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Business Ethics & Corporate Governance

Prof. Aparna Kanchan

Unit Objectives

Values, Morals & Ethics


the necessity of a background for ethical models the principles of Ethics



the significance of integrity & professional management


are our fundamental beliefs. They are the principles we use to define that which is right, good and just. Values provide guidance as we determine the right versus the wrong, the good versus the bad. They are our standards.


values include honesty, integrity, compassion, courage, honor, responsibility, patriotism, respect and fairness.

are values which we attribute to a system of beliefs, typically a religious system, but it could be a political system of some other set of beliefs. These values get their authority from something outside the individual- a higher being or higher authority (e.g. society). some codes of conduct put forward by a society or, some other group, such as a religion, or accepted by an individual for her own behavior or
Morals normatively

to refer to a code of conduct that, given specified conditions, would be put forward by all rational persons.

What is Ethics?

can be defined as an attempt to study individual, group, organizational, professional, social, market and global moral experiences in a way that would help determine the right rules and obligations that should govern human conduct , the character traits that deserve to be developed in life & the intentions that are considered virtuous

Ethics is about our actions and decisions. It is the study of moral awareness, judgment, character and conduct of not just an individual but also a group When ones actions are not congruent with our values - our sense of right, good and just - we will view that as acting unethically.

Ethical Absolutism V/s Relativism



The claim that there are moral rules which hold for all persons in all situations, and which allow no exception .



The claim that there is no objective moral standard of right and wrong, and that moral values are relative to a persons cultural or individual background, or to a certain situation.

Types of ethical relativism

Cultural ethical relativism:

1.Chinese and westerners have different concepts of human

rights. They should not intervene with each others moral practice. 2. Polygamy is wrong in western societies but not so in the Middle East. The ethics of marriage is just a matter of social norm.

Individual ethical relativism:

1. A

family man would be deeply guilty for committing adultery. But a sexual libertarian simply finds this an expression of personal freedom. Just why argue about its right or wrong?

Analysis of moral concepts



X is right = My society approves of X. X is wrong = My society disapproves of X.



X is right = I approve of X. X is wrong = I disapprove of X.

Determinants of moral values:

Cultural relativism
Customs Tradition Language Ideology Politics Religion

Individual relativism

upbringing Social status Desire Emotion Personality (trait or type) Mood Feeling Genes (?)

Why believe in cultural ethical relativism?


First argument: the diversity of moral codes


of the argument:

Individual cases of moral disagreement

Inductive generalization Denial of moral objectivity


Illustration (James Rachels, 1995):

Case 1:

The Greeks believed it was wrong to eat the dead, whereas the Callatians believed it was right to eat the dead. Therefore, eating the dead is neither objectively right nor objectively wrong, and is a matter of opinion.




Case 2:

The Eskimos see nothing wrong with infanticide, whereas Americans believe infanticide is immoral. Therefore, infanticide is neither objectively right nor objectively, and is a matter of opinion.




After generalization:

Different cultures have different moral codes. Therefore, there is no objective truth in morality. Right or wrong are only matters of opinion, and opinions vary from culture to culture.


Second argument: moral uncertainty


are not always certain about the truth of our own moral beliefs. Example: I cannot say whether Marxism is the best political doctrine even if I am a Marxist. in case that we feel certain that a moral claim is true, we still can conceive that it is not objective. we have no right to say moral rules are universal or absolute.



Third argument: situational differences


tend to be more tolerant of peoples behaviour because of their exceptional situations.


It seems less objectionable to eat dogs in the time of famine. Killing in the time of war is not always wrong.


cultures have different existential conditions. Therefore, our moral rules cannot be applied in a different culture.

Consequences of cultural relativism


cannot criticize the moral practices of other societies. Cultural/social norms become the basis of moral judgment. There is no moral progress. We should be tolerant to other societies moral practices if they do not harm us.


Objections to cultural relativism


Problem with relativist reasoning


we conclude that X is so-and-so cannot be true or false simply because people disagree about the truth of the statement? Examples:

The earth is flat. There is no God. Aliens exist.


Moral practice Vs moral belief:

Seemingly conflicting behaviours can in fact be motivated by the same moral belief/value. For example:

Collatians believed that eating their fathers was right because they thought this could preserve their fathers souls. Greeks believed that burning their fathers bodies was right because the mother nature was the best place for dead persons to go to. It follows that both their actions were motivated by a respect to the dead persons. Their actions are therefore based on the same moral value.


