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REQUIRED READINGS MANUEL G. VELASQUEZ: Business Ethics: Concepts and Cases (Pearson: Latest Edition) P. S. BAJAJ & RAJ AGGRAWAL: Business Ethics (Biztantra)
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MOVIE: Should CEOs/managers have ethics Before Study of ethics let us learn something about ourselves and our society
Questions to Ponder and answer Majority of People are not happy and satisfied in their personal lives Majority of People are not happy and satisfied in their Jobs NASSCOM Study of 18000 employees in IT industry is an eye opener .
Interactive exercise to understand µHow We Think and Why We Think The Way We Think¶ .
If your view is somewhat closer to statement on left. I) Most people have no real interest in their work People are interested only in their own benefit 1 2 3 4 People enjoy work and achievement People like to help each other II) 1 2 3 4 . If you agree totally with statement given on left.Questionnaire 1 The following pairs of statements represent assumptions about how people behave in relation to their work. circle number 2 if your view is somewhat closer to statement on right. circle number 4. circle number 1. Example: On considering the pair numbered I. circle number 3. if you agree totally with statement given on right.
circle number 1. I) I have no real interest in my work 1 2 3 4 I enjoy work and achievement I like to help people II) I am interested only in my own benefit 1 2 3 4 . circle number 2 if your view is somewhat closer to statement on right. If your view is somewhat closer to statement on left.Questionnaire 2 The following pairs of statements represent assumptions about how I behave in relation to My work. circle number 4. Example: On considering the pair numbered I. if you agree totally with statement given on right. If you agree totally with statement given on left. circle number 3.
Business Exercise Close the exercise with results & Let us absorb the learning .
Basic Principles Questions that need addressing ± What is Ethics and business ethics (Students to answer) ± MOVIE: What is ethics .Business Ethics .
previous slide not done . Vagelos CEO) WHY DID HE DO IT? (Streptomycin) (SATBARI). not willing to fund Mectizan (Dr.Business Ethics . Ivermectin Cost of devpt 100 million USD Population affected 18 million by 1979 Population at risk 85 million WHO.Basic Principles Merck Example for River blindness (1979) of medicine for animals . Govt.
Ethical Dilemmas in workplace Ethics and business seem to be a contradiction to each other Whenever ethics conflicts with profits. businesses choose profits over ethics .
Ethical Dilemmas in workplace Latest research indicates that businesses that do not so. Infosys v/s HCL. gain in the long term?? Test cases Wipro. Reliance Analysis of 100 companies over a 25 years period & stock valuation .
an employee¶s dilemma . basically investigating it and generating results of that investigation Morality ± Standards that an individual or a group has about what is wrong and what is right. or good and evil CASE STUDY: Goodrich.Ethical Dilemmas in workplace Ethics ± A study of morality.
helping others is good ± Where do these come from ± Even though we may believe in them.Ethical Dilemmas in workplace Moral Standards ± The norms about the actions that we believe are morally right or wrong Example: Stealing is bad. we don¶t live up to them all the time .
Ethical Dilemmas in workplace Non Moral Standards ± Where we don¶t get caught into dilemmas ± Language grammatically correct or not ± Athletic standards etc. .
Kermit example) ± Are based on impartial considerations (universal viewpoint. or pride. fraud etc. ± These are felt to be preferred over other values (even over self interest.Ethical Dilemmas in workplace Characteristics that distinguish Moral standards and Non Moral standards ± Matters that can seriously injure or benefit human beings (murder. guilt. shame. or put yourself as the recipient of the behavior) ± These are associated with special emotions. self respect . child abuse. rape.) ± Moral standards are not established by authoritative bodies like law etc.
and is not a descriptive study like sociology or anthropology . i. defines what is wrong or right.e.Ethical Dilemmas in workplace Ethics ± discipline that examines one¶s moral standards or that of a society ± It is normative study.
Ethical Dilemmas in workplace MOVIE: Ethical dilemmas in workplace_ Ethics Guy .
