Business Ethics

Business Ethics
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Business Ethics - Introduction
• Ethics involves systematizing, defending and recommending concepts of right &
wrong behavior • Ethics is a mass of moral principles or set of values about what
is right or wrong, true or false, fair or unfair, proper or improper • What is
right is ethical and what is wrong is unethical
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Business Ethics - Definitions
• There is only one ethics, one set of rules of morality, one code that of
individual behavior in which the same rule apply to everyone alike ….. Peter •
Ethics is a branch of philosophy which is the systematic study of selective choice,
of the standards of right & wrong and by which it may ultimately be directed
….Phillip Wheel Wright
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Drucker
Business Ethics - Definitions
• Supreme oneness is the rationale of all ethics and morality. Ethics cannot be
derived from the mere sanction to any personage. Some eternal principle of truth
has the sanction of ethics. Where is the eternal sanction to be found except in the
only infinite reality that exists in you & us and in all ,in the self, in the soul
…. Swami Vivekananda
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Business Ethics: What Does It Really Mean?
Business Ethics:Today vs. Earlier Period
Society’s Expectations of Business Ethics Ethical Problem
aut c A dn a det c ep xE sc ht E ss en s u B fo i i
Ethical Problem
Actual Business Ethics
1950s
Time
Early 2000s
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Ethics:
Objectives
• Define the greatest good of man & establish a standard for the same • Set /
Establish moral standards / norms of behavior • An overall study of human behavior
– what is moral / immoral should be assessed • Apply judgement upon human behavior
based on these standards and norms • Suggest moral behavior, prescribe
recommendations about Do’s & Don’ts • One’s opinion or attitude about human conduct
is expressed
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Ethics & Related Terms
• Ethics & Morality: Morality is a set of rules to guide the actions of individuals
• Ethics & Religion: Ethics gets ideas from religion & through experiments it
approves them as Code of conduct • Ethics & Law: Law is a code of conduct which the
authority in power prescribes for society. It differs from Ethics in its option to
use force when necessary • Ethics & Values: Values are deep-seated ideas & feelings
that manifest themselves as behavior or conduct Law + Knowledge = Ethics
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Business Ethics
• Business ethics are the application of general ethical rules to Business Behavior
• Business ethics are rules of business by which propriety of business activity may
be judged • Business ethics is a form of applied ethics
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Business Ethics
• The 3 C’s of Business Ethics are
– Compliance of laws, principles of morality & policies of the company –
Contribution to society in terms of Quality of products / services, employment etc
– Consequence of business activity towards environment, social responsibility
towards shareholders, bankers, customers, employees & good public image
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Business Ethics – Case Study 1
Sanjay Verma was an MBA, specialized in Marketing & Advertising. He has just joined
ABC Ad Agency. He was a competent & intelligent person with outstanding performance
during his MBA period at the institute. Yet he got this job with great difficulty
due to recession in the job market. He had somehow managed to find this job through
a contact of his uncle. The chairman of the company wanted him to somehow persuade
a well known newspaper to avoid reporting on a controversial corruption charge
against him & instead write a favorable editorial. Verma was not convinced that his
chairman was clean in the case. On the other hand the newspaper was willing to
accommodate the chairman, if the organization was willing to give a large size
advertisement. Recently Verma lost his father leaving Verma to take care of his
mother & three sisters. What should Verma do?
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Business Ethics – Case Study 2
Amit was a young & dynamic manager at XYZ Pvt Ltd and was recently married. Due to
the nature of his job, he had to do lot of travelling and therefore unable to
devote his time for his wife. At one time he was away for 25 days tour only to
return for a day and again go for 10 days tour. This situation led to differences
in his married life, turning to serious note. Once he took his wife along with him
to tour and found that he and his wife could stay in hotel within the permissible
limits of his lodging & boarding allowance with no extra burden on his company.
Thus he was away for work for a good part of the day but could spend time with his
wife in the evenings. This situation worked out perfectly for himself & his wife
and their relations became good. Therefore he started taking his wife along with
him on his tours. Is it ethical on the part of Amit.
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Business Ethics - Significance
• Good business ethics promotes good business • Good business ethics always leads
to positive consequences • Good ethical behavior will increase goodwill of both
business as well as the businessman. If the business image is tarnished it would
have a direct consequences on sales, profits, morale & day to day functioning of
the business • Good B. ethics protects both sides of the business • Good ethics
promotes self satisfaction, mental relief, free from anxiety • Good B. ethics
encourages & motivates others to follow and sets example • Good B. ethics breeds
success • Good B. ethics has ushered in an era of New Management that has laid down
a ‘code of conduct’ based on good ethical practices
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Concept of New Ethics
• New economy has brought in greater transparency / flexibility but also greater
complexity & risks • This has resulted in a change in the ethical dimension by
raising new ethical issues • Varied dimension of the new economy like
globalization, technology, assets, framework, recruiting & talent retention has
lead to the need for a new definition of ethic
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Concept of New Ethics – Ethical Dimension
• A good code of conduct should include certain managerial & employee guideline for
making ethical decisions. • A typical code of ethics would include
– – – – – – – Do not use abusive language Manage personal finance well Demonstrate
courtesy, respect, honesty & fairness Exhibit good attendance Conduct business in
compliance with law Follow all accounting rules & control Make true claims in
product advertisements
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• Globalization: Growing integration of economies & societies around the world has
lead to globalization – faster communication, improved infrastructure, technology,
changed regulations, free trade & free movement of people. Ethics, morality &
globalization are connected with each other. • Technology: is the driving force
helping business face challenges of today's competitive business environment. All
functional areas of the organization – marketing, finance, HR, manufacturing, are
being facilitated by technology • Intangible assets: Everything that can be counted
does not necessarily count; everything that counts cannot be necessarily
counted .... Albert Einstein . All intangible assets like customer, intellectual
property, employee, leadership, culture, strategy, brand, innovation , knowledge,
are future oriented so they create future value. Intangible assets are difficult to
manage & control and hence risky. Intangibles cannot be directly measured.
