world countries they have increased. In Argentine. advertising and sales.

globally. cigarette consumption is growing faster than population. Thus. There are also ecological effects of flue-cured tobacco production that requires fire. By growing tobacco. which particularly bad in countries with large numbers of people living at subsistence levels. less acreage is available for domestic food production.20% of all advertising time. wood fires are a main method for curing tobacco. underwriting loans. which requires one tree for every 300 cigarettes. In third world countries. and guaranteeing purchases. This bad . although cigarette smoking is on a decline in developed countries. US tobacco companies create strong incentives for local growers to shift to tobacco production by paying startup costs to farmers. it is on a rise in third world countries and.

Although well intended. The harshest critics of third world exploitation argue that we should just stay out of third world countries altogether. and let those countries manage their resources as they see fit for themselves. these interests will increase. Most large companies today have multinational interests. if anything.since firewood accounts for 90% of the heating and cooking fuel in developing countries. Isolationist . and. There are three basic positions to take on the problem of businesses exploiting third world countries. this position is unrealistic especially in view of the growing economic interdependence of countries around the world. This position is also undesirable from the standpoint of the interests of the third world countries themselves.

FDA. some business people argue that. especially when they require some control of the company. Governments by and large set the agenda for what . On the other extreme. OSHA. local governments in the host country must also accept responsibility for what happens. outside countries are less inspired to support the business ventures of that third world country.economic policies are typically ineffective. we should not equate US standards with universal moral standards. For example. but not morally required of all businesses around the world. they are not moral issues. and minimum wage standards are good. Further. although issues of exploitation are sociologically interesting. If a third world country blocks off outside capitalist ventures. On this view.

and exploitation all raise a range of ethical questions.businesses can and cannot do. By accepting control. they also accept responsibility. Cultural Relativism and Universal Moral Principles The above-discussed problems of interference in foreign government. do as the Romans. bribery. A third and middle ground position on exploitation is that multinationals from rich countries can operate effectively in third world countries when adhering to basic moral principles.” This is the issue . perhaps the most important is whether companies should adopt the attitude that “When in Rome. In the next section we will look at some suggested moral principles for multinationals.

Is cultural relativism true? Philosophers have debated this . As long as we stay within our own cultural environment. multinationals will be tempted to adopt the least costly moral principles that a given cultural context will allow. this is no problem since we simply act morally as our society dictates. namely. and another foot in the moral context of a foreign culture. However. whether moral values vary from society to society. and there is no universal standard of morality that applies to all people at all times. multinationals face the problem of relativism directly by placing one foot in the moral context of American culture.of cultural relativism. Driven by the profit motive. Cultural relativism implies that moral values are completely defined by cultural contexts.

For example. such as obligations to care for one’s children and elderly parents. Also. and murder. rape. Many cultural practices are unquestionably shaped by cultural environments. stealing.question for over two thousand years. such as rules requiring women to covering their heads in public. However. a society simply could not continue. there seem to be some foundational principles that appear uniformly. philosophers point out that many seemingly diverse standards of behavior in . Some philosophers argue that these principles appear universally in societies since. if a society permitted murder. and prohibitions against drinking alcohol or eating types of meat. we would all move out of town and live in seclusion. prohibitions against assault. without them.

if we grant that there is some commonality to moral values around the world. First. then. Second. multinationals should follow the norms that constitute a moral minimum. multinationals should follow . multinationals have moral responsibilities that cross cultural boundaries.fact reflect common values. However. Philosopher Norman Bowie recommends three universal moral standards that are appropriate to the activities of multinationals. some cultures kill their elderly. So. and this is a principle that we too have. putting the elderly to death is based on the principle that children should see to the happiness of their parents. which is a practice that we find abhorrent. For example. to that extent. which are advocated in all societies.

such as basic liberty rights. which is part of political and civil liberty in general. we must accept the whole liberty package. Third. Philosopher Richard T.principles of honesty and trust. These are required as foundational for any business operations. which are moral norms of the market place. De George offers a more specific set of guidelines for the following: . and the systematic violation of moral norms of the marketplace would be selfdefeating. So. This means that businesses should not operate in countries with human rights violations unless they can be catalysts for democratic reform. Business depends on economic liberty. if we accept economic liberty. multinationals should not violate human rights.

such as regulatory agencies. such as land and tax reform. which makes it all the more necessary for businesses to adherence to moral standards. In view of how strong the profit motive is to businesses. we may .· · · · · · · Do no intentional direct harm to the host country Produce more good than bad for the host country Contribute to the host country's development Respect the human rights of its employees Pay one’s fair share of taxes Respect the local culture and work with it Cooperate when local governments reform social institutions. De George believes that third world countries lack adequate background institutions.

Until a few hundred years ago.wonder how realistic many of these cross-cultural moral principles are. such . Perhaps we can generalize from these views and say that we may not follow even the best moral principles unless an external authority monitors our actions and punishes us when we go wrong. most philosophers believed that moral principles were pretty useless unless people believed in God and were afraid that God would punish them for evil deeds. In more recent times. We can see the moral responsibility of multinationals in the same light. social contract theorists argue that fear of punishment from governments is the only thing that will motivate us to follow moral principles. There are reasonable moral guidelines that multinationals should follow.

But even this is effective since most large businesses believe that their reputation is their biggest asset. several external mechanisms are already in place to punish irresponsible multinationals. . international human rights groups. businesses may set them aside for reasons of profit. All of these organizations have limited clout. Without an external monitoring authority. the United Nations. which managers of multinationals can probably figure out on their own.as those offered by Bowie and De George. though. and environmental groups all take special interests in seeing that multinationals live up to high standards. Fortunately. though. and rely mainly on the threat of bad publicity to bring about change. News organizations.

Study Questions for “Doing Business in Foreign Countries” Bribery in Third World Countries (1) What is the definition of bribery. and how does it differ from extortion and gift giving? (2) What are the two main arguments usually given in favor of bribery? (3) What is the main problem with both of the arguments for bribery? (4) What penalty did Lockheed pay when it was caught in a bribery scandal? Endorsing. some critics argued that US companies should . and Opposing Foreign Governments (5) What problems might arise when a multinational sets up in right-wing country and left wing foreign countries respectively? (6) During the 1970s and 1980s. Influencing.

