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)

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

inspiration and motivation have always played a key role in the success of any venture. it is often difficult to understand . At this level of understanding. 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.

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

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

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

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

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

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

Ethics is the science of morality or the systematic study of moral rules and principles. By encyclopedia of Judaism . By dental dictionary 4. 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. 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. a system of moral principles. quality.3. The science of moral obligation. or practice.

virtue.5. For a possible distinction between ethics and morality. Instead. freedom. 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. the various rules of 6. duty. For the kinds of problems encountered. relativism. Also the second-order study of the objectivity. rationality. see morality. . choice. or skepticisms that may attend claims made in these terms. The study of the concepts involved in practical reasoning: good. see under the special terms. subjectivity. obligation. right.

which denotes internalized moral virtue and its expression in practice as abstention from immoral conduct. By Columbia encyclopedia 7. .moral conduct are subsumed under the rubric of śīla. 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.The study and evaluation of human conduct in the light of moral principles. By Buddhism dictionary .

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

Inculcated 4. England’s Classification 4. desirable or undesirable. Grave’s Classification 3. Social Phenomenon 5. Learned Responses 3.individual on the basis of which he judges what is good or bad. ethical or unethical. Adaptive Process Values are even classified into various categories that are – 1. Part of culture 2. Rokech’s Classification . Allport’s Values Classification 2. 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. Gratifying Responses 6.

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

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

The moral concept of justice has one meaning concerned with developing . 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.way to characterize values is that they are what an individual believes to be having worth and importance to their life. Morals are values that we attribute to a system of beliefs that help the individual define right versus wrong. good versus bad. but only those beliefs that define importance. These values typically get their authority from something outside the individual – a higher authority. Values do not encompass all beliefs.

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

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

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

Ethics aims at perfection in the . • Ethics co–exists with law. 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. 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.

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

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

• • • • Leadership issues: corporate governance. Law reform. The misuse of corporate ethics policies as marketing instruments. such as the ethical debate over introducing a crime of corporate manslaughter. Political contributions made by corporations. 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. .

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

See also: affirmative action. such as the rights and duties owed between employer and employee. strike breaking. race. sexual harassment. religion. • • • Discrimination issues include discrimination on the bases of age (ageism). 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. disabilities. Issues affecting the privacy of the employee: workplace . weight and attractiveness. gender.

• • • surveillance. Issues relating to the fairness of the employment contract and the balance of power between employer and employee: slavery. See also: privacy. Issues affecting the privacy of the employer: whistle-blowing. 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. but where is the ethical line to be drawn? . drug testing. Occupational safety and health. employment law.[4] indentured servitude. To some extent society regards this as acceptable.

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

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. grey markets. or the degree of permissibility may depend on the changing state of preventative technologies or changing social perceptions of acceptable risk. Black markets.• • products regarded as immoral or harmful Children and marketing: marketing in schools. 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. .

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

• • Patent infringement. copyright infringement.Ethics of intellectual property. knowledge and skills Knowledge and skills are valuable but not easily "own able" as objects. 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. trademark infringement. Misuse of the intellectual property systems to stifle competition: patent misuse. .

Even the notion of intellectual property itself has been criticized on ethical grounds: see intellectual property. in order to prevent any competitors employing them. 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. international . Business intelligence and industrial espionage. patent troll. Bioprospecting (ethical) and biopiracy (unethical). The practice of employing all the most talented people in a specific field. International business ethics While business ethics emerged as a field in the 1970s. submarine patent.• • • • • copyright misuse.

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

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

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

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

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

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

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

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

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

It is hoped that having such a policy will lead to greater ethical awareness. or they can be more detailed policies. 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. and legal . An increasing number of companies also requires employees to attend seminars regarding business conduct. containing specific behavioral requirements (typically called corporate ethics codes). specific case studies. which often include discussion of the company's policies. consistency in application. and the avoidance of ethical disasters.called a corporate ethics statement).

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

company will avoid a lawsuit because its employees will follow the rules. at worst. 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. . by both word and example. most ethicists would suggest that an ethics policy should be: • Given the unequivocal support of top management. this makes the policy duplicitous. whether or not such conduct is explicitly sanctioned by management. and. Thus. at best. Should a lawsuit occur. it is merely a marketing tool. To be successful.

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

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

Although intended to assist judges with sentencing. even small and medium-sized companies have begun to appoint ethics officers. They often report to the Chief Executive Officer and . 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. which set standards that organizations (large or small. WorldCom and Tyco). commercial and non-commercial) had to follow to obtain a reduction in sentence if they should be convicted of a federal offense.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.