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War for Talent : • This is a critical driver for corporate performance. Good talent
management is required for hot economic times. • Talented, skilled, knowledgeable
people with innovative ideas are amongst the most valuable intangible assets of a
company. Recruitment, selection, as well as retaining talented people is a big
challenge to companies today. • Many companies offer attractive financial
incentives to recruit / retain talent. However these are inadequate. • Companies
who do a better job of addressing the needs of the Genx’ers will be the most
successful in this war for talent. Some of the steps required to address this war
for talent are – Discover the needs/wants of the talented people – Offer a good
package in line with the competition – Assessment of gaps based on expectations of
employees / realities – Address the root cause on why people want to leave the
organization – Healthy work life balance
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Factors Causing Unethical behavior • Competition • High expectation of the
stakeholders of the business like shareholders, employees, customers etc •
Ambiguous situations creates ethical dilemma leading the manager to take decision
on an alternative which gives higher return at the cost of losing integrity. •
Political corruption • Social values & customs are not followed by the new
generation • Money & success becomes the important motivator behind any activity •
People neglecting social responsibility, integrity & discipline
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Unethical conduct • Encourage corrupt practices • False representations of returns
& income statements • Exploitation of scarce natural resources • Ignoring social
interest • Unhealthy competition • Political donations • Exploitation of common
consumer • Illegal trade with enemy country
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Factors for building an Ethical Infrastructure • Commitment from Top Management:
Ethical behavior should be fully supported by top management by setting examples. •
Setting up of an ethics committee: which looks into
– – – – – – Holding meetings to discuss ethical issues Dealing with grey areas
Communicating/enforcing the code of conduct to all employees Tracking violations of
the codes Rewards / punishment for compliance / violation Reporting to top
management on the ethics activities.
Code of Ethics: • To encourage ethical conduct, formal codes of ethics are framed •
A code of ethics states an organization’s basic & primary 07/26/12 19 values and
rules of conduct
Communicating Ethics • The best ethics program is one which is communicated well
and easily understood by all • Both written and verbal form of communication needs
to be adopted • Communication needs to clear & crisp without any ambiguity Ethics
Training: Effective ethics training should have • Employee participation to
exchange views • Clarify ethical values & enhance awareness of ethics • Define
criteria for ethical decision making • Focus on ethical issues of the organization
• Investigate ethical environment of the organization, analysis, strategies,
resources & goals an upgrade them 20 07/26/12 continuously.
Response & Enforcement • Implementing an ethical program is one of the biggest

challenges for an organization • Reward systems, incentives & penalties form a part
of enforcement
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Case Study 3 An airplane manufacturer has spent great deal of money to develop a
new state of the art airplane. The company needs cash badly as it is financially
over extended. If it does not get some large orders soon, it will have to close
down some part of its operation. Doing that will put several thousand workers out
of job. The result will be disastrous not only for the workers but also for the
town in which they live. The President of the company has been trying to influence
the government of a foreign country in a large purchase. He learns that one of the
key government minister in charge of making the final decision is heavily in debt
because of gambling. He quietly contacts gthe minister & offers him one million
rupees in cash if he awards the contract for 10 planes to his firm. The money is
paid and the contract is awarded. 07/26/12 22 Comment on the ethics issue involved
in tha above case
Values & Ethics
Value: What we choose as worthwhile or believe to have merit in a general or broad
sense. Issues of right or wrong are related to ones ‘Values’. Values are the
standards of right & wrong. Whether something is right or wrong is not a matter of
fact. It is a matter of opinion. An action may be upheld by some as right while
others might have a contrary view. Values represent • A specific mode of conduct or
end state of existence is personally or socially preferable to an opposite or
converse mode of conduct or end state of existence …… Stephen Robbins Edward
Spranger defines Values as the constellation of likes, dislikes, viewpoints, inner
inclinations, rational / irrational judgments, prejudices, and association pattern
that determines a persons view of the world.