What were some of their reasons? (7) What were the negative consequences of ITT interfering in Chile’s government in the 1970s? Exploiting Countries - Third World (8) What are some ways that multinationals exploit third world countries? (9) What were the principal irresponsible actions of Union Carbide in the Bhopal explosion? (10) What actions of the Tobacco companies in third world countries are especially exploitive? (11) What reasons do some multinationals give for not abiding by US standards in third world countries? .leave South Africa.

Cultural Relativism and Universal Moral Principles (12) Define cultural relativism (13) What are some moral values that seem to be held by all cultures? (14) What are Norman Bowie’s three recommended moral principles for multinationals? (15) What external monitoring organizations help assure that multinationals act responsibly? BUSINESS AND THE ENVIRONMENT The greatest damage done to the environment is inflicted by business and industry. Businesses extract the greatest tolls in terms of energy consumption. toxic waste. and not from domestic activities. air and .

which shields the earth from the sun’s life-destroying ultraviolet rays. such as carbon dioxide production and the . Increasing amounts of industrial toxic waste contaminates ground water. which in turn becomes harmful for human consumption. The burning of fossil fuels such as oil. though.water pollution. threaten the survival of life on our planet. Others. which adds to global warming through a greenhouse effect. and deforestation. gas and coal produces excess carbon dioxide. Some of these problems are expensive nuisances. Fluorocarbon gasses used in making domestic products such as refrigerators and styrofoam depletes the earth's ozone layer. such as oil spills and toxic waste. Oil spills from petroleum industries destroy shorelines and kill millions of sea animals.

television sets and shopping malls. Although businesses don’t consciously set out to harm the environment. such as automobiles. In this chapter we will look at some of the causes of environmental irresponsibility in businesses. First. skyscrapers. large businesses and industries are inherently imposing on nature. Businesses’ Resistance to Environmental Responsibility. They take pieces of nature and reshape them into things that didn’t exist before. and some theories about why businesses should be more responsible. which in many cases is worse than it needs to be. and in that .release of fluorocarbon gasses. Not only are the end products artificial. several factors create an unfortunate situation.

technically. a disaster that happens to things that are held in common. Environmentalists sometimes refer to this phenomenon as a tragedy of the commons. Given the size and complexity of businesses in industrial countries. Second. no one owns the air and the particular damage that I do isn’t too noticeable. such as air and water. businesses are driven by the motive to make a profit. It doesn’t seem wrong to pollute the air if. it is easy to disregard natural resources that are held in common and seem abundant. Stockholders demand a return on their investment. and this . it is not surprising that they contribute heavily to this tragedy. such as the US. but the means of producing these things are taxing on natural resources. that is.sense unnatural. Third.

and environmental responsibility is highly costly. and agencies such as the EPA must be politically compromising.mandate transfers down through the management hierarchy. That is. businesses lobby for support at all levels of government. and environmental advocates such as the Sierra Club will feel that the . with few immediate financial rewards. government environmental watchdog agencies. businesses feel that the EPA restricts them too much. Agencies such as the EPA say that they know that they do their jobs correctly when everyone is angry with them. To protect their financial interests. Part of making a profit is to reduce costs. Finally. such as the Environmental Protection Agency. are limited in what they can do in imposing restrictions on businesses.

However.EPA does too little to protect the environment. For example. many of the environmental offenders are businesses in third world countries. and certainly have a right to do so. Maintaining a balance between economic development and energy conservation is far more difficult for poorer countries than it is for wealthier ones. but developing countries cannot do so easily. Underdeveloped countries are trying to catch up to the economic level of industrialized countries. they cannot play catch up in a way that is both economically feasible and environmentally responsible. On a global level. developed countries can shift to energy sources that give off less pollution. Environmental problems are intensified in third world .

such as the United Nations. Increased population places increased demand on the utilization of land.countries because of growth in population. But this is only partially effective. leads to deforestation. our society has become increasingly more environmentally conscious. such as the United States. have only limited leverage. It is not effective to simply encourage developing countries to do better. in turn. which. Sometimes developed countries. Since the 1960’s. which doubles about every 70 years. try to assist developing countries by offering them free technology. and now we simply take it for granted that we all are responsible for maintaining the integrity of the . Recommendations from world organizations.

However. they are not perfect and they allow for many kinds of environment judgement calls. they argue that businesses do not have an obligation to protect the environment above what the law requires. conservative businesses people commonly feel that their responsibility to the environment is limited. Although laws are strict concerning environmental regulation.environment. If businesses showed special concern for the environment beyond what the law requires. then this would interfere with their ability to compete. Ultimately. environmental responsibility rests with consumers. they give two distinct arguments for their views. First. If consumers are not interested in favoring businesses that have . Typically. they argue.

environmentally friendly policies. This is so too with my motivation to purchase products that are manufactured by environmentally unfriendly companies. In a sense. The problem with this view is that environmental responsibility cannot be left to what consumers are willing to tolerate. Even if I knew that a pair of tennis shoes was manufactured in a third world sweatshop. businesses need to save consumers from succumbing to their most thrifty inclinations. my purchase decision might still be motivated only by the price tag. Most consumers will be attracted to the least expensive consumer products. then it is not up to businesses to champion environmental policies on their own. . irrespective of moral considerations surrounding the manufacturing of those products.

what is best for the environment is not always financially best for business. as noted above. When cases of conflict arise between the environment and profit motive. they often take a “good ethics is good business” approach and emphasize areas of environmental responsibility that will generate a profit. They might also update older energy-hungry heating or production units if the investment has the right payoff.Second. which they can indicate on their packaging and thereby attract environmentally conscious consumers. For example. However. the “good ethics is good business” approach . they might push recycling. if businesses agree that they have an environmental responsibility beyond what the law requires.

quickly appears shallow.

