! { ST JOSEPH’S EVENING COLLEGE | BUSINESS ETHICS- (V SEMESTER -B.Com) | Lo Notes -) Meaning of Ethics Ethics is about moral choices. It is about the values that lie behind them, and the reasons people give for them. It is about innocence and guilt, right and wrong, and what it means to live a good or bad life. It is about the dilemmas of life, death, sex, violence and money. It explores human virtues and vices, rights and duties, The word Ethies originated from the Greek word ‘ethos’, meaning- character or manners. Ethics is the discipline dealing with what is good and bad, or right and wrong, or with moral duty and obligation, and what ought to be. Ethics could be considered as the source of character of a person expressed as right or wrong conduct or action, Ethics is related to moral questions. It is a study of morals and moral choices. It focuses on standards, rules and codes of conduct that govern the behaviour of individuals and groups. It deals with what is right, what is proper and what is just. Ethical rules are present in all societies, all organizations and all individuals, though they may vary greatly from one to another. What is considered ethical by one society may be forbidden by another society. But all people wherever they are, need rules to govern their conduct, rules that tell them whether their actions are right or wrong, moral or immoral, approved or disapproved. Ethics and actions Actions can be divided into three categories 1, Moral: if they reflect a person's values and those of saciety a Tmmoral” of they go against « person’s or society's values 3. Amoral: if they do not reflect choices based on values or social norms. ‘Morality and Ethics Every society has its set of moral rules or guidelines that set the boundaries of acceptable behaviour. Often these rules are about behaviour that might harm other people (killing, stealing), behaviour that is concerned with the well-being of others {helping those who are in need, responding to the suffering of others), or actions that touch on issues of respect for other persons (segregation, using other people for one’s own ends without concern for their welfare). Often the rules about such behaviour is expressed in statements about what you ought to do or should do. These rules fit together to form a moral code by which a society lives. Moral codes are seldom completely consistent. There are contradictions in moral rules. Sometimes our old moral rules do not cover new situations and we have to figure out how to cover new situations. (Right to privacy and access‘to computer date-on other people, spying on phone of politicians, euthanasia, abortion) Ethics is the conscious reflection on our moral beliefs with the aim of improving, extending, or reflecting those beliefs in some way.omer y Moral development of persons ‘There are three levels and six stages in the moral development of persons. Level 1: Pre-conventional Level (Self-Orientation) © Stage 1. :Punishment avoidance: avoiding punishment by not breaking rules, The person has little awareness of others’ needs. eward seeking: acting to receive rewards for oneself. The person has awareness of other's needs but not of right and wrong as abstract concepts. © Stage 2.: Level 2.: Conventional Level (Others Orientation) * Stage 3:Good person: acting ‘right’ to be a ‘good person’ and to be accepted by family and friends, not to fulfill any moral ideal. + Stage 4: Law and order: acting ‘right’ to comply with law and order and norms in societal institutions. Level 3: Post-conventional, Autonomous, or Principles Level (Universal, Humankind Orientation) * Stage 5: Social contract: acting ‘right’ to reach consensus by due process and agreement. The person is aware of relativity of values and tolerates differing views. © Stage 6: Universal ethical principles: acting ‘right’ according to universal, abstract principles of justice, rights. The person reasons and uses conscience and moral rules to guide actions. What is business? Economic activity or business, is any situation where people voluntarily enter into transactions of economic exchange of goods or services. These goods and services can be provided by three levels of society: the state, organizations of civil society, and individuals. ‘There are three broad dimensions of economic activity * The macro or systemic dimension: This business is determined at national level and international level as determined by the Government. * The messo or institutional dimension : This describes relations between economic organizations and others - between business and the state, organizations of civil society, or private individuals. “ + The miero or intra-organizational dimension: This concentrates on the economic actions and decisions of individuals within an organization. What is Business ethics? | Business Ethics are moral principals that define right and wrong behaviour in the world of business. It is the evaluation of business activities and behaviour as right and wrong. Business Ethics are the application of general ethical rules