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Values & Ethics
Characteristics of Values • Values tend to be relatively stable & enduring. A
significant portion of our values are established in our early years from parents,
teachers & others • Values constitute the foundation of one’s character. They are
the core of our personality and a powerful force affecting / influencing behavior •
They are abstract representation of what people believe as right, proper & worth
while to pursue • Some values are not fixed, but change over time & situation •
Values have intensity and content attributes in which the content attribute says
that a mode of conduct is important and the intensity attribute explains how
important • Values which are internalized by an individual, becomes a part of his
personality, then go beyond the zone of choice for the person concerned. His
actions based on these values then become spontaneous & continuous, automatic and
instinctive.
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Values & Ethics
Value Formation in Society: The values in an individuals value system are
introduced and later reinforced over a life time of experiences, particularly
during growing up or formative years. During this period the major influences are
from 1. Family one is born into 2. School / educational institutions one goes
through 3. Religion 4. Society / community one belongs to Values are fostered by
each of the above institutions & together form the value system of the individual.
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Values & Ethics
Types of Values Instrument Values: The values which concerns the way we approach
the end states. These relates to means of achieving the desired results. Examples
are • Hard work & achievement • Education & intellectual pursuits • Self
sufficiency, independence • Truthfulness, honesty • Assertiveness- standing up for
yourself • Being well mannered & courteous towards others • Open-mindedness – open
to new ideas • Caring towards others
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Values & Ethics
Terminal Values: They are those end state goals that we praise such as comfortable
life, a sense of accomplishment, equality among all people. Some of them are 1.
Happiness; satisfaction in life 2. Peace & harmony in the world 3. Knowledge &
wisdom 4. Pride in accomplishment 5. Security; freedom from threat Ethical Value
System: Everything that we see, hear, say, imagine or do can be divided into two
main categories 1. The way situations are 2. The way situations ought to be How
situations ought to be is what gives rise to values. These values are not easy to
measure or express in words. If we know the consequences of our actions, we can
convert values into rules of behavior that can be described as ethics. 07/26/12 27
Value + Knowledge = Ethics
Values & Ethics
Any initiation of action begins with an inventory of values. These get converted to
intentions for actions, which then get articulated as actual behavior. Values
Intentions Behavior Consequences One of the important lessons to learn in ethics is
to see life as it is, without our perceptions and attitudes distorting it to fit in
with what we want to see. All of us react not to reality itself, but to our own
interpretation of reality. Our behavior is affected by not by a particular
situation, but by how we see and what we see in that situation. When we describe
the world around us or people in it, we in effect describe ourselves, our
perception, attitudes, our morality and our ethical value 07/26/12 28 system
Values & Ethics
Ethics & Value Maximization When ethics & values are taken together, we should do
the analysis of ethics in relation to value maximization to find out the values of
ethics for people working in any organization Ethics & Trust Trust is one of the
most important ethical complements, they are compatible with each other as ethical
behavior leads to trust
Ethical behavior of employees
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Build trust among employees
Higher productivity of the organization
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Ethics in Organization Development of Ethical Corporate Behavior
Employees towards Organization
Organization towards Employees
Ethics Domain
Organization towards other Economic

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Institution
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Ethics in Organization Development of Ethical Corporate Behavior • Organization
towards employees: It covers areas of wages & working conditions, hiring & firing
and employee privacy • Employee towards organization: Covers how employees treat
the organization. Whether employees maintain honesty & confidentiality with regard
to company matters when dealing with outsiders • Organization towards other
economic institutions: Deals with how organizations treats other institutions like
share holders, suppliers, customers, competition & dealers
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1. Methods for Developing Ethical Corporate Behavior Ethics training: To achieve
corporate excellence across the organization covering all functions. Many companies
have started regular ethics training. Carefully designed ethics training programme
can make a positive contribution. Ethics training has a long lasting effect unlike
other training programmes. Some of the objectives addressed through the ethics
training programmes are Creates awareness of companies ethical policies How to
apply & where to apply ethical principles on a day to day basis Covers all in the
organization with simulated case studies based on actual events in the company
a) b) c)
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2. Code of ethics : This reflects the organizations primary values, norms, beliefs
& ethical rules of operations. Generally framed to encourage ethical behavior duly
supported by top management. When managing complex issues, having a code of ethics
helps in continued dialogue & reflection around ethical values produces ethical
sensitivity & consensus. Continuous feedback, review, modification & updation needs
to be done. Each function can have its own code of ethics like for Marketing,
Purchasing, Design, Accounts & manufacturing
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3. Organizational Ethics Development System (OEDS) This involves Development of
ethics policy handwork & manual for self • governance and integrity. Top management
commitment which is very important to • corporate ethics should be effectively
communicated. Assessment of ongoing improvements of ethics • • Sound ethics
reporting & conflict resolution process for non-compliance • Assessment of
individual / organization’s integrity system
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4. Ethics Committee: Formation of an ethics committee is a new concept. Some of the
salient features are
a) b) c) d) e) f) Periodical assessment Frequent meetings about ethical issues
Proper communication about code of ethics from top to bottom Establish reward &
punishment system Enforcing the codes Timely reporting to BOD’s
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5. Ethics Advocate : An ethics specialist or officer is a member of the Board of
Directors who plays a key role to guide ethical conduct & a good and wide
contribution in board’s decision making. He shows the correct path to the board
members as well as other decision makers in the light of ethics. Integrate Ethical
Concepts :Senior level executives have responsibility to apply & integrate ethical
concept in day to day actions. They have to build a kind of structure that supports
ethical behavior like proper information to new employees about ethics standards,
annual performance appraisals, ethical guidance and very important system of
internal whistle blowing which makes higher management aware of violations in time.