deceptive

and

Examples of Environmentally unsound Business Practices Although most companies are guilty of varying degrees of environmental irresponsibility, some extreme cases vividly illustrate irresponsibility at its worst. A first case involves resistance to air pollution control measures. In the early 1950s, Union Carbide built a series of metal and chemical plants in the Ohio valley, between Ohio and West Virginia. Mountains on both sides of the valley trap in soot, ash, and other air pollutants, which resulted in increased incidents of respiratory disease among local residents. During the 1960s, Union Carbide refuse to participate public discussions

about the problem and ignored a governmental request for an on site inspection. The company soon became a symbol of corporate resistance to pollution control. Part of their resistance owes to the fact that the environment was not an issue in the 1950s and new pollution control measures were both expensive and untested. Also, Union Carbide was less susceptible to consumer boycotts since only 20% of its products were direct consumer goods that we might purchase in a department store, such as antifreeze. In 1970s they became the target of the investigation by the newly formed Environmental Protection Agency, which instructed Union Carbide on several pollution control measures. Union Carbide responded by shutting down a

boiler plant and laying off workers, claiming that was the only way they could comply with the required pollution reduction. Critics charged that Union Carbide’s tactics amounted to environmental blackmail, threatening to cut jobs if they had to be environmentally responsible. Ultimately, Union Carbide restructured their company and adhered to pollution control standards. A second case of environmental irresponsibility involves nuclear power accidents. There are currently around 400 nuclear power plants world wide, providing about 15% of the world’s electricity. For the past few decades, the nuclear power industry has been under attack by environmentalists and few new plants have been started. Ironically, the original intent of

nuclear power was to provide a safe, clean, and cheap alternative to coal and oil, which are notoriously damaging to the environment. Nuclear power produces no smoke or carbon dioxide, and only harmless steam. It also doesn’t require environmentally intrusive mining or drilling efforts. Two major disasters contributed to the now tarnished image of the nuclear power industry, both the result of safety violations and human error. First occurred at the Three Mile Island nuclear power plant in Harrisburg, Pennsylvania. In 1979, a series of mechanical and human failures contributed to a partial core meltdown to one of its reactors. Radiation was released into the local community, and, although connections with health problems were difficult to prove, a family of

a Down’s Syndrome child received 1 million dollars in compensation. A much more serious nuclear power disaster occurred in 1986 in the Ukrainian city of Chernobyl, then part of the Soviet Union. Partly from negligence and partly from design problems, a steam explosion and fires threw tons of radioactive material into the environment. 31 people were killed and 1,000 injured from direct exposure to radioactive material by means of inhaling radioactive gasses and dust, and ingesting contaminated food or water. 135,000 people were evacuated from the surrounding area, hundreds of square miles of land was contaminated, and the long term health effects of the accident are still being assessed. Financial losses reached $3 billion, and countries throughout

Europe claimed losses into the hundreds of millions of dollars. Although the Soviet government owned the Chernobyl plant -- and not private industry -the disaster had a decisive impact on the entire nuclear power industry. In addition to the risks of catastrophic disasters such as Chernobyl, nuclear power plants create other environmental problems that involve nuclear waste disposal. Nuclear waste is deadly to animal life, and remains toxic for a very long time. After Three Mile Island and Chernobyl, critics called for a moratorium on the construction all future nuclear power plants, and a systematic closing of the ones currently in use. Defenders, though, argue that nuclear energy is necessary in view of the limitations of alternative energy sources, such as coal, oil, and solar technology.

They also argue that nuclear waste sites need to confine wastes for only a few thousand years since after 1,000 years the ingestion toxicity is comparable to that of the original uranium from which the wastes were derived. Finally, defenders say that we can reasonably expect a decrease in nuclear accidents even if we increase nuclear power use, similar to how airline travel has increased while their accident rate has decreased. Defenders recommend that clustered reactors provide better operational support, security, and handling of wastes. A third and final case of environmental disaster involves large-scale oil spills. In 1989, an Exxon oil tanker called the Valdez struck a reef in Alaska’s Prince William Sound and created the

The ship was so large that it took a full minute to respond to steering changes. the piloting officer miscalculated and ran the . Attempting to navigate around an iceberg. 42 year old Joseph Hazelwood.06. He had a reputation as a drinker. was with Exxon for 20 years. which an ineffective radar system failed to detect earlier. Icebergs were in the path of the ship. Hazelwood assigned the piloting of the vessel to a less experienced officer and then retired to his quarters. The captain of the ship.largest crude oil spill in US waters. The tanker trip was part of a routine convoy from Alaska to Long Beach California that was successfully made by other tankers over 8. and at the time of the disaster his blood alcohol level was . which some departments at Exxon knew about.000 times.

Hazelwood was ultimately fired for not being on the bridge at the time of the disaster and was convicted of negligent discharge of oil. The cleanup was also expensive. suffered an . Initially viewing it as only a public relations problem. The spill had a terrible impact on plant and animal life in the area.000. which made the situation worse. Exxon was slow to respond with cleanup efforts. it sloshed onto the beaches for hundreds of miles. with a punishment of 1000 hours of community service in the cleanup.ship into a reef. Exxon paid in excess of 2 billion dollars in the cleanup efforts and. just as significantly. which the news media vividly captured in pictures and on television. when the weather changed. the average cost of rehabilitating a seal was $80. Oil poured from the ship and.

Three Philosophical Theories of Environmental Responsibility As noted earlier. We will consider three of these theories. some businesses argue that their environmental responsibility is confined to what the law requires and what will yield a profit. 40. each of which yields substantially different conclusions about the . ethicists typically argue that businesses need to look beyond profit motive and legal regulations to find more persuasive reasons for environmental responsibility.000 Exxon credit card holders destroyed their cards.almost irreplaceable loss of reputation because of the disaster. However.

environmental businesses. and that its beauty and resources are preserved so human life on earth . The assumption here is that only human beings are morally significant persons and have a direct moral standing. This involves the duty to assure that the earth remains environmentally hospitable for supporting human life. a duty that is derived from human interests. Since the environment is crucial to human well-being and human survival. Environmental anthropocentrism is the view that all environmental responsibility is derived from human interests alone. then we have an indirect duty towards the environment. that is. or human centered. responsibility of The first of these theories is anthropocentric.

then. and the benefit that future generations of people will receive. On this view. they cannot have rights any more than a dead person can have rights. Some have argued that our indirect environmental duties derive both from the immediate benefit which living people receive from the environment. both parties to this dispute acknowledge that environmental concern derives solely from human interests. critics have maintained that since future generations of people do not yet exist. strictly speaking. Nevertheless. A second general approach to environmental responsibility is to base it on the moral consideration that we owe to animals. higher animals qualify as morally significant . But. a position that we will call the animal rights view.continues to be pleasant.