Neutrality and tolerance

Ethical relativism is the claim that there is no moral principle which is universally applicable. But it also says that people in whatever culture should respect others moral codes. As being neutral is neither right nor wrong, why must we be tolerant of other cultures practices?

Example: If I am a relativist, it is not wrong for my country to wage war on Islamic countries simply because we dont like their religions. Nothing is right or wrong independent of my countries values.


Principles of Ethics


1st Principle Knowingly do no harm

Eg. Enron Corporation, Worldcom and Aurther Anderson go bankrupt Code of Conduct booklet

Respect We treat others as we would like to be treated ourselves Integrity We work with customers and prospects openly, honestly and sincerely Excellence We are satisfied with nothing less than the best Human Rights We believe in offering the employees fair compensation thru wages & other benefits


with Enron

Concealed information- Violated right to information & corporate disclosure norms Misrepresented Profits Top Management engaged in insider trading Misused financial instruments Special purpose entity Over valued contracts to generate money


2st Principle Benefits of Ethics & Ethical Business

Generally believed that Ethics has its own rewards for all those abide by it The truth and the beauty of ethical & Moral life has been affirmed The history of ethics and Morality is as old as when man began to live with others on this planet The theory and practice of ethics is important particularly for both individuals and groups and for institutions Theory provides- background Definition provides- meaning Practice provides- unique determinations


What is Ethics?


History of Ethics

from the Greek word Ethos meaning Human Character It refers to the philosophical science that deals with the rightness and the wrongness of human action International Encyclopedia of Ethics

Ethics is the name given to the most general study of the rightness and the wrongness of human actions

History of Ethics

is divided into-

Descriptive Ethics Which provides the scientific description of what ethics is Normative Ethics Which involves both the standard normative ethical theory and also it applications to particular disciplines, actions, classes of actions Meta Ethics Which is about the methods, the meaning & language of Ethics

Meta-ethics Hierarchy
Utilitarians Naturalist Natural Law Kantians GE Moore Nonnaturalist Meta-ethics Hume Emotivist Noncognitivist Anti-realist Prescriptivist Ayer Stevenson Hare Humes Fork Intuitionists WD Ross Naturalistic Fallacy



History of Ethics

also defines Morality which originates for the Latin word , Mores meaning ;

tradition or folkways refers to personally held ethical beliefs theories of obligation & the social elements that reinforce ethical decision


(from the Latin moralitas "manner, character, proper behavior") 4th Century CE* in the writings of St. Ambrose

* CE- Common Era of Christian era

History of Ethics

recognizes the obligation that humans have in each other as a primary factor of ethical theories accounts of the choice between good and evil



structures of religion, law, society etc. are often examined from the perspectives of the roles they play in promoting morality


Why Ethics?


Why Ethics?

is important to be ethical as it ensures equal rights, equal opportunities for everyone It enables peoples true talent & expertise to be of use for their advancement and gives others a chance to learn & reap benefits from their expertise Socrates Contribution to Ethics : Whatever is Good that we seek, whatever is
true that we discover, whatever is just that we do- on the premise that human beings have only rational desires


Why Ethics?
According to Socrates immoral behaviors is a Cognitive mistake We make mistake in our thought, in our thinking So what do we do? We must correct them by acquiring Wisdom and Knowledge


Why Ethics?
According to Plato Even mature people make mistakes, and he reasons that even mature persons have non-rational irrational desires, and these are the root cause of immoral desires.

According to Aristotle (Student of Plato) Human desires can be classified into three

Rational Desires Emotional Desires Physical desires


Why Ethics?

advocated the Virtue Ethics as Education both theoretical and practical. people to lead a moral life and to conduct their affairs with morality, good character is developed having good virtues and good education



Need for Ethical Background


Theological & Philosophical Background of Ethics


both backgrounds to avoid polarizations, balance in thought & actions


Eg: the good must be seen as good over and above all else and everywhere at all times, accessible to everyone In this sense of comprehensiveness of good, it is only GOD who is good Every human being has the access to the good & can contribute to his or her own good by good actions which reflect the divine image of the good GOD.