Ethical Dilemmas in workplace Business ethics ± Study of right and wrong as applied to business ± Can one claim that a Corporation /organizations are morally responsible? ± Investigates three types of issues Systemic (Micro and Macro environment) Corporate (issues related to organization) Individual (issues related to individuals in orgs) .
more people can access. selling goods banned elsewhere. Economic sizes. ± Ethical Arguments that are against these processes Shifting of businesses from places like US with tough environmental laws. .Ethical Dilemmas in workplace Ethics and Globalization & rise of MNCs Before we start. abortion etc. polygamy. differing ethical views of different cultures leading to ethical relativism. let us see a good video on Career advice ± Ethical Arguments that are pro this process Products standardization.
human slavery.Ethical Dilemmas in workplace Movie: What is ethical relativism Arguments against Ethical relativism When two people or two groups have different beliefs. discrimination between people on basis of color. Nazi holocaust. caste. creed. philosophers point out that at least one of them is wrong Read the handout about Philosopher James Rachels¶ views on this (Handout -1) There seem to be some universal rights or wrongs. religion etc. .
Ethical Dilemmas in workplace Technology & Business Ethics ± IT creating new ethical challenges on information ownership. Facebook crisis. animal and humans genetically . individual privacy. employee oversight ± Biotechnology is raising new questions about fiddling with plants.
Arguments against bringing ethics into business (students .
of competition Less chances of strikes Can handle legal hassles more easily .Arguments against bringing ethics into business Profits will increase Less restraints in doing business Business expansion easier More flexibility for employees Prices more competitive Recruitment becomes easier Retrenchment is easy Can copy technology. product etc.
Arguments for Bringing ethics into business (students) .
Arguments for bringing ethics into business Goodwill Less frauds & less legal issues Stakeholders satisfaction & loyalty Smooth functioning of the org Healthy work environment Valuation increase over long run Government support Increase in profits over long run Quality of products & services will be better New employee attraction and retention of existing employees .
bhopal case . tax evasion etc. deemed universities case.Basic Principles Arguments against bringing Ethics into Business ± 1. pollution control measures not taken.Business Ethics . Businesses should focus on profits and produce what the society wants and do so in the most efficient manner Dangers: deceptive advertising..
Employees have a duty to their employers and hence are duty bound to follow whatever employers want and not bring their moral standards to office (law of agency) Counters: Would an employee have a limit defined or not. Police encounters in India .Basic Principles Arguments against bringing Ethics into Business ± 2.Business Ethics . Nazi officers defending their actions as government approved.
consumer protection getting stronger day by day . well laid out. impartial promotion/ recognition policy may not break a law. It is enough for business people to follow the law and not worry about ethics Counters: Not following a transparent..Basic Principles Arguments against bringing Ethics into Business ± 3. taking care of parents etc.Business Ethics . ethics turn into law ultimately if not followed by self. but would it be good for the organization . smoking indoors.
Basic Principles Arguments for bringing Ethics into business ± 1. energy drinks. steroids etc.Business Ethics . may dump effluents into fresh water rivers. may push products like cigarettes. . not declare side effects of medicine. organizations may give inferior offering to customers. System Argument: Any business activity involves interacting with various systems in the ecosystem and if some do not follow ethics then the system would not work in the long run and harm would be incalculable Employees might steal from their org.
Tatas. Wipro. Eli lily.Basic Principles Arguments for bringing Ethics into business ± 2. Infosys . Government bodies). Rewards: Enough evidence exists that corporations known for their ethical ways get rewarded by the system (customers. employees etc.Business Ethics ..
the retaliation will be multifold and harmful for the business Employees would not like to work or shortchange the org.Basic Principles Arguments for bringing Ethics into business ± 3. vendors will become extra careful etc. customers would walk away.Business Ethics . . or creditors. Self Interest: If a business tries to take advantage of employee or customers or suppliers.