Our responsibility toward the environment. horses. then. as well as the environmental interests of humans. such as dogs. just as humans are. For Singer. cats. such as chickens. Animal rights advocate Peter Singer goes a step further and argues that even lower animals. Thus. the mistreatment of animals is analogous to racism and slavery since it gives unequal treatment to beings with equal interests. deserve equal moral consideration insofar as they are capable of experiencing physical pleasure and pain. cows. Singer describes this inequity toward animals as speciesism. either higher or lower. dolphins. and chimpanzees.creatures. pigs. hinges on the environmental interests of animals. environmental responsibility derives from the interest of all morally significant .

persons. Common to all of these claims. which includes both humans and at least some animals. Even if there is no direct human consequence of destroying environmental collections. The third theory is that of ecocentrism. that it is deserving of a direct duty. is the position that the environment by . such as animal species and rain forests. though. and that it has inherent worth. just as we have direct responsibilities to humans. which is that we have direct responsibilities to environmental collections. Ecocentrists use various terms to express this direct responsibility to the environment. They suggest that the environment has direct rights. that it qualifies for moral personhood. we still have a moral responsibility to those collections anyway.

the main premise of morality is that the individual is a member of a community of interdependent parts.itself is on a moral par with humans. Leopold explains that morality evolved over the millennia. as reflected in the Ten Commandments. The earliest notions of morality regulated conduct between individuals. For all three of these phases in the evolution of ethics. He calls this final phase the land ethic. Leopold argues that we are on the brink of a new advance in morality that regulates conduct between humans and the environment. Aldo Leopold first articulated econcentrism in his highly influential essay "The Land Ethic" (1949). For Leopold. "The land ethic simply . as reflected in the Golden Rule. Later notions regulated conduct between an individual and society.

and animals. plants. Implications for Businesses - Each of the above theories has different implications on business’s responsibility to the environment. businesses have an obligation not to damage the environment in ways that negatively impact on human life. waters. or collectively: the land. From the animal rights perspective. From the anthropocentric perspective." This involves a radical shift in how humans perceive themselves in relation to the environment. businesses have an obligation to avoid . Now we need to see ourselves as members of a community that also includes the land.enlarges the boundaries of the community to include soils. Originally we saw ourselves as conquerors of the land.

from the ecocentrist perspective. and damage to the environment harms animals more than it harms humans. This is especially pertinent given that the environment is the immediate habitat of animals. They need to avoid harming animals directly. instead we should prefer a sterility chemical. For example. we should not control pests through poisoning. or inhumane food production techniques. businesses have a direct obligation to protect the environment since it is wrong to harm members of the moral . Finally. since this causes animals to suffer.harming animals either directly or indirectly. such as they might do through animal testing. They need to avoid harming animals indirectly. such as they might do by destroying animal environments.

animals.community. For example. or they may pay off a community in compensation for living with the polluted stream. animal rights. In many cases the anthropocentric. they may restore the stream. and ecocentric interests overlap. sometimes when businesses are found legally responsible for polluting a stream. excess carbon dioxide. For example. though. several corrective options may be open to them. and environmental collections. First. toxic waste. which costs a lot of money. air and water pollution. and release of fluorocarbons equally affect humans. the interests of the three do not overlap. Although the . In many cases. which might cost them less money. and the environment is a member of the moral community.

suppose that a business considered building a factory on a site that.anthropocentrist will be satisfied with paying off the community. what should businesses do? First. To use another example. businesses will automatically be bound by . For the animal rights advocate and ecocentrist. if constructed. this reasoning ignores the needs of animals and the integrity of the ecosystem itself. In view of these various theories of environmental obligation. the business would only need to take into account the recreational value that the bird breeding ground would have to human bird watchers. this would not touch the concerns of the animal rights and ecocentrist. though. would destroy a breeding ground for birds. Typically. from the anthopocentrist position.

the environmental regulations that are required by law. it doesn’t cover everything. Although this covers much ground. If companies don’t respond properly. which greatly harms their reputation. companies need to take this into account. and. Second. Animal rights and environmental lobby groups today are becoming increasingly more influential. they appear arrogant and uncaring. Many environmental problems lend themselves to graphic portrayal by the media -such as sea animals covered in oil -which intensifies negative public opinion towards a company. . businesses should at least be sensitive to environmental concerns from both the anthropocentric and animal rights perspectives. as a matter of good public relations and even survival.

Study Questions for “Business and the Environment” Introduction (1) What are some of the life threatening environmental issues connected with business and industry? Businesses’ Resistance to Environmental Responsibility (2) What are the four reasons why businesses have such a negative impact on the environment? (3) Why do many businesses in third world countries pose big environmental problems? (4) What is wrong with businesses saying that their environmental responsibility is confined to what the law requires? (5) What is wrong with businesses saying that their .

environmental responsibility is linked with what will generate a profit? Examples of Environmentally unsound Business Practices (6) What is “environmental blackmail”? (7) What are some of the environmental problems associated with nuclear power plants? (8) What reasons do some people give in defense of nuclear power plants? (9) What were some of the negative consequences for Exxon resulting from the Valdez accident? Three Philosophical Theories of Environmental Responsibility (10) What is the basis of our environmental responsibility according to anthropocentrism? .

(11) What is speciesism? (12) What is the basis of our environmental responsibility according to ecocentrism? Implications for Businesses (13) On what environmental issues do anthropocentism. and ecocentrism overlap? (14) Why should businesses be sensitive to environmental concerns from the anthropocentric and animal rights perspectives? . animal rights.

These may be general principles such as. for example. there is a detailed description of the social practices which the enterprise wishes to see respected in the production and sale of the goods and services which it markets.Code of Conduct Characteristics The codes of conduct or codes of practice adopted by a number of mainly multinational enterprises include a variable number of principles which define the ethical standards of the enterprise. the concept of non-discrimination while. in a number of cases. Some enterprises make a distinction between the basic principles which regulate its internal activity and those which it wants to apply in the selection .

United . A number of codes make explicit reference to ILO Conventions. the reference is more indirect. in particular those concerning the respect of human rights at work. while the concept of ethical practice has made a remarkable comeback in recent years in the strategic policy of industrial and commercial enterprises. even if the principles established are often based on fundamental ILO Conventions. The agrofood.and monitoring of activities of its subcontractors. However. it is above all in the textile sector. In other cases. chemicals and consumer products sectors are amongst those which have progressively introduced a number of codes of practice. that the trend is the most evident. and in particular in clothing and footwear. forestry.

on the other hand. practically no initiatives of this kind have been taken. Since Levi Strauss adopted in 1992 a code entitled "Business partner terms of engagement and guidelines for country selection". In the developing countries. a growing number of production enterprises working under subcontracting arrangements for the multinational enterprises of the . the trend has been longer in coming. although increasing attention is now being given at the headquarters of the major European enterprises in the TCF sectors to the specific application of codes of "good practice" and codes of conduct.States enterprises have played a pioneering role in this respect. many other enterprises producing apparel and footwear as well as major retail groups have followed suit. In Europe.