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

the competitive business environment the . In part. a culture and climate that usually emanates from the top of the organization.minimal. 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 other institutions that affect an individual. over the short term. this is because ethical business practices result from a corporate culture that consistently places value on ethical behavior. The foundation for ethical behavior goes well beyond corporate culture and the policies of any given company. for it also depends greatly upon an individual's early moral training.

associated with the avoidance of charging interest on loans. society as a whole. religious and cultural perspectives have a strong influence on the conduct of business and the creation of business values. . Particularly in Asia and the Middle East. indeed. 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. Examples include: • Islamic banking.company is in and.

those who dispute that premise. political. . (who contend that "business ethics" is an oxymoron) do so by definition outside of the domain of business ethics proper. for example. 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. the branch of philosophy that deals with the philosophical.• • Traditional Confucian disapproval of the profitseeking motive. such as libertarian socialists. that the ethical operation of a private business is possible -. Business ethics operates on the premise.

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

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

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

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

3. Paying salaries lower than those fixed by the government to the employees. Smuggling of goods. sales tax. poor lightning. Evasion of excise duty. • Against Government 1.elected as directors. income tax etc. Revealing confidential information or trade secrets to competitors. Artificially inflating profits to get re. Lack of safety measures for workers. Poor working conditions like dirty water. Unethical Business Practices • Against Employees 1.5. 6. 7. 2. 2. Overlooking safety violations to get the job done. .

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

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

Accepting Gifts 3. Treatment of problem employees 5. Dumping of pesticides Micro level problems: 1. Fairness in performance appraisal 2.2. Confronting expense account Levels of Ethical Decisions in business Level 4 Individual Level 3 Internal policy Level 2 Stakeholders . Confidentiality of company 4.

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

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

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

Such a significance of business ethics is attributable to following reasons: 1. a business organization is pressurized by various environmental factors to act credibly and behave ethically.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. Thus a business . Environmental Pressures: As apart of overall economic system.

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

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

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. There are six major elements that are essential ethical judgments: 1. . Identification and It refers to the ability to judge the relevance or non relevance of ethical factors in decision making situations.Business Managers must come to appreciate the key elements that comprise making ethical judgments. Ethical Ordering: 2. In addition to their identification. ethical issues must be ranked.

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

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

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

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

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.When the mechanism of moral disengagement are at work in corporations. Numerous exonerative strategies can be enlisted to disengage social and moral sanctions from detrimental practices with a low sense of personal accountability. business ethics is difficult to manage. especially when the sanctioning practices are surreptitious and the responsibility for policies is diffused. .

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

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

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. . ideal moral principles will be checked by economic viability. scrupulous marketing. This may be more than a tightbudgeted business bargained for. we will look at three different ways of deriving standards of business ethics. environmental impact.company from some legal and public relations nightmares. truthful advertising. morality in business is also costly. and humane working conditions. A morally responsible company must pay special attention to product safety. In most issues of business ethics.

it is profitable to make safe products since this will reduce product liability lawsuits.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. Similarly. There are both weak and strong versions of this approach. The weak version is often expressed in the dictum that good ethics results in good business. it may . which simply means that moral businesses practices are profitable. For example.

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

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

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

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

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

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

or at least in the United States. without a widely recognized system of ethics that is external to the law. supra-legal moral obligations in our society appear to be optional. it is reasonable to expect their businesses to maintain a respect for elders even if it is not part of the legal system. we lack a counterpart to an external source of morality as is present in Muslim or Confucian societies.has a strong emphasis on filial piety. and. 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. in Chinese and other Confucian societies. it is unreasonable to expect business people to be obligated . thus. Even within Christianity. In short. In Western culture.

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

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

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

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

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

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. This is the approach taken by most philosophers who write on business ethics. The law . 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.

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

unfairness. These principles do not tell us specifically what counts as harm. 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? .• on the rationally reflective choices of people. But. or a violation of human rights. The attraction of these principles is that they appeal to universal moral notions that no one would reasonably reject. Veracity principle: businesses should not be deceptive in their practices. the problem with these principles is that they are too general.

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

competitors. including employees. 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. and communities. Alternatively. 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. creditors. should the stockholders' interests have . suppliers. the stakeholder approach to business ethics emphasizes that we should map out of the various parties affected by a business practice. governments.A stakeholder is any party affected by a business practice.

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.