Checklist Method :By using a checklist, employees can avoid situations wherein
people do unethical behavior & justify it as saying that its not illegal
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6.
7.
7. Rewards & Punishment system :Motivation has a great impact on employees
behavior. So the best way to get people on ethical path is establishment of a fair
reward system. So when people behave in an unethical manner, they do it for some
hidden rewards. Hence the organization must develop a system to reward ethical
behavior & punish unethical behavior. This will motivate people to conduct
themselves ethically. 8. Whistle Blowing :Whistle blowing is when an employee tells
the employer, who is breaking the law. This was first used for Government employees
who made complaints to public about corruption. In a true sense whistle blowing
involves telling somebody outside the company about the illegal activities being
carried out within the company.
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Whistle Blowing
Reports the unethical behavior to higher authorities in the same organization
Internal
External Reports about unethical behavior to external agencies like media,

newspaper or public interest groups
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10. Other Guidelines : Establish audit agency reporting to outside directors •
‘Practice what you preach’ – should be followed by the • leadership team Surprise &
unpredictable audits • • Ethics must be evaluated for long-term impact on the
individual as well as the organization
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A company ‘X’ listed on NSE supplies components to company ‘Y’. Y markets the
components in the global market. Since the company ‘Y’ has a stand in the global
competitive market, it has signed certain agreements with company ‘X’ which
specifies that company ‘X’ will use raw materials from well known companies ‘A’ &
‘B’. Instead of buying the raw materials from ‘A’ & ‘B’ as per the agreement,
company ‘X’ buys from elsewhere with bills & certificates identical to ‘A’ & ‘B’.
Suresh who is a manager with ‘X’ came to know about the companies unethical
practice regarding printed fake bills & certificates providing substandard products
to company ‘Y’ He tried to expose the fraud internally and approached to the head
of the Deptt. As there was little protection to whistle blowers, Suresh has been
fired by his boss. But he did not give up that easily. He approached to an external
agency ‘POLO’ services to expose the fraud. As the proof of the mischief, he showed
the fake bills & test certificates including the invoice from where they were
printed.
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Some experts from POLO services approached company A. The CEO of company A
scrutinized the bills and confirmed that they were fake. After this Suresh with
personnel from POLO visited company Y and convinced company Y’s top management
about the fraud. Company Y set up a committee to go through the entire case in
detail. One month later Suresh again approached company Y to find the progress of
the case because of which he had lost his job. He talked to the CEO of the company
and was very much disappointed to see that the case was all over. The CEO tried to
make up the things by merely saying that as far as Quality was concerned they found
everything perfectly alright and as company X was facing some problems of excise
evasion, law would take its due course. Suresh regretted about company Y’s response
and was very confused about why no action was initiated against the proven fraud.
List your comments on the case
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Ethical Leadership
Leadership: The ability to influence a group towards the achievement of goals.
Leadership plays a significant role towards goal attainment. Leadership is
different from Management. Good Management brings about order & consistency by
drawing up formal plans, designing & monitoring results against plans. Leadership
deals with coping with change. Leadership develops a vision of the future, align
people by communicating this vision & motivate, inspiring them to overcome hurdles.
Leaders in the 21st century are facing a conflicting situation where on the one
side there is a pressure to show excellent results by exploiting opportunities
taking into account new economy, and on the other side there is pressure to
discharge social responsibilities, respond to growing expectations from customers.
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Ethical Leadership
To operate a business companies need to have social approval & an implicit license
from a number of stakeholders. This social approval demands from leaders & their
companies to follow processes which are consistent with ethical & moral values.
Customers Industry reputation Employees Politics Suppliers
Public Opinion Law
Company
Investors
Competitors Industries & Mkt Std
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Ethical Leadership
Leadership – Ethics & Values: • Leaders who are able to keep a balance between
entrepreneurial skills & corporate citizenship are the effective leaders of the new
economy • Effective leadership is about laying the foundations for the efficient &
ethical conduct of business • Long term survival as well as growth starts from
ethical leadership • Integrating ethics into the organization needs true effective
leaders • Organization mission & objectives can be reflected by their vision • To
take an organization on the excellence path, a blend of strategic & culture is
required which can be achieved by effective leadership • Strategic thinking &
cultural building can be achieved by a leader's moral principles & integrity •
Leadership makes real difference between success & failure, whether in war,
business, sports, family & society
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Ethical Leadership
Establish An Ethical Framework: The Co-operative Bank, UK aims to deliver value to
all its Partners in a balanced fashion over time, where value is defined by
partners & not the Bank. In 2000, the Bank produced a pre-tax profit of 90.3
million pounds, an increase of 9% compared to 1999. The after tax return on equity
was 22%. The outstanding commitment of the staff was the single most important
reason for the success. In every staff survey conducted it was found that extra
ordinary levels of pride in the Bank as the leading promoter of ethical business
practice. Mervyn Pedelty, CEO
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Ethical Leadership
The example in the previous slide clearly states that ethical framework which takes
an inclusive approach starts with “ Leadership Philosophy “. The interpretation of
ethical value system may vary for different organizations. It is far more important
that values are acceptable to employees rather than being enforced by top
management. Therefore it is quite important that top level management & leaders
demonstrate the values they preach. Leaders have an important role to establish the
culture in which ethical behavior can be nourished. By setting clearly the purposes
& values, achieving universality in diversity, identifying success, measuring
performance objectively and providing appropriate rewards & further communicating
with all stakeholders, leaders can contribute effectively in the set of ethical
infrastructure.