Origin and rationale of the phenomenon In the 1970s. considerable criticism was levelled against multinational enterprises concerning their activities in the developing countries. It was such criticism which led to the establishment.industrialized countries must respect the codes established by the latter. by a number of government international . which significantly affects their activities. National and international trade unions as well as a number of host countries accused them of carrying out their activities without consideration of the harmonious social and economic development of the countries in which they operated.

organizations. the International Labour Organization adopted in 1977 a Tripartite Declaration of Principles on Multinational Enterprises and Social Policy which is still in force and to which trade unions in the TCF sector attach considerable importance. To some extent the codes drawn up by intergovernmental . such as that of the United Nations. of draft codes of conduct some of which. held in Geneva between 28 October and 1 November 1996. In the social sphere. as can be seen from a draft resolution tabled by the Workers' group at the recent ILO Tripartite Meeting on the Globalization of the Footwear. have remained a dead letter. Textiles and Clothing Industries: Effects on Employment and Working Conditions.

Other external factors have contributed to the recent publication of codes of conduct. Garment and Leather Workers' Federation has for many years been calling for a greater sense of social responsibility by enterprises in the sectors and has provided support to national federations in their campaign for the respect of . The pressure brought to bear by the international trade union movement has without doubt played an important role in this process. In the TCF sectors the International Textile. and in particular that of the ILO in this sphere of social policy. which were of a voluntary kind can be seen as the forerunners of subsequent initiatives taken unilaterally by individual enterprises.international organizations.

freedom of association.human rights at work. Consumers' associations as well as a number of non- . nondiscrimination as well as occupational safety and health. forced labour. of the United States where in May 1995 the Clothing Manufacturers' Association of the United States of America (employers) and the Amalgamated Clothing Textiles Workers' Union (workers) signed for the first time a national branch collective agreement which included. amongst other aspects. a code of conduct applicable to enterprises and their subcontractors which established minimum standards regarding wages. mention may be made. child labour. Of the progress made in this sphere. for example. hours of work.

governmental organizations have also endeavoured to draw the attention of consumers. The following chapter contains a summary of some of these initiatives which clearly . Although in a large number of cases attention has been focused on the specific problem of child labour. associations and organizations have taken their campaign further either by trying to promote social labels for one or more categories of TCF products. the public authorities and the enterprises concerned to the need to respect a number of minimum rules regarding human rights. or by organizing campaigns to sensitize the public to the general problems of basic workers' rights or by trying to draw up standard codes which enterprises could adopt and tailor to their particular needs.

Governments have also played a significant role in the promotion of standards concerning the respect of human rights and codes of conduct. In Europe some governments.show the increasing awareness of the international community about the social problems raised by globalization in the TCF sectors. the so-called "No Sweat" campaign introduced by the Clinton Administration in the fight against sweatshops has . In the United States. are calling for greater respect of human rights in the sphere of international trade and are actively participating in national studies as well as research carried out by the European Commission on the social aspect of international subcontracting in the TCF sectors. such as that of France.

led to the establishment of a Trendsetter List of enterprises in the TCF sectors which respect labour legislation and human rights in general in their production and marketing activities and ensure that these rights are respected by their subcontractors. in particular in subcontracting of apparel production. At the same time as it stepped up its inspections. it adopted a positive approach by drawing up and distributing to the . and which has been faced with a number of cases involving the exploitation of immigrant workers in sweatshops set up on the United States territory. The Department of Labor. which had identified a number of deficiencies concerning the respect of human rights and labour legislation in the TCF sectors. has taken steps to clean up the sector.

this list. included a large number of enterprises which had adopted a code of conduct. In 1996. Nordstro Works m Bergners Henri Old Navy Bendel Clothing .media a list of socially responsible enterprises in the sectors producing and marketing TCF articles. reproduced below. Enterprises participating in the "No Sweat" campaign Abercrombie Galyans & Fitch Trading Baby GapKids Superstore Mast Industries NFL Propertie s Banana Gerber Nicole Republic Childrens Miller wear Bath & Body Guess Inc.

Store Bryland Lands End Pantaloon ’s Boston Jessica Patagonia Stores McClintoc k Cacique Lane Structure Bryant Carson Pirie Lerner Superior Scott New York Surgical Mfg. Dana Levi The Buchman Strauss Limited Elisabeth Limited The Gap Too Express Liz Victoria's Claiborne Secret Source: Department of Labor. 25 Mar. with the help of the . 1996. It is undeniable that this campaign.

Sporting Goods Manufacturers' Association. Its 1996 session offered the opportunity to a number of enterprises and employers' associations in the TCF sectors (Levi Strauss. International Mass Retail Association) to show what progress had been achieved in . the Bureau of International Labor Affairs of the Department of Labor organized three public hearings on international child labour issues which outlined the conditions of child exploitation in the world in all industries which export products to the United States. the United States Government has been particularly active.media. has given enterprises an added impetus to adopt codes of conduct. Between 1994 and 1996. In the specific sphere of child labour.

at the request of Congress. A number of representatives of nongovernmental organizations and trade unions also described their activities in this sphere.1 The study. in particular through codes of conduct. including in the promotion of codes.this sphere. In 1996. the Department of Labor also published. and in particular Senator Harkin who is responsible for a number of Bills to prohibit the import of products made by children. a study on the influence of codes of conduct adopted by United States apparel enterprises on child labour. The presence of members of Congress. which examined a representative sample of some 48 enterprises selected from the major firms in the production and . reflected the growing concern of political circles in the United States about this delicate problem.