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

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

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? .Such cases often reveal blatantly crude. insensitive. which we can view as warning signs of unethical conduct. or reckless attitudes of businesses.

(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.(6) What are problems with this? Business Ethics Restricted to Following the Law (7) Define “supra-legal” principle. (12) What is the problem with deriving business ethics from broad moral principles? (13) What is a stakeholder? .

(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 .

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. 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 challenge for businesses here in the United States it difficult enough when balancing one’s profit interests against the needs of employees. consumers. the moral expectations of the host country are as stringent as our own. In developed countries. influencing foreign . though. governments and special interest groups.

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

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

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

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

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

000 in fines and five years in prison.fine. A dramatic example of bribery naivete involves the Lockheed Corporation. The US government commissioned the company to design a hybrid aircraft. but. A major US defense contractor. after . which in the 1970s was caught offering a quarter of a billion dollars in bribes overseas. it is reasonably clear that the legal penalties of international bribery outweigh the possible business benefits. 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. Lockheed fell on hard times for both economic and technological reasons. In any event. and executives may be subject to $10.

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

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

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

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

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

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

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

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

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

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

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

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

then they attract the best workers. Bhopal is the capital of Madhya Pradesh. a pesticide factory owned by Union Carbide in Bhopal India exploded killing 2. With a population of 700.000 people. Also. Although it was a multinational.000 people. which hurts employers in surrounding businesses. one of India’s poorest and least developed states. with the factory located in the poor section. In 1984. Two cases illustrate the disastrous effects of exploiting third world countries.500 people and injuring and additional 300. all of the above types of businesses destroy the local culture by introducing an American climate. Indian .If they pay wages to third world employees that are higher than what indigenous businesses can pay. The city is geographically divided between rich and poor sections.

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

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

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

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

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

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

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

By accepting control. 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.businesses can and cannot do. In the next section we will look at some suggested moral principles for multinationals. bribery. and exploitation all raise a range of ethical questions. do as the Romans. Cultural Relativism and Universal Moral Principles The above-discussed problems of interference in foreign government. they also accept responsibility.

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

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

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

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

such as land and tax reform. which makes it all the more necessary for businesses to adherence to moral standards. De George believes that third world countries lack adequate background institutions. In view of how strong the profit motive is to businesses.· · · · · · · 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. we may . such as regulatory agencies.

such . We can see the moral responsibility of multinationals in the same light.wonder how realistic many of these cross-cultural moral principles are. 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. 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. In more recent times. 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. Until a few hundred years ago.

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

Influencing. 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. 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.Study Questions for “Doing Business in Foreign Countries” Bribery in Third World Countries (1) What is the definition of bribery. some critics argued that US companies should .

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.

air and . toxic waste. and not from domestic activities. Businesses extract the greatest tolls in terms of energy consumption.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.

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

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

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

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

but developing countries cannot do so easily. 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. developed countries can shift to energy sources that give off less pollution.EPA does too little to protect the environment. 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. For example. many of the environmental offenders are businesses in third world countries. However. On a global level. Environmental problems are intensified in third world .

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

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

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

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

quickly appears shallow.



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

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

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

ethicists typically argue that businesses need to look beyond profit motive and legal regulations to find more persuasive reasons for environmental responsibility. We will consider three of these theories. However. some businesses argue that their environmental responsibility is confined to what the law requires and what will yield a profit. each of which yields substantially different conclusions about the .almost irreplaceable loss of reputation because of the disaster. Three Philosophical Theories of Environmental Responsibility As noted earlier. 40.000 Exxon credit card holders destroyed their cards.

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

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

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

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

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

or collectively: the land. 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. businesses have an obligation to avoid . plants.enlarges the boundaries of the community to include soils. waters. From the animal rights perspective. Originally we saw ourselves as conquerors of the land. From the anthropocentric perspective. Now we need to see ourselves as members of a community that also includes the land. and animals." This involves a radical shift in how humans perceive themselves in relation to the environment.

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

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

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

the environmental regulations that are required by law. Although this covers much ground. Animal rights and environmental lobby groups today are becoming increasingly more influential. which greatly harms their reputation. businesses should at least be sensitive to environmental concerns from both the anthropocentric and animal rights perspectives. If companies don’t respond properly. 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. it doesn’t cover everything. . companies need to take this into account. they appear arrogant and uncaring. Second. and. 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.

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. These may be general principles such as.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 . for example.