Business Ethics - Basic Principles
Moral Development process Lawrence Kohlberg¶s model ±Six Stages
± Level One: Preconventional Stages
Stage One: Punishment & Obedience orientation Stage Two: Instrumental & Relative Orientation
» Actions as Instruments for satisfying child¶s needs
Business Ethics - Basic Principles
Moral Development process Lawrence Kohlberg¶s model- Six Stages
± Level Two: Conventional Stages
Stage Three: Interpersonal Concordance Orientation (peer group, relatives etc.) Stage Four: Law and Order orientation (country, society)
Business Ethics - Basic Principles
Moral Development process Lawrence Kohlberg¶s model- Six Stages
± Level Three: Postconventional, Autonomous or Principled Stages
Stage Five: Social Contract Orientation (people hold
conflicting views and consensus should be worked out, less rigid, others may also be right in having different views)
Stage Six: Universal Ethical Principles Orientation (logical comprehensiveness, Universality, consistency, justice,
Business Ethics - Basic Principles
Moral Development process Lawrence Kohlberg¶s model
± All do not pass through all stages ± Most remain stuck at one or other level (maslow)
Business Ethics - Basic Principles
WorldCom¶s Whistleblower case study
Capital punishment should be banned .Moral Judgment Example: Innocents should not be harmed is a moral standard Capital punishment sometimes leads to death of innocents.Business Ethics .Basic Principles Moral Reasoning Process Moral Standard ---> evidence or information about a person/ institution regarding some behavior which is not in conformity to moral standards --.
Business Ethics .Basic Principles Moral responsibility and Blame Moral responsibility of an individual /institution for an injury or a wrong requires three criteria to be fulfilled .
one must cause / fail to prevent the injury or wrong when one could and should have done so ± If you remove the word should. then when you read newspaper and know that people are starving and do not act. coal mines.Basic Principles Moral Responsibility.criteria ±1.Business Ethics . then you are a murderer. chemical factories . stone crushers.
.Basic Principles Moral Responsibility. The person must know what he / she is doing Although ignorance doesn¶t always excuse a person.Business Ethics .criteria ± 2. Don¶t tell me what you are going to do. just get results.
or mental impairment . The person must act of his own free will It should not be a mistake. physically forced to do.Business Ethics .Basic Principles Moral Responsibility.criteria ± 3.
US population Work ethic by TYT .Basic Principles Presentation: Indian work ethic Movie: Is the Indian work ethic better Movie: Indian vs.Business Ethics .
Nelson Mandela) Arguments for and against doing business in South Africa ( Handout 4). Justice and Caring . Rights.Basic Principles Caltex & South Africa (1948.Business Ethics . this was a moral debate Arguments for and against appealed to 4 moral considerations ± Utilitarianism.
Business Ethics .Basic Principles Utilitarianism: Weighing Social Costs and Benefits (also referred as Consequentialist approach) As per this theory. an action is right if it satisfies 3 steps ± Determine all the alternative actions or policies available for any issue / problem ± Estimate the direct and indirect benefits and costs that action will generate for each and every person it touches ± The action that produces the greatest sum total of utility at the least costs is the right action .
Basic Principles Utilitarianism: Weighing Social Costs and Benefits (also referred as Consequentialist approach) ± Ford example . emotion pain due to loss of family members etc.Business Ethics . . development of Pinto ± This theory advocates that right action or policy is one that will produce the greatest net benefits or the lowest net costs (if only costs are being considered) ± In this case costs that were missed out were physical pain.
rear placed tank burst more often) ± Cost of modifying tank = 137 million USD (11 usd per car.Basic Principles Utilitarianism: Weighing Social Costs and Benefits (also referred as Consequentialist approach) ± Ford example . development of Pinto.Business Ethics . petrol tank problem ( at 20 MPH.5 million cars) ± No modification would result in 180 burn deaths. 180 serious burn injuries.15 million USD ± Arguments : Handout 5 . 12. and 2100 burned vehicles ± Insurance payouts for above would be = 49.
. freedom. some are difficult to measure.Business Ethics .Basic Principles Utilitarianism: Weighing Social Costs and Benefits (also referred as Consequentialist approach) ± An attractive theory. confusion on benefit and cost (who defines it) . people use it for their actions by saying it is for greater good. health. particularly for non economic goods like . beauty etc. love. some are difficult to forecast. equality. useful in economics Measurement problems is considered an argument against this principle.