). clearly confirmed that the adoption and application of codes of conduct which contained a reference to the prohibition of child labour (in 42 out of 48 enterprises) had reduced child labour in the subcontracting enterprises established in the developing countries. The report believes that although it is likely that a number of other factors also contributed to this improvement (greater awareness of consumers of the problems of child labour. etc. concern by exporters about possible legislative measures to boycott products made with child labour.marketing of clothing in the United States. there is no doubt that the most significant impact is due to the increasing number of codes of . The drop was particularly significant in Central America.

the globalization of the economy has also encouraged greater awareness of the commercial importance of the respect or nonrespect of basic standards relating to human rights. in recent years. It is no longer possible for the developing countries which want to increase or maintain their penetration of the markets of industrialized countries to ignore the existence of various kinds of pressure which exist in this sphere. to reduce the obstacles to the ratification of these fundamental standards and their . As a result.conduct established over the last five years. often with assistance from the ILO. a number of governments have endeavoured. By strengthening the role played by the developing countries in international trade.

which benefits from broad media coverage and against which pressure is greatest in the context of the liberalization of trade. an agreement to discontinue the employment of children of school age in apparel enterprises and to provide for their participation in . with the support of governments and local non-governmental organizations. it is for example within the framework of this programme and in collaboration with UNICEF that the Bangladesh Garment Manufacturers' and Exporters' Association signed. The most dramatic progress has been made in this sphere of child labour. Here once again the ILO has played an important role as catalyst. In the TCF sectors. in particular through its International Programme for the Elimination of Child Labour (IPEC).effective application.

In the industrial countries. the decisive factor for the adoption of such codes is . However. Social progress of this kind is without doubt the first step towards the establishment of more elaborate codes of conduct which take account of the new social requirements of international trade.special education programmes. It is true that pressure brought to bear by trade unions and consumer' associations or non-governmental organizations play an important role. as noted above. Furthermore. some government campaigns may have a significant influence on industrialists and encourage them to give greater attention to social matters. the motivations of enterprises which have adopted codes of conduct are often more complex.

In the textile and footwear sectors. On these highly competitive markets. employees.probably the public image which the enterprise wants to project to its clients. it is therefore important for a company to project a positive . An enterprise's public image is now an asset which must be protected and developed to the maximum. in which the concept of the socially responsible employer has acquired a new importance. suppliers and shareholders. The construction of a positive public image. a company's public image is particularly important and often determines a decision whether the public will buy its goods. is a long-term and increasingly more complex task in which management teams are much more involved in the past.

image and to retain a good reputation over the long term. at the risk of using its credibility. To the extent that the media highlight certain conditions of work which are particularly deplorable both in the sweatshops of the industrialized countries as well as in the developing countries. Given the importance of subcontracting practices in the TCF sectors. it is clear that an enterprise which adopts a code of . It is therefore up to the enterprise to implement the principles established in the code. the adoption by a global enterprise of a code of conduct is an attempt to provide a kind of guarantee for the final consumer that the products made or marketed by the company have not involved any kind of exploitation of workers concerned.

conduct takes a number of risks because any failure to respect the code which is noted by trade unions or the media will have greater impact and a correspondingly negative effect. and in particular the Anglo-Saxon press which is more sensitive to the subject. includes many examples of enterprises which have been singled out for their non-respect of their code of conduct. This explains the importance of application conditions and helps explain why some enterprises prefer to keep a low profile and refrain from giving too much publicity to their codes of conduct. The most frequent examples in the apparel and footwear sectors concern the non-respect of human rights in factories working under subcontracting arrangements for large international brands. The press. most .

The recent scandal in the United States caused by the Kathie Lee Gifford case is symptomatic of the influence of the media on the social image of an enterprise. However. The combination of factors concerning the person in question and the . celebrities who use their fame to promote a given brand of clothing or shoes are also subject to criticism in the media if the products bearing their name have been manufactured in conditions which do not respect the fundamental rights of workers. This leading television presenter had to explain why she had agreed to let the Wal-Mart enterprise use her name and her fame to promote a line of clothing some of which had apparently been produced in sweatshops in Honduras and even New York.often in the developing countries.

and it is by no means sure that the numerous statements of good intentions on both sides have managed fully to re-establish consumer confidence. In the same way. to protect their competitiveness. In their search for a balance between the lowest possible production costs. and the . the many articles which have appeared in the press on the cost of manufacturing sport shoes in the developing countries compared with their selling price in the industrialized countries morally penalize leading enterprises in the sector which are furthermore trying to promote good social practice through their codes of conduct.fact that the Wal-Mart enterprise had its own code of conduct considerably tarnished the image of both parties.

multinational enterprises in the TCF sectors have little room for manoeuvre. chairs in business ethics have been established in a large number of universities and business schools) it is only recently that a number of financial analysts have noted that enterprises which applied codes of conduct performed better than average on the stock exchange. It should however be pointed out that although theoretically the importance of the ethical aspect in the management of enterprises has been widely recognized (since the beginning the 1980s. conclusions cannot be drawn about the existence of a direct link of cause .2 Of course. Hence the extreme sensitivity to the subject in the context of globalization.maintenance of a good social image likely to satisfy consumers and pressure groups.

provided that their application is not subject to restrictions.3 The large majority of trade unions favour the generalization of codes of conduct. the main weakness of the codes lies in the fact that they are applied and monitored by the enterprise . In their view. Some investment consultancy firms now take account of ethical elements in their criteria for the composition of stock exchange portfolios.and effect between these two factors since it is generally the most productive enterprises in a given sector which have the human and financial resources enabling them to develop an ethical approach. It can however be noted that the existence of a responsible social attitude is not detrimental to the image which financial markets have of a given enterprise.

the generalization of such a system raises a number of problems . it rarely has the necessary human resources to do so. Trade unions therefore favour a new approach in which the control of the application of codes would be entrusted to independent and trustworthy persons or associations. This twofold responsibility restricts their effectiveness. its ethical principles. This would involve developing a kind of "social audit" function comparable to that of a financial audit.itself which is thus both judge and jury. Furthermore. It is in fact often the employees responsible for product quality and the commercial agents of the firm who control the application of the codes by subcontractors. they believe that even when the enterprise tries to apply. at all levels. Of course.

it is worth noting that the case of The Gap enterprise. 1 A conclusion reached. However. in a study published in 1996 by Peter Prowse 2 . Washington. 242 pp. is a major precedent which could become standard practice in the future.which go beyond the purely financial aspect of the cost of an additional audit and is still a long way off. 1996. for example. Notes: US Department of Labor. Bureau of International Labor Affairs: "The apparel industry and codes of conduct: A solution to the international child labor problem?". DC. which accepted the external monitoring of its application of its code (this case will be examined below).

3 . It is therefore the first Swiss private bank to propose ethical criteria. In Switzerland the branch of a Scandinavian bank (Edouard Constant bank) has had an ethical portfolio since 1 January 1997.Associatives on the annual reports of the 100 main companies quoted on the stock exchanges in Europe.

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India .HDFC PROFILE HDFC Bank was incorporated in August 1994. and. currently has an nationwide network of 1229 Branches and 2526 ATM's in 444 Indian towns and cities.