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Ethical Leadership
To show how a leader can influence his followers to follow ethics, here is a good
example about IBM. As early as 1961, I circulated a standard of ethics about what
our people could & could not do. These were rules against bare-Knuckle selling
practices, such as disparaging other companies products or leaking information
about machines we hadn’t yet announced in order to block a competitor from making
sale. Perhaps the most important, I told the salesman that in fighting for orders,
they had to show a sense of fair play. Tom Walton Jr, President IBM Mr. Walton's
1961 note to salesman includes the words ‘Turn the situation around. Suppose that
you were a Competitor – small, precariously financed, without large support
organization and without a big reputation in the field, but with a good product.
How would you feel it if the big IBM company took the action which you propose to
take’
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Ethical Decision Making
The very speed of change introduces a new element into management, forcing managers
to make more & more decisions at a faster pace. ‘Alvin Toffler’
Management Planning Organizing Leading Controlling
Decision Making
Goals & Achievements
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Ethical decision making is a very complex & difficult task. There cannot be a
single standard or process which can be followed by all persons in the
organization. People who work in an organization are the moral agents. They make
collective decisions and act on them. They follow certain rules which are
explicit / implicit, codes of conduct & regulations. Actions based on the followed
behavior can be subjected to ethical appraisals.
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Ethical Decision Making Structure of Ethical Decision Making
Identify problem Generate alternate solutions
Evaluate alternatives using costbenefit approach
Select the best solution
Implement the chosen solution
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How to Use Ethical Reasoning : 1. Utilitarian Criteria: This is used to provide the
greatest good for the greatest number which is guided by the value ‘UTILITY’.
Decisions are made on the basis of outcomes or consequences. It attempts to make
ethical evaluation precise by aggregating the happiness of everyone affected and
deducting their unhappiness. To be on the safer side decision makers choose
utilitarian criteria for important decisions like ‘termination’, closing down
plants, laying off large number of employees, raising prices in the best interest
of the organization. Many people have contradictory views and they argue that the
perspective needs to change. Hence some more criteria has been developed to guide
decision makers using non-utilitarian criteria
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2. Rights Criteria: Decision making based on Rights Decision which is consistent
with the fundamental rights and liberties as laid down in the constitution like the
right to speech Example: As whistle blowing is the latest phenomenon occurring in
the modern corporate world of the 21st century. So if decision makers use rights
criteria, a good protection can be given to the whistle blowers when they blow the
whistle against wrong doers 3. Distributive Justice Criteria :This ethical
reasoning sees justice value as a most likely outcome of an ethical process of
decision making. The essential feature of this concept is Transparency & full
participation of those affected. This requires individuals to impose & enforce
rules fairly & impartially so there is equal distribution of 07/26/12 52 benefits &
costs
4. Social Contract Criteria: It suggests that empirical & normative – what is and
what ought to be must be combined. It integrates two contracts
a) b) General social contract among economic participants that defines the ground
rules for doing business A more specific contract among specific members of a
community that covers acceptable ways of behavior
Studies have shown that Utilitarian is consistent with objectives such as

efficiency, productivity & high profits. But because of the changing world of
management, this opinion, perspective should also be changed. New society demands
to follow non-utilitarian criteria, managers must fix some ethical standards.
Commonly accepted virtues such as happiness, lawfulness, consistency, integrity, &
loyalty may be in specific situations conflict one another. Thus managers typically
face moral dilemmas in their decision making. The two approaches to moral questions
are a) Natural Law: This approach considers that certain ultimate values are
matters of natural law. Under this view, certain actions are always wrong 07/26/12
because they break some basic intuitive law. 53
Ethical Decision Making b) Situational law: To determine that an action is right or
wrong, it totally depends on the situation in which the action occurs. This view
holds that an action under one set of circumstances and one environment would be
right. Where as the same action under another set of circumstances and in another
environment would be considered wrong. Decision Making
Ends
Means
Motives
Foreseeable Outcomes
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Ethical & unethical actions are largely a function of both the individual’s
characteristics and the environment in which he Works. The following model explains
the ethical/unethical decision making behavior.