Business Ethics . Rights & Justice Handout 5 .Basic Principles An example of Utilitarianism application and its problems with moral issues viz.
Unethical practices David Batstone: Unethical Behavior (Done) Actual examples from India: ± employment of ladies in the night jobs in BPOs. like snooping on key strokes (Discuss after seeing movies) MOVIE: email in the workplace Movie: Workplace under Surveillance . Implications ± Should employment bonds be there ± Should a company monitor its employees continuously through CCTVs and other means. does ethics have to do anything about this business decision.
Ethics and company philosophies Movie: Scandals in business. What to do Worldcom Whistleblower Case Study © Movie: How to Manage unethical employees ±I .
right to education. right to worship) Tightly correlated with duties (others have duties) Provide individuals with autonomy and equality (worship) Act as a basis for justifying actions and getting protection ± Rights V/s Utilitarianism Rights ±individuals. right to work) ± Moral right or human rights (right not to be tortured.Business Ethics .Basic Principles Concept of a Right ± 1948 UN adopted a ³Universal declaration of human rights´ ± Legal right ( freedom of speech. India¶s NREGA scheme) ± Contractual rights and Duties . utilitarianism ± society as a whole ± Negative rights & Positive Rights (19th century to 20th century.
Business Ethics .Basic Principles Kant¶s Ethical theory ± Basis of moral right ± Immanuel Kant 1724-1804 ± Theory based on a moral principal that he called Categorical Imperative which requires that Everyone should be treated as a free person equal to every one else Has two implications. expect this treatment for yourself as well as give this treatment to others .
Business Ethics . the person¶s reason for carrying out the action is a reason that he or she would be willing to have every other person act on. in any similar situation Two criteria ± Unversalizability ± Reversibility .Basic Principles Kant¶s Ethical theory ± Basis of moral right ± First formulation of Categorical Imperative An action is morally right for a person in a certain situation if. and only if.
hence are immoral Case Study: Eli Lily .Basic Principles Kant¶s Ethical theory ± Basis of moral right ± Second formulation of Categorical Imperative An action is morally right for a person if. but also both respects and develops their capacity to choose for themselves Deception. the person doesn¶t use others merely as a means for advancing his or her own interests.Business Ethics . force. Coercion fail to follow this. in performing the action. and only if.
Basic Principles Justice and Fairness ± Distributive justice Concerned with the fair distribution of society¶s benefits and burdens ± Retributive justice Just imposition of punishments and penalties ± Compensatory justice Just way of compensating people for what they lost when they were wronged by someone .Business Ethics .
hence should get equal share of society¶s benefits and burdens. task. handicapped person) Political equality & economic equality ± Justice based on contribution: Capitalist Justice Benefits should be distributed according to the value of the contribution the individual makes to a society. Effort v/s Output . sick person.Basic Principles Justice and Fairness ± Justice as equality: egalitarianism All are equal.Business Ethics . arguments against (lazy person. a group.
Basic Principles Justice and Fairness ± Justice Based on Needs and Abilities: Socialism Work burden should be distributed according to the people¶s abilities. motivation) ± Justice as Fairness: Rawls (a more comprehensive theory) . and benefits should be distributed according to people¶s needs (family.Business Ethics .
(b) to take priority over (a) in case of conflict .Basic Principles Justice and Fairness: Rawls ± Distribution of benefits and burdens in a society is just if and only if it follows three principles: 1. Each person has an equal right for the basic liberties compatible with similar liberties for all (Principle of equal liberty) and 2. Social and economical inequalities are arranged so that they are both ± A) To the greatest benefit of the least advantaged person (Difference Principle) ± B) Attached to positions open to all under conditions of fair equality of opportunity (principle of fair equality of opportunity) 2 to take priority over 1.Business Ethics .
Business Ethics .Basic Principles Conflict diamonds Exxon mobile .