Diverse Cultural Background for Ethical Models


are cultural differences which play some role in our understanding & application & use of Ethical models Our personal, family & social background are important for ethics There is a larger social or work organization cultural background which shapes or influences our thoughts and actions on ethics Diverse cultural background need not be a source of ethical conflict or controversy To be respectful of cultures and to overcome such conflict or controversy , it is helpful to make the distinction between conventional morality & also principled morality coexisting simultaneously in a culture

Third Principle of Ethics: Expanding The Human Capacity to Reason, Judge, Discern & Make Ethical Decisions

Ethical principles that are generally used in ethical decision making provide ways in which human capacity for reasoning, discerning, judging & for making decisions can be expanded decisions are made using ethical principal & standards



decision making models use certain moral principles to make moral decisions or judgments


Moral Principles

& reasonableness of the arguments are the basis on which ethical decisions or judgments are taken. People deviate when they take decisions on the basis of feelings Whatever the society accepts or tolerates cannot be a good guide for making decision on what is ethically right or what we ought to do rightfully. Normative theory provides adequate ethical standards to decide what is right or wrong Most commonly used in business decisions are ;

the utilitarian principle, the rights principle, the distributive justice principle, the virtue ethics principle & the care ethics principle, the golden rule principle


Utilitarian Principle

that the morally correct action is the one that maximizes net social benefits, where net social benefits are equal to social benefits minus social costs focuses on the end i.e. the result of an action the end is good, the result is good, then the action is good




is also used in inter- temporal framework for decision making


Concerns with Utilitarian Principles


benefits & costs might be hard to measure in precise, noncontroversial terms e.g. value of human life, dignity, respect & many other intrinsic values might appear to justify unethical conduct : the ends justify the means attempts to combine quantity & quality. It has 2 measures greatest good for the greatest number endorses majority rule and violates minority rights as claimed by its critics




Rights Principle
Rights are claims or entitlements that people have Moral rights are those rights that humans have on the basis of their being humans States that morally correct action is the one that you have a moral right to do that does not infringe on the moral rights of others & that furthers moral rights of others Rights theory does not focus on the outcome or ends of the action It is more intrinsic in that it focuses on the motivation, the methods and the means The rights like right to free speech, right to freedom of religion, right to an education are regarded as human rights & guaranteed as fundamental rights by the constitution of countries Moral rights are not given by any authority & cannot be withdrawn or nullified by any one in authority


Distributive Justice Principle


that the morally correct action is the one that produces a fair distribution of benefits & costs , good & harm Justice understood as fairness Principles of fairness



political theory, in economic theory & in discussion of distributional issues, several definition problems occur consider equality as a central value, & so egalitarianism would have a definition of fairness that emphasizes the equality of the distribution In capitalism, the fairness definition would be based on the central value that capitalism holds, that is based on the contribution of people


Ethics of Care Principle


that the morally correct action is the one that appropriately cares for the people with whom you have close or significant relationships interact with one another in a world where relationships matter and ethical behavior has a lot more than impersonal principles Principle provides some stages in the moral development of personal ethics 1. Self care 2. Care of others 3. Care of self & care of others



Virtue Ethics Principle


that the morally correct action is the one that displays good moral virtues that does not display bad moral vices concerned with what humans need to flourish, to be happy, to have a good character & to enjoy a good life of Virtue Compassion/ conscientiousness, co-operative, courage, fairness, generosity, honesty, industrious, loyalty, moderation, self control, self- reliance, tolerance




Fourth Principle : - Integrity & Professional Management


and Business corporations need to have professional ethics & professional management invest in ethics needs to invest in ethics and all those supportive systems that help to have and to secure the benefits of ethics in the organization aim of Management is to provide awareness of different Management theories, different communication theories and how they are related to different theories of ethics



Fifth Principle : - Individual, Benefits of Business Ethics in Rational & Political Organisation

have certain moral duties to the organization & vice-


Employees duties eg: Avoid conflict of interest, commercial bribe, commercial extortion, thefts, gifts , insider trading Employers duties eg: fair pay, health & safety, meaningful jobs, job satisfaction, having competent co-employees and ethical leaders with mission & vision


is only the political view of the organization that provides rights to the employees

Employee privacy, freedom of conscience, right to participate in decisions, right to whistle blowing etc 48

Fifth Principle : - Individual, Benefits of Business Ethics in Rational & Political Organisation

in an organization have specific participatory roles & functions they perform Ethical behaviour is said to range from love, dignity to dos and donts of self- interest pursuits Wide range of behaviour occurs in different ways given the complexity of the organizations, the size, the number of participants etc. An organization has mainly 2 views Rational Political An individual in an organization has a functional role to play and make a contribution to the attainment of the rational goals of the organization