Moral Development
Organization Environment
Locus of control
Ethical/unethical decision making behavior 07/26/12 55

Moral Development : General belief is that a persons values are formed during his
childhood and do not change subsequently. The ability to deal with moral issues
develops as they move through their lives. The process of examining ones moral
standards and applying them to concrete situations includes two parts 1. A persons
ability to use and evaluate his/her moral standards, which develops in the course
of a person’s life. 2. Reasoning processes through which these moral standards are
employed and evaluated. The highest one’s moral development is, the less dependent
he is on outside influence. Example: Managers with high moral development place
increased values on the rights of others and regardless of majority’s opinion. They
are likely to challenge organization practices which they believe are personally
wrong.
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Organization Environment: Whether the work/organization ethics align with personal
ethics. Does the organization support / encourage ethical behavior by rewarding it
or discourage unethical behavior by punishing it. An individual with high ethical
behavior gets demotivated if the organization does not recognize the same. The
converse – a new comer in an ethical organization, though not so ethical
personally, slowly moulds in the morally strong environment. Locus of control:
Locus of control is a personality trait which measures the extent to which people
believe they are selfresponsible for the happenings and events in their life.
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Locus of Control
Internal External Meaning – believes what happens Meaning – believes that what to
them in life is fully because of happens to them is because of their own actions
luck or chance. Consequences – believe in Consequences – rely on external
themselves; follow their own influence, less likely to take internal standards of
right / wrong responsibilities to guide their behavior
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Problems in Ethical Decision Making 1. Due to globalization, as companies deal with
other countries where cross culture diversity issue arise. Managers working in
MNC’s find it very difficult to standardize ethical standards as they do change as
society changes 2. Sometimes decision makers do not follow what they must follow as
they have conflict in individual values vs. organizational goals. 3. Individual
moral standards affect whole organization decisions if they are morally strong,
ethical decisions would be the outcome 4. If the decision makers / managers /
policy makers are greedy, look for short cut routes to earn in the shortest
possible time, they have an upper hand on the moral values and therefore ethically
the decision process would be corrupt. 5. Competitive pressure would also be one of
the main causes which forces decision makers to choose such path where they have to
kill their morals, values and move on unethical path just to cope with the
competition. 6. Poor decisions without deep thinking of consequences 7. Ambiguous
situations create problem which put the manager in dilemma as to which decision
they should make & follow 8. 07/26/12 Pressure of budget systems 59
Guidelines for Manager for Ethical Decision Making 1. Have individual codes of
conduct (personal code of ethics – moral, right & ethical) 2. Industrial codes of
ethics - list of Do Not’s / Do’s
a) b) c) d) Non deceptive ad's Fair dealing with customers Safety measures Quality
products
3. 4. 5.
Professional managers who are more ethical do not go for compromises Sometimes
Govt. rules, values & beliefs guide managers to follow ethics path in decision
making. Corporate Code of ethics
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Ethical Dilemmas
Ethical Dilemmas in Organization Ethical dilemmas are situations where business men
face lots of choices and no clear cut right answer. Business men find dilemmas out
of the eternal conflict between ends & means. Ethical dilemmas are complex
judgments on the balance between the economic performance & the social performance
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Ethical Dilemmas
Salient Features of Ethical Dilemmas Uncertain outcomes: One cant be sure about the
consequences that • result from most ethical choices. Multiple choices and
alternatives: These are situations where we find • more than two alternates which
have to be considered. Mixed Consequences: Ethical dilemmas in management when
solved, the • outcome oppose each other. One decision considered as favorable by
one party and unfavorable by another party. Example – a decision to terminate 10%
of the workforce & increment in the salaries of the remaining 90% workforce.
Direct/Indirect involvement: Ethical dilemmas are more prominent • when one is
directly involved as against a person who has an indirect involvement. Example-What
do you do when your boss wants you to make false TA / DA bills and transfer the
benefits to him.
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Ethical Dilemmas
Approaches / Method for Resolving Ethical Dilemmas. There are no easy approaches to
resolve ethical dilemmas. As the degree of complexity increases, the risk to choose
and Apply the approaches & methods will become more. Some of the approaches are
listed below.
Approaches to Resolve Ethical Dilemmas
Utilitarian (End-based)
Universalism (Rule-based)
Care-based
Virtue ethics
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Ethical Dilemmas
1. Utilitarian (end-based) approach: This was originated by the British thinker
Jeremy Bentham. It aims at creating the greatest degree of benefits for the largest
number of people. According to this system, a human conduct is considered as good
if it results in benefits for society and bad if it generates harm to society. 2.