Market economy Various ideologies of great thinkers . For & Against argument ± Handout of two arguments Economic Systems ± Command economy.Business System Basics Globalization .
widening disparity between haves and have-nots in capitalistic societies.Business System Basics Free Markets and Rights : John Locke ± Human beings have a natural right to liberty and property ± All are free and equal ± Each person owns his body and labor. clash between negative & positive rights. role of caring for others. and whatever he mixes his labor into ± People agree to form a Government to protect their right to freedom and property ± Criticisms (unproven assumption. top 20% US population have 49% of wealth) .
they also get influenced by concern for others .Business System Basics Free Markets and Utility: Adam Smith ± Market competition ensures that the pursuit of self interest in markets advances the public¶s welfare ± Government interference in markets doesn¶t advance the public¶s welfare ± Fluctuating prices divert resources appropriately ± Criticism (unlike his time monopolies and large orgs have emerged and hence can influence markets in their favor w/o Govt interference. human beings don¶t get always governed by self interest. manufacturers consume certain resources for which they don¶t pay and hence become ruthless in exploiting those like polluting the environment groundwater being used by coke or dumping of harmful chemicals into rivers.
businesses and Government) ± Proposes that free markets are not necessarily the most efficient means for using the society¶s resources and Govt.Business System Basics Keynesian view (John Keynes) ± Aggregate Demand (households. intervention is useful ± (Stagflation) .
work. cyclic crises. rising unemployment and declining relative compensation) of workers ± The solution that he recommends is collective ownership of society¶s resources and use of central planning .Business System Basics Marx and Justice Marx claims of injustice in Capitalism ± Exploitation of workers whose surplus is taken by owners as profit ± Alienation of workers from product. self and others ± Subordination of Govt. to interests of ruling economic class ± Immiseration (combined effect of increased concentration.
Justice.Ethics & Markets Three Degrees of Competition ± Perfect Competition A free market in which no buyer and seller has the power to significantly affect the prices at which goods are being exchanged All markets in this tend to move towards equilibrium point where the amount of goods buyers want to buy exactly equals the amount of goods sellers want to sell and price desired by both parties match It also satisfies three moral criteria. Utility and Rights???? .
Ethics & Markets Three Degrees of Competition ± Perfect Competition The answer as to why perfectly competitive markets achieve moral outcomes can be explained in two stages Stage I & II ± Why these markets move towards the equilibrium point ± Why the markets that move toward equilibrium point achieve 3 moral outcomes .
Ethics & Markets Three Degrees of Competition ± Perfect Competition Stage I ± Demand Curve based on principle of diminishing marginal utility ± Supply Curve based on principle of increasing marginal costs ± Merging of these curves gives rise to the equilibrium point .
Ethics & Markets Three Degrees of Competition ± Perfect Competition Stage II ± At equilibrium point the buyer as well as seller is getting a just return for their contribution ± These markets maximize utility » Motivates producers to invest in areas where consumer demand is high » Encourage producers to minimize resources consumed & use the most efficient technology » Distribute commodities in such a way that matches their needs and the money available .
Ethics & Markets Three Degrees of Competition ± Perfect Competition Stage II ± Rights » Buyers and Sellers are free to enter or leave the market » All exchanges are voluntary » No single buyer or seller dominates the market Criticism of these theories .
regulate e. Regulation View (do not break.Ethics & Markets Three Degrees of Competition ± Monopolies ± Class to try to answer if Justice. Rights are violated or not in this form of competition ± What about Oligopolistic competition Explicit agreements. Utility. Price fixing.) . Bribery Antitrust view (break up large companies).g. Tacit agreements.
no influence to be used. disclose the nature of product) . both parties should have full knowledge.Ethics of production and marketing Market approach view to consumer protection (motor / vacuum cleaner will get heated if run for more than 30 minutes at a stretch) Criticism: Full info generally not available nor customer is a RUM Customer is supposed to be a Rational Utility Maximizer (RUM) (but research says it is not true) Contract View of Business Firm¶s Duties to Consumers (as per Kant¶s theory misrepresentation is to be avoided.
Ethics of production and marketing The Duty to Comply (Contract View) ± Comply with all claims made expressly ± Comply with all claims that are implied ± Frederick Sturdivant classified these claims in four areas Reliability Service Life (should it include obsolescence) Maintainability Product Safety .
cognitive dissonance (Contract View) Problems with Contractual Theory » Buyers are capable & knowledgeable » any other???? Students to fill in .Ethics of production and marketing The Duty of Disclosure (Contract View) The Duty Not to Misrepresent (Contract View) (paid testimonials) The Duty not to Coerce .