to business behaviour, They are concerned with moral issues in business just as medical ethics are concerned with morality of medical practices and policies, or political ethics are concerned with the morality of political affairs.BUSINESS ETHICS ORGANIZATION AND ETHICS Rational Organization Organization is a structure of a formal relationship designed to achieve some technical or economic goals with maximum efficiency Relationships — formal Hierarchies of authority identified in the organizational chart representing various official positions and lines of authority, Top Management Middle Layer Operating Layer Bottom Layer ~ Produce the essential output of the organization. Apex of pyramid ~ Top management In a rational organization ~ most of the information is collected from the operating layers using the various levels, through each of which the information reaches the top management levels. Top Management makes general policy decisions and issues general commands, pass it downward to the operating layer as detailed work instructions. From these two reciprocal flows there arises two moral obligations or ethical responsibilities. 1. The obligations of the employees 2. The obligations of the employer ‘The Employees Obligations to the Firm (Ethical) ‘The main moral duty of the employee is to work a) Towards the goal of the firm b) Toavoid any activities which might cause harm to these goals ©) Toobey organizational superior Unethical — Deviate from the above in order to serve one’s own interest. Illegal ways of serving one’s own interest in an organization is “White collar crime” The Employer’ ligatic Provide them with the compensation they have freely and knowingly agreed to receive, in exchange for their services Areas of conflicts of interest ‘An employee of a company is engaged in carrying out a task on behalf of the company and the employee has private interest in the out come of the task. Conflicts of Interests may be mostly financial ~ holding another job or consulting position in out side firm with which there own company deals or competes. Bribes Gifts Embezzlement Larceny Trade secrets‘A commercial bribe is a consideration given or offered to an employee by a person outside the firm with the understanding that when the employee transacts business with his own firm, the employee will deal favourbly with that person or with that person’s firm. The consideration may consist of money, tangible goods, the “kick back” as a part of an official payment, preferential payment or any other kind of benefit. Accepting gifts may or may not be ethical. Embezzlement — fraudulent appropriation of another's property by the person to whom it was entrusted. Larceny ~ Stealing or theft — modern forms of theft are various forms of information using computer to gain entry into company’s data bank for copying company’s computer programmers. ‘Trade Secrets - Proprietary Information, i.e., company's on activities, technologies, future plans, polices or records. which are not patented or copy righted . Company doesn't want anyone outside to have that information . Firms duties to the Employee 1. Provide them compensation they have freely agreed to receive Proreied olaty 2. Faimess of wages 3. Fairness of employee's working conditions Inadequate working conditions, inadequate wages make the work contract unfair. Working Conditions 1. Job Satisfaction — Five dimensions — skill variety, task identity, task significance, Autonomy, Feedback. 2. Health and safety — work place hazards and hazardous occupations.BROADER ETHICAL ISSUES IN SOCIETY-CORRUPTION AND BRIBERY Corruption is cancer which has been eating India for a long time. This phenomenon is assuming gigantic proportions as years pass by. Corruption and Moral Degeneration ‘The corruption we find is generally from 1. Politicians Bureaucrats Public sector undertakings Policemen ~ CAg§pupport of syphoning funds to golf equipments Businessmen Educational Institutions Individuals — IBA 7 lakhs ‘White collar criminals — money laundry Hawala racket etc., ex ayeen Corruption takes place where public sector enterprises and private entrepreneurs aim at (@) Maximization of profit by evading taxes (b) Illegal procurement of raw-materials (©) Hoarding of goods (@ Black marketing — While obtaining license and at the starting of business, the private enterprises owners have to approach politicians for the latter's favour. How does. cep ‘The Vicious Circle of Corruption Government Cannot Meet Salary Bill Public wants better Services Sy Poor Services by the Government Late and Low Payment Cornupti Thirst for Extras Low Revenue for Government ae ae es SS Incomes,Petty corruption — endemic in many countries Grand corruption - so common in international aid programmes and in the “Armaments Industry” Black marketing and Hoarding Bribery, Bribebs are personal payments, gifts or special favours granted improperly to influence the ‘out come of decisions Effects of Bribery Itraises the cost of goods sold It leads to perceptions of unfair treatment of some persons, companies, groups