Universalism (rule-based): This is based on the duties & obligations of an
individual. The moral worth on individual action should be judged by the intention
of the person and not by the outcome of the action. It assumes that good intentions
always result in good outcomes, ultimately if not immediately. 3. Care-based
approach: You have to reserve the dilemma keeping in mind that you have obligation
to care for those you have a close relationship or who care for you. You must care
for them just to maintain a strong bond in relationship. But some men argue that
this would create favoritism while working with those you have valuable
relationship as well as it can degenerate into unjust favoritism & sacrifice of own
needs to care for children, parents, spouse & friends with whom you have a close
relationship. 07/26/12 64
Ethical Dilemmas
4. Virtue Ethics : Virtue ethics can be represented as a mental construction with
prudence.. This mental construction has two ceilings – one is crowned by private
prudence and the other by public prudence. In general we say that when a person
follows virtue ethics, that means while performing any action, he / she should
develop a morally virtuous character. Methods of resolving ethical dilemmas :
Ethical dilemmas occur in organizations in different forms, framework and
structure. Hence a single unique /standard method can not be applied to resolve
them. Each organization has its own strategies, planned procedures for dealing with
ethical dilemma. Some of the methods / steps adopted by different organizations are
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Ethical Dilemmas
1. 2. 3. Define the problem and clearly recognize the moral issue in it Determine
who will be affected by the decisions? What would be your role? Until the ethical
dilemmas can be reduced to common issues which are manageable, it is hard to
resolve them. Collect information & facts about the problem. Isolate the illegal
issues involved in the problem by testing right versus wrong. Identify right v/s
right paradigm such as
a. b. c. d. Justice v/s mercy Short term v/s long term Truth v/s loyalty Individual
v/s community
4. 5.
6.
At this stage you can select any one appropriate approach to resolve dilemma like
a. b. 07/26/12 c. d. Care based Rule based End based Virtue based
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Ethical Dilemmas
7. Find out if there are any other way out of the situation 8. Decide & act – use
approach that is most suitable and take action 9. Review the decision. Platinum
Standard of Ethics : Scoft Ventrella provided a platinum standard of ethics for
dealing with ethical dilemmas as listed below. I. Ask yourself – whose problem it
is? Is it a case of conflicting interests or a question of right and fairness?
Legal /illegal II. Does the decision accurately reflects the kind of person you
are? Does your character match your decision? Do you follow – Practice what you
preach? III. Be careful and aware of what actions you show and try to imagine the
situations that if all your deals, actions, phone calls being observed, recorded
and further reported, what would be the outcomes? IV. Keep your words – How firmly
you fulfill your commitment? V. Develop & sustain integrity – the most powerful
value is integrity which is
a. b. c. d. e. Courage (telling the truth) Self discipline Goodness - honesty,
morality, kindness, fairness, generosity Centering power Living by inner truth and
inner mind to remain incorruptible ie. Let your mind be guided by conscience 67
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Ethical Dilemmas
Case study A: Amith Mishra, GM (HR) for a manufacturing firm ABC. The firm is
undergoing a major change in direction. The rapid Changes in industries as well as
competitors dynamic policies and plans, puts a big pressure over the firm to adapt
in the new environment. Mr.Mishra is thinking of hiring some young & energetic
person to cope with the changing dynamic Situation. ABC has organized a walk in
interview for the new Recruitments. Ms. Isha Patil, well qualified as well as
experienced in similar field has appeared for the interview. She has just left one
of the competitor’s company because of Some personal reasons. Meanwhile in the
interview she indirectly gave hints that she would be happier to tell you all
the07/26/12 competitors plans & policies. What should Mishra do? 68
Ethical Dilemmas
Case study B: Mr.Murthy was working as an officer in the excise dept of a reputed
steel company. He was from a very reputed & good family. The steel company was
reportedly involved in excise evasion of its goods. Excise evasion resulted in the
dealers selling steel which was not excise paid. Mr.Murthy along with his boss were
directly involved in excise evasion. Their philosophy being that they are doing it
for the good of the company and not for themselves. The govt. had recently raided a
few companies practicing excise evasion in the vicinity of the steel company.
Therefore Mr.Murthy was under tremendous stress these days. Even he knew that he
his name would come in the list as one of the company’s executive to be
interrogated. Mr.Murthy wife, knowing about the entire situation advised him to get
out of such activity or else quit the company. Mr.Murthy was in a dilemma. What
should he do?
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Corporate Social Responsibilities
Why business should be socially responsible? 1. Long term survival: If an
organization wants to survive in the long run, it has to establish a loyal brand of
customers etc. If the business does harm to society by their irresponsible acts,
society will not allow them to exist in the future. 2. Public Expectation: General
public expects certain behavior from organizations apart from quality products,
fair prices, good services etc. While doing business they should not disturb any
balance of society like pollution, crime, corruption etc. 3. Goodwill: As we know
that goodwill needs to be earned by firms understanding & discharging their social
responsibilities 4. Govt.Laws & Regulations: Some times govt. laws force the
business to behave in a socially responsible manner to survive in the long run. 5.
Better Environment to Operate: If an organization can improve the quality of life
of customers, try to integrate private good & public good, more focused on solving
a particular problem of society, the better it will be able to solve its own
problems and in a better 07/26/12 70 environment to operate.
6. Keep the balance (give & take relationship): Business organization exists &
operates within society. As it takes so much from society, it should owe something
back. When businessmen understand the fact that they are social entities and
without society’s approval they wouldn't exist, they accept their responsibilities
towards society and attempt to fulfill them. Social Responsibilities Model : Inputs
Human Resources Raw Material Machinery Money Infrastructure Information Market
Material
Processing
•Utilization of all kinds of inputs •Processing of information to manufacture
products & services
Outputs
•Employment generation •Goods & services to satisfy customers needs •Work as a
corporate citizen to meet society’s expectations •Spread education
Feedback
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To understand social responsibility technically some models have been developed 1.