Ethics of production and marketing The Due Care Theory ± This theory holds that because consumers must depend on the greater expertise of the manufacturer. the manufacturer not only has a duty to deliver a product that lives up to the express and implied claims but also has a duty to prevent injury to others even if the manufacturer explicitly disclaims such responsibility and the buyer agrees to the disclaimer ± Caveat Emptor replaces Caveat Vendor .
Ethics of production and marketing The Due Care Theory Producer¶s Responsibilities under this theory ± ± ± ± Design Production Information Caveat Vendor & not Caveat Emptor Problems with this theory ± Clear method for determining Due Care diligence ± Assumes that manufacturer can discover all risks before it reaches customer .
will increase carelessness by consumers. will increase litigation. US society healthcare) .Ethics of production and marketing The Social Costs View ± Caveat Vendor (legal parlance ³Strict Liability) ± In this theory a manufacturer has a duty to assume the risks of even those injuries that arise out of the defects in the product that could not have been foreseen or eliminated ± Based on Utilitarian arguments (Class to generate these arguments . handout) ± Problems with this theory : (Unfair to one party.
Ethics of production and marketing Advertising Ethics Critics of Advertising state that ± It degrades people¶s tastes ± It wastes valuable resources ± It creates monopoly power Psychological arguments against these criticisms .
Ethics of production and marketing Consumer Privacy ± Psychological Privacy ± Physical Privacy Balancing privacy with legitimate business needs ± ± ± ± ± ± Relevance Informing Consent Accuracy Purpose Recipient & Security .
Ethics and the Environment Dimensions of Pollution ± Air Pollution Global Warming Greenhouse Gases Ozone Depletion Acid Rain Airborne Toxics Air Quality Water Pollution Land Pollution .
regardless of whether this benefits human beings ± This view has found favor with a lot of environmentalists ± It raises costs for businesses and hence consumers .Ethics and the Environment Ecological Ethics ± It is the view that nonhuman parts for the environment deserve to be preserved for their own sake.
Nonhumans have intrinsic value ± Environmental Rights approach: Humans have a right to a livable environment ± Market Approach: external costs violate utility. rights and justice .Ethics and the Environment Kinds of Ethical approaches to Environmental Protection ± Ecological approach:.
Ethics and the Environment Private costs & Social Costs If private costs are reduced social costs go up and vice versa .
Ethics and the Environment Rights of future generations Arguments against ± Future generations do not exist now and may never exist ± Why should present be sacrificed for the future ± How do we know what will interest the future generation .
Ethics and the Environment Conservation based on Justice ± Rawls: Leave the world no worse than we found it ± Care: Leave our children a world no worse than we received ± Attfield: Leave the world as productive as we found it .
but on the basis of prejudice or some other invidious or morally reprehensible attitude Affirmative action program: ± A program designed to ensure the proportion of minorities within an organization matches their proportion in the available workforce .Ethics of Job Discrimination Discrimination: ± The wrongful act of distinguishing illicitly among people not on the basis of individual merit.
Ethics of Job Discrimination Arguments against Discrimination ± Utility: Discrimination leads to inefficient use of human resources ± Rights: Discrimination violates basic human rights ± Justice: It results in unjust distributions of benefits and burdens .
Ethics of Job Discrimination Affirmative Action (AA) ± Compensation argument claims AA compensates groups for past discrimination ± Criticism is that it is unfair as those who benefit now were not those who were harmed .
Ethics of Job Discrimination Affirmative Action (AA) ± Utilitarian argument claims AA reduces need by attempting to fulfill them and so increases utility ± Criticism is that costs outweigh benefits and that other ways will produce greater utility .
Ethics of Job Discrimination Affirmative Action (AA) ± Equal Justice argument claims AA will secure equal opportunity and is a morally legitimate means ± Criticism is it discriminates against other groups. preferential treatment violates principle of equality .
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