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

on the other hand. many other enterprises producing apparel and footwear as well as major retail groups have followed suit. 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. practically no initiatives of this kind have been taken. a growing number of production enterprises working under subcontracting arrangements for the multinational enterprises of the . In Europe. In the developing countries. the trend has been longer in coming.States enterprises have played a pioneering role in this respect. Since Levi Strauss adopted in 1992 a code entitled "Business partner terms of engagement and guidelines for country selection".

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. which significantly affects their activities. Origin and rationale of the phenomenon In the 1970s. 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. by a number of government international .

Textiles and Clothing Industries: Effects on Employment and Working Conditions. 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. 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. of draft codes of conduct some of which. To some extent the codes drawn up by intergovernmental .organizations. held in Geneva between 28 October and 1 November 1996. In the social sphere. such as that of the United Nations.

The pressure brought to bear by the international trade union movement has without doubt played an important role in this process. 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 . In the TCF sectors the International Textile. which were of a voluntary kind can be seen as the forerunners of subsequent initiatives taken unilaterally by individual enterprises.international organizations. and in particular that of the ILO in this sphere of social policy.

mention may be made. child labour. freedom of association. for example. Of the progress made in this sphere. a code of conduct applicable to enterprises and their subcontractors which established minimum standards regarding wages.human rights at work. 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. nondiscrimination as well as occupational safety and health. amongst other aspects. Consumers' associations as well as a number of non- . hours of work. forced labour.

the public authorities and the enterprises concerned to the need to respect a number of minimum rules regarding human rights. associations and organizations have taken their campaign further either by trying to promote social labels for one or more categories of TCF products. 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.governmental organizations have also endeavoured to draw the attention of consumers. 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.

such as that of France. 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. the so-called "No Sweat" campaign introduced by the Clinton Administration in the fight against sweatshops has . In the United States. In Europe some governments. Governments have also played a significant role in the promotion of standards concerning the respect of human rights and codes of conduct.show the increasing awareness of the international community about the social problems raised by globalization in the TCF sectors.

it adopted a positive approach by drawing up and distributing to the . has taken steps to clean up the sector. in particular in subcontracting of apparel production. 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. At the same time as it stepped up its inspections. which had identified a number of deficiencies concerning the respect of human rights and labour legislation in the TCF sectors.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. The Department of Labor.

In 1996.media a list of socially responsible enterprises in the sectors producing and marketing TCF articles. Nordstro Works m Bergners Henri Old Navy Bendel Clothing . included a large number of enterprises which had adopted a code of conduct. 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. this list. reproduced below.

Dana Levi The Buchman Strauss Limited Elisabeth Limited The Gap Too Express Liz Victoria's Claiborne Secret Source: Department of Labor. with the help of the . 1996. It is undeniable that this campaign. 25 Mar.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.

media. Sporting Goods Manufacturers' Association. the United States Government has been particularly active. has given enterprises an added impetus to adopt codes of conduct. Its 1996 session offered the opportunity to a number of enterprises and employers' associations in the TCF sectors (Levi Strauss. In the specific sphere of child labour. 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. Between 1994 and 1996.

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

etc. 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 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. 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.).marketing of clothing in the United States. concern by exporters about possible legislative measures to boycott products made with child labour.

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. By strengthening the role played by the developing countries in international trade. often with assistance from the ILO. As a result. a number of governments have endeavoured. to reduce the obstacles to the ratification of these fundamental standards and their . 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.conduct established over the last five years.

an agreement to discontinue the employment of children of school age in apparel enterprises and to provide for their participation in . in particular through its International Programme for the Elimination of Child Labour (IPEC).effective application. 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. which benefits from broad media coverage and against which pressure is greatest in the context of the liberalization of trade. In the TCF sectors. with the support of governments and local non-governmental organizations. Here once again the ILO has played an important role as catalyst.

Furthermore. 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. It is true that pressure brought to bear by trade unions and consumer' associations or non-governmental organizations play an important role.special education programmes. as noted above. some government campaigns may have a significant influence on industrialists and encourage them to give greater attention to social matters. In the industrial countries. However. the motivations of enterprises which have adopted codes of conduct are often more complex. the decisive factor for the adoption of such codes is .

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

at the risk of using its credibility. 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.image and to retain a good reputation over the long term. Given the importance of subcontracting practices in the TCF sectors. 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.

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. includes many examples of enterprises which have been singled out for their non-respect of their code of conduct. most .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. 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 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. The combination of factors concerning the person in question and the . 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. However. 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.