Ackerman’s Model: The basic goal of any corporate entity should be social
responsiveness. All firms in order to be socially responsible pass through some
development stages » Awareness stage » Planning & action stage » Implementation
stage
– – Top managers & decision makers learn of an existing social
problem.
Planning stage to address the problem (hiring a specialist or consultant if
required) Implementation stage – must be integral part of daily operations – True
commitments at all levels of the organization must be obtained – 07/26/12 72
2.
i. ii. iii. iv.
Carroll's Model: According Carroll’s, there are four categories of social

responsibilities
Economic responsibilities – the primary responsibility of any business is to be
economic. Producing goods & services to meet needs / wants of society and generate
profit by selling them Legal responsibilities – Each & every business must operate
within the law and legal framework which are considered as legal responsibilities
Ethical responsibilities – Meeting the ethical expectations of society
Discretionary responsibilities – are steps forward of ethical responsibilities, in
which firms go for voluntary actions to serve society. There is no demand from
society. The firm willingly contributes to the welfare of society.
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3. Approaches to Social Responsibility –
Social Contribution Social Response Social Obligation Social Opposition
Level of Social Responsibility
a) Social Opposition: When businesses opposes society by feeling or showing no

obligations towards it is called social opposition. If while doing any unethical
act they are caught, they play safe by denying it or some other practices like
07/26/12 74 bribery.
b) c) Social Obligation – The firm in this category believe that as they are
operating in society so it is their duty to do business in the legal boundaries.
Social Response – The firm in this degree do more than their social obligations.
They realize that merely fulfilling legal requirements are not sufficient. So they
go beyond towards ethical conduct of business. Social Contribution – The firms
which contribute themselves to social development fall in this category. It is the
top most step on the ladder of social responsiveness. The do business with full
dedication & commitment to society.
d)
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Main Social Responsibilities of Business Organization 1. Responsibility to make
profit – The basic objective of any business is to make profit. As a loss making
firm, it cannot produce quality products, cannot fulfill commitments and therefore
cannot generate revenues/profits to its shareholders. Hence organizations have a
social responsibility to be profitable and only then it can meet its social
obligations / commitments. 2. Responsibility to generate employment – All
businesses must provide fair opportunities to all people. The must create the
conditions / situations which help the employees to put forward their best efforts
achieve organizational goals.
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3. Responsibility of Optimum Utilization of Resources Each organization must
understand that it has some moral obligations to utilize the scarce national
resources of the country in an optimum way, without wasting, avoid damages or mis-
utilize the resources. Responsibility to Provide Quality Products – Providing
quality products at fair prices is one of the most important social
responsibilities. Responsibility to Protect the Environment – Protection of
environment is equally important as other responsibilities. Business organization
as responsible corporate citizens must take serious steps to protect environment
and keep it in a healthy condition. Responsibility to Provide Quality of Life –
Quality of life is ones internal growth, growth of character, mind & soul and
enriched life. Hence business organization should provide opportunity to its
employees as well as society to enrich their lives and better quality of life.
Responsibility to Safeguard the health – Safeguard the health & physical safety of
consumers as well as employees become a vital area to be cared by organizations.
This becomes more serious with drug & other chemical companies. They must take
adequate care to check & safeguard consumers health & well being. Fair Trade
Practices – If business firms are showing socially responsible behavior they must
go for fair trade practices, some of which are – not making false advertisements,
avoid monopolistic trade practices, not go for artificial scarcity, not bribing
public servants, providing quality products & services, fair prices & provide
timely & accurate information to its 07/26/12 77 stakeholders.
4. 5.
6.
7.
8.
9. Responsibility to Development of Nation – If companies are involved in
international business, they must contribute their efforts towards development of
their country by earning foreign currency, earning goodwill, and reputation in
global market, make good relationship among nations. 10. Responsibility to fulfill
all duties & national obligation – As a corporate citizen, business firms are
required to fulfill certain obligations under various laws and to perform certain
duties. They must operate their business within the boundaries of legal framework
provided by govt. They must contribute to national prosperity & try to reduce some
national problems like corruption, unemployment etc.
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Corporate Social Responsibility and India - CSR activities are now an integral part
of organizational objectives in India. Post liberalization Indian companies have
come to term with CSR and its wider ramifications. Both Public & Private sectors
have accepted CSR as a part & parcel of their economic activities. Some Public
sector companies have been more active in CSR. Examples being Oil India, NTPC etc.
NTPC is the first PSU to have developed a comprehensive Resettlement &
Rehabilitation policy. The main CSR policies of NTPC are 1. To lead the sector in
the areas of resettlement & rehabilitation and environment protection including
effective ash utilization, peripheral development & energy conservation practices
2. To continuously attract & develop competent & committed human resources to match
standards 3. 0.5% of its profits are set aside for community development measures
under the umbrella of CSR 4. 07/26/12 To contribute to sustainable power
development by discharging CSR 79
Indian private sector have also shown their good efforts at CSR activities The TATA
group whose belief