India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995.(RBI) to set up a bank in the private sector. HDFC has . the Corporation has maintained a consistent and healthy growth in its operations to remain the market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. with its registered office in Mumbai. Promoter HDFC is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited'. Since its inception in 1977. as part of the RBI's liberalisation of the Indian Banking Industry in 1994.

and to achieve healthy growth in profitability. large shareholder base and unique consumer franchise. a strong market reputation.developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. The bank is . Business Focus HDFC Bank's mission is to be a World-Class Indian Bank. With its experience in the financial markets. HDFC was ideally positioned to promote a bank in the Indian environment. The objective is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services for target retail and wholesale customer segments. consistent with the bank's risk appetite.

Product Leadership and People.Operational Excellence.5 billion).000 shareholders. The HDFC Group holds 19.4.committed to maintain the highest level of ethical standards. corporate governance and regulatory compliance.4% of the bank's equity and about 17. HDFC Bank's business philosophy is based on four core values . The shares are listed on the Stock Exchange. Customer Focus. professional integrity.6% of the equity is held by the ADS Depository (in respect of the bank's American Depository Shares (ADS) Issue).2 billion). The paid-up capital is Rs424.6 crore (Rs. Capital Structure The authorised capital of HDFC Bank is Rs550 crore (Rs5. . Roughly 28% of the equity is held by Foreign Institutional Investors (FIIs) and the bank has about 570.

Mr. administration. The bank's American Depository Shares are listed on the New York Stock Exchange (NYSE) under the symbol 'HDB'. The Bank's Board of Directors is composed of eminent individuals with a wealth of experience in public policy. industry and commercial banking. Senior . has been a professional banker for over 25 years. and before joining HDFC Bank in 1994 was heading Citibank's operations in Malaysia. Aditya Puri. The Managing Director. Management Mr. Mr. Capoor was a Deputy Governor of the Reserve Bank of India.Mumbai and the National Stock Exchange. Prior to this. Jagdish Capoor took over as the bank's Chairman in July 2001.

All the bank's branches have online connectivity. Senior banking professionals with substantial experience in India and abroad head various businesses and functions and report to the Managing Director. the bank believes that its people are a significant competitive strength. Given the professional expertise of the management team and the overall focus on recruiting and retaining the best talent in the industry. which enables the bank to offer speedy funds transfer facilities to its . Technology HDFC Bank operates in a highly automated environment in terms of information technology and communication systems.executives representing HDFC are also on the Board.

The Bank has made substantial efforts and investments in acquiring the best technology available internationally. expertise and . the Bank has succeeded in leveraging its market position.customers. The Bank has prioritised its engagement in technology and the internet as one of its key goals and has already made significant progress in webenabling its core businesses. The Bank's business is supported by scalable and robust systems which ensure that our clients always get the finest services we offer. to build the infrastructure for a world class bank. In each of its businesses. Multi-branch access is also provided to retail customers through the branch network and Automated Teller Machines (ATMs).

For these customers. cash management. The bank .technology to create a competitive advantage and build market share. including working capital finance. Business HDFC Bank offers a wide range of commercial and transactional banking services and treasury products to wholesale and retail customers. transactional services. the Bank provides a wide range of commercial and transactional banking services. The bank has three key business segments: Wholesale Banking Service The Bank's target market ranges from large. etc. blue-chip manufacturing companies in the Indian corporate to small & midsized corporates and agri-based businesses. trade services.

Based on its superior product delivery / service levels and strong customer orientation. the Bank has made significant inroads into the banking consortia of a number of leading Indian corporates including multinationals. It is recognised as a leading provider of cash management and transactional banking solutions to corporate customers.is also a leading provider of structured solutions. companies from the domestic business houses and prime public sector companies. which combine cash management services with vendor and distributor finance for facilitating superior supply chain management for its corporate customers. mutual funds. stock exchange members and banks. Retail Banking Service .

which is generally accepted as a key factor in attaining fairness for all stakeholders and achieving organizational efficiency. Phone Banking. This . The products are backed by world-class service and delivered to customers through the growing branch network. as well as through alternative delivery channels like ATMs. giving the customer a one-stop window for all his/her banking requirements.The objective of the Retail Bank is to provide its target market customers a full range of financial products and banking services. Corporate Governance HDFC Bank recognizes the importance of good corporate governance. NetBanking and Mobile Banking.

) Key Shareholders Rights Listing Registrars and transfer agents Grievance Redressal Dividend Policy Memorandum of Association Articles of Association Board Meetings . is established to provide a direction and framework for managing and monitoring the bank in accordance with the principles of good corporate governance. therefore. • • • • • • • • • • • • • • • Code of Corporate Governance Corporate Governance Rating Composition of the Board Profiles of Directors Board Committees Ownership Rights Promoters Rights( HDFC LTD.Corporate Governance Policy.

The bank would have loan application forms for retail advances and credit cards. if any. pre-payment options and any other matter which affects the interest of . the amount of such fees refundable in the case of non acceptance of application. payable for processing. These would include information about the fees/charges.• • • Quarterly Updates Fair Practice Code for Lending Code of Ethics / Conduct Fair Practices for lending 1.

As part of the wholesale banking business. The bank has a process for identification of target customers to whom facilities can be provided based on customer selection and risk assessment for that segment. so that a meaningful comparison with that of other banks can be made and an informed decision can be taken by the borrower. 2. the bank has various segments to which credit facilities are provided for their business requirements.the borrower. These include a wide range of customers and range from small & medium enterprises to large corporate borrowers. the focus is on contacting prospective . Thus.

Code of Ethics 1. Thus. Be aware of frauds Security tips . 2.customers and encouraging them to avail of banking services from HDFC Bank based on the incremental value we can add to a customer's business. we do not have any standardized application forms to be submitted by prospective customers. rather than customers making applications to the Bank for facilities / services. for the wholesale banking segment.