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. and the .fact that the Wal-Mart enterprise had its own code of conduct considerably tarnished the image of both parties. to protect their competitiveness. In their search for a balance between the lowest possible production costs. In the same way. 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.

2 Of course. 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.maintenance of a good social image likely to satisfy consumers and pressure groups. conclusions cannot be drawn about the existence of a direct link of cause . 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. Hence the extreme sensitivity to the subject in the context of globalization.

3 The large majority of trade unions favour the generalization of codes of conduct. 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. provided that their application is not subject to restrictions.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. 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.

they believe that even when the enterprise tries to apply. 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. Of course.itself which is thus both judge and jury. at all levels. This twofold responsibility restricts their effectiveness. This would involve developing a kind of "social audit" function comparable to that of a financial audit. it rarely has the necessary human resources to do so. Furthermore. the generalization of such a system raises a number of problems . its ethical principles. 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.

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

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

currently has an nationwide network of 1229 Branches and 2526 ATM's in 444 Indian towns and cities. and. 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.

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

and to achieve healthy growth in profitability. The bank is . Business Focus HDFC Bank's mission is to be a World-Class Indian Bank. 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. With its experience in the financial markets. consistent with the bank's risk appetite. 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. HDFC was ideally positioned to promote a bank in the Indian environment. large shareholder base and unique consumer franchise.

6 crore (Rs.4% of the bank's equity and about 17. The shares are listed on the Stock Exchange. Roughly 28% of the equity is held by Foreign Institutional Investors (FIIs) and the bank has about 570.Operational Excellence. .6% of the equity is held by the ADS Depository (in respect of the bank's American Depository Shares (ADS) Issue).2 billion). The HDFC Group holds 19. corporate governance and regulatory compliance. Customer Focus. HDFC Bank's business philosophy is based on four core values .5 billion).committed to maintain the highest level of ethical standards. Product Leadership and People.4. Capital Structure The authorised capital of HDFC Bank is Rs550 crore (Rs5. professional integrity.000 shareholders. The paid-up capital is Rs424.

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

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

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

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

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

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

• • • • • • • • • • • • • • • Code of Corporate Governance Corporate Governance Rating Composition of the Board Profiles of Directors Board Committees Ownership Rights Promoters Rights( HDFC LTD. therefore.) 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.Corporate Governance Policy.

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

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

Code of Ethics 1. Be aware of frauds Security tips . we do not have any standardized application forms to be submitted by prospective customers. 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. rather than customers making applications to the Bank for facilities / services. for the wholesale banking segment. Thus.

Committee of Directors 8. Articles of Association 15. Composition of board 7. Internet Browsing 18.3. Code of Lending 17. Money mules Introduction: . Profile of Directors 9. Ownership Right 10. Code of corporate Rating 6. Security Meaasures of HDFC 4. Keyshareholders Right 12. Promoters Rights 11. Fair Practices 16. Code of Corporate Governance 5. Memorandum of Association 14. Dividend Policy 13.

1. including the ethical handling of actual and / or apparent conflicts of interest between personal and professional relationships. 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 2.The Board members / Officials shall engage in and promote honest and ethical conduct of business.

business. customers and other materially significant information obtained or created in connection . 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. including the ethical handling of actual and / or apparent conflicts of interest between personal and professional relationships. its business.

Rules and Regulations: . accurate. fair. 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. 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.Compliance with Governmental Laws.

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. 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.The Board members / Officials shall comply with all the applicable governmental laws and the applicable rules and regulations. Violation of the Code: .

The Board shall have the powers to take necessary action in case of any violation of the code. 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. In line with this policy and recognisation of healthy . 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 %.

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. 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% .2008 as against 70% for the year ended March 31.performance during 2007-08. 2007.

2002 2000 .2001 1999 .1998 1996 .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.2005 .2005 2003 .2006 2004 .1999 1997 .2004 2002 . .2003 2001 .2000 1998 .

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

000 shares or are not less than 1/10th of the total voting power in respect of any resolution. As per Banking Regulation Act. 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 . To demand poll along with other shareholder(s) who collectively hold 5.of votes of a shareholder is proportionate to the number of equity shares held by him. 1949. 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.

To inspect various registers of the company. . bonus shares etc. To receive the residual proceeds upon winding up of a company. 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. 1956. To receive dividend and other corporate benefits like rights. To appoint or remove director(s) and auditor(s) and thus participate in the management through them. as and when declared / announced. To proceed against the company by way of civil or criminal proceedings.

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

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

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

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

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

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

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