at the expense of others. It decreases the level of trust across groups. Bribery is said to be more extensive in developing nations. In countries like Indian high ranking government officials can become wealthy or can supplement their salaries through widespread bribery, which appears to be a common and acceptable practice. Some nations” tolerance of bribery in conducting business is higher than others - Japan. Business in Japan is an open to bribery, which cultural accepted. Universally bribery is not accepted as an immoral, illegal or unethical business practice. Bribery is away of life-for-many-foreiga- business. professionals-and-government-officials many countries have legislations prohibiting bribery, few actually seem to enforce violations or confront individual involved in bribery. Cor e At conflict of interest arises when an individual is in the position of having to decide whether to advance the interests of business or to operate his or her own personal interests In an ethical environment employees scrupulously separate their private financial interests from their business dealings. :CORPORATE CRIME, Corporate or Business Crime cause serious financial losses CRIMES EMPLOYEES BETWEEN FIRMS AGAINST SOCIETY Conflict of interests Anti-Competitive Practices Violating Embezzlement Price Fixing Pollution Kickbacks Bid Rigging Standards Expense Account Padding Money Laundering Job discrimination Unsafe products Crime Against One's Own Company Employees harm their own company by violating their duty of loyalty and fidelity to their employer by taking bribes Embezzle company funds Pad expense accounts Engage in conflict of interest activities: Hiring unqualified family members Chanelling company business to outside firms in which they have a financial interest ‘Thus employees have enriched themselves unjustly at the employer’s expense. Companies try to combat this by carefully screening prospective employers, installing surveillance techniques, establishing tight accounting controls, guidelines issuing in the form of code of ethics. Crimes Against other Companies Criminal actions are taken by one company against another for purpose of financial or competition gain. Inside trading is another violation. It occurs when someone gets advance information about the potential change in the price of a company’s stock and then proceeds to buy or sell the stock before others know about it. Crime Against Corporate Stake Holders and Public Interest Dumping of dangerous waste by one corporation may harm people or the environment, When the corporations fail to comply with safety regulations intended to protect4ficir employees, they are committing crime against the general public or specific stake holder groups. Defective or dangerous manufacture of toys is also the same case. Society has acted through its legal system to forbid such harmful behaviour. So business has an obligation and an ethical duty to comply with law. Cheating the Investor There are many ways to cheat investors Misrepresenting the potential of the investment, Diverting the earnings or assets so that the investors’ rightful return is reduced. Every year, tens of thousands of people are the victims of investment scams, In India, many firms are in deep trouble and they have not paid back their investment amount even after the maturity date. Like this lakhs of investors have been cheated by thousands of companies. Some of the retired people who do not get pension or other benefits have gone to the streets, A business that is in deep financial trouble can be made to look reasonably good to all but the ‘most astute, shrewd investors. Example Sathyam Scam ~ the CEO of the company took advantage of the investors by using the company’s earnings or resources for personal gBirth Order Only Child Birth Order —_susiness Ethics -Notes -2 Typical Characteristics Pampered and spoiled. Feels incompetent because aduits are more capable. |s center of attention; cften enjoys position. May feel special Seif-centered, Relies on service from others rather than own efforts Feels unfairly treated when doesn't get own way. ‘May refuse te cooperate, Plays “divide and conquer" to gat own way. Never has parents' undivided attention, ‘Aiways has sibling ahead who's more advanced. "eet as if in aoe; trying so-catch up or overtake frst child. If first child is “good,” second may become "bad." Develops abilities frst child doesrit exhibit: If first chikt successful, may fee! uncertain of self and abilties, May be rebel, ‘Often doesn't lke position Feels “squeezed’ if third child is born. May push down other siblings Behaves like only chi Feels every one bigger and more capable. Expects others to do things, make decisions, take responsivity Feels smallest and weakest. May not be taken seriously Becomes boss of family in geting service anc own way. ‘Develops feelings of infeionty or becomes “speeder” and overtakes older siblings. Remains "The Baby.” Places others in service. if youngest of three, often allies with oldest child against middle child,