Internet Browsing 18. Money mules Introduction: . Fair Practices 16. Code of Corporate Governance 5. Promoters Rights 11. Security Meaasures of HDFC 4. Dividend Policy 13. Articles of Association 15. Composition of board 7. Code of Lending 17.3. Committee of Directors 8. Ownership Right 10. Memorandum of Association 14. Profile of Directors 9. Code of corporate Rating 6. Keyshareholders Right 12.

including the ethical handling of actual and / or apparent conflicts of interest between personal and professional relationships. 1. The Board Members 2. Applicability: This Code of Ethics/Conduct is applicable to the following persons. Officials of the Bank one level below the Board Ethical Conduct: The Board members / Officials shall engage in and promote honest and ethical conduct of .The Board members / Officials shall engage in and promote honest and ethical conduct of business.

including the ethical handling of actual and / or apparent conflicts of interest between personal and professional relationships. its business. Confidentiality of Information: The Board members / Officials shall ensure and take all reasonable measures to protect the confidentiality of non-public information about the Bank. Conflict of Interest: The Board members / Officials shall avoid conflict of interest and disclose to the Board any material transaction or relationship that reasonably could be expected to give rise to such a conflict. customers and other materially significant information obtained or created in connection .business.

accurate. Disclosure of Information: The Board members / Officials shall endeavor to produce full.with any activities with the Bank and to prevent the unauthorised disclosure of such information unless required by applicable laws or regulations or legal or regulatory process. timely and understandable disclosures in reports and documents that the Bank files with or submits to the Securities and Exchange commission and other regulators and in other public communications made by the Bank.Compliance with Governmental Laws. fair. Rules and Regulations: .

Contract or Term of Employment: Nothing in this Code or other related communications by itself creates or implies an employment contract or terms of employment.The Board members / Officials shall comply with all the applicable governmental laws and the applicable rules and regulations. Violation of the Code: . Variation of the Code and Waivers: The Code shall be reviewed from time to time for updation thereof. Any variation in the Code or any waivers from the provisions of the Code shall be approved by the Board and shall be disclosed on the Bank's website.

Your Bank's dividend policy is based on the need to balance the twin objectives of appropriately rewarding shareholders with cash dividends and of retaining capital to maintain a healthy capital adequacy ratio to support future growth. Dividend Policy Your Bank has had a track record of moderate but steady increases in dividend declarations for the last 10 years and dividend payout ratio in the last few years has been in the range of 20-25 %. In line with this policy and recognisation of healthy .The Board shall have the powers to take necessary action in case of any violation of the code.

performance during 2007-08.2008 as against 70% for the year ended March 31. your directors pleased to recommend a dividend of 85% for the year ended on March 31. Details of dividend declared by the Bank: 2007-2008 2006-2007 85% 70% . 2007. This dividend shall be subject to distribution tax to be paid by the Bank but will be tax-free in the hands of the members.

1997 55% 45% 35% 30% 25% 20% 16% 13% 10% 8% OWNERSHIP RIGHTS Certain rights that a shareholder in a company enjoys : To transfer the shares.1999 1997 .2002 2000 .2005 .2005 2003 .2003 2001 . .2000 1998 .1998 1996 .2001 1999 .2004 2002 .2006 2004 .

In case the member is a body corporate. to appoint a representative to attend and vote at the general meetings of the company on its behalf. To vote at the general meeting on show of hands wherein every shareholder has one vote. the balance sheet and profit and loss account and the auditors' report. annual report. To receive notice of general meetings. In case of vote on poll. To appoint proxy to attend and vote at the general meetings. To attend and speak in person.To receive the share certificates upon transfer within the stipulated period prescribed in the Listing Agreement. the number . Proxy cannot vote on show of hands but can vote on a poll. at general meetings.

To requisition an extraordinary general meeting of any company by shareholders who collectively hold not less then 1/10th of the total paid-up capital of the company. 1949.000 shares or are not less than 1/10th of the total voting power in respect of any resolution. To demand poll along with other shareholder(s) who collectively hold 5. the voting rights on a poll of a shareholder of a banking company are capped at 10% of the total voting rights of all the shareholders of the banking company. To move amendments to resolutions proposed at .of votes of a shareholder is proportionate to the number of equity shares held by him. As per Banking Regulation Act.

1956. as and when declared / announced. To receive the residual proceeds upon winding up of a company. To proceed against the company by way of civil or criminal proceedings. . To inspect various registers of the company. To receive dividend and other corporate benefits like rights. To inspect the minute books of general meetings and to receive copies thereof after complying with the procedure prescribed in the Companies Act.meetings . To apply for the winding-up of the company. To appoint or remove director(s) and auditor(s) and thus participate in the management through them. bonus shares etc.

The rights mentioned above are prescribed in the Companies Act. 1956 and Banking Regulation Act. wherever applicable. and should be followed only after careful reading of the relevant sections. These rights are not necessarily absolute. 1949. .

singly or jointly hold not less than 20% of the paid-up share capital of the Bank. promoter of the Bank: The Board shall appoint nonretiring Directors from amongst the Directors nominated by HDFC Limited with the approval of shareholders. with the approval of the Board and the shareholders so long as HDFC Limited and its . HDFC Limited shall nominate either a part-time Chairman and the Managing Director or a full time Chairman. so long as HDFC Limited and its subsidiaries.PROMOTERS RIGHTS The Memorandum and Articles of Association of the Bank provides the following rights to HDFC Limited.

the two directors so nominated by HDFC Limited are the Chairman and the Managing Director of the Bank. so long as HDFC Limited. Under the terms of Bank’s organisational documents. HDFC Limited has a right to nominate two directors who are not required to retire by rotation. its susbsidiaries or any other company promoted by HDFC Limited either singly or in the aggregate holds not less than 20% of paid up equity share capital of the Bank. At present. singly or jointly hold not less than 20% of the paid-up share capital of the Bank.subsidiaries. .

H.O.Bibliography References 1. ^ "Ethics the easy way"..E. Retrieved on 200805-21. .R.

Milton (1970-0913). (2007). 7. The New York Times Magazine. (1979). ^ Enderle. "The Social Responsibility of Business is to Increase Its Profits". 6. Retrieved on 2008-05-21. 1. 4.ht ml Further reading • Albertson. R. University of Notre Dame Press. M. "What is wrong with slavery".edu/acade mics/centers/cbes/jonachan. ^ Hare. Todd. 3. ^ "Miliband draws up green tax plan". Philosophy and Public Affairs 8: 103–121. Business Ethics.stthom. Richard de (1999). International Business Ethics. ^http://www. ISBN 0-268-01214-8. The Gods of Business: The . BBC (2006-10-30).2. 5. ^ George. ^ Friedman. Georges (1999).

• Intersection of Faith and the Marketplace. Los Angeles. Jack N. CA: Trinity Alumni Press. (1988). NJ: . Englewood Cliffs. Behrman. Essays on Ethics in Business and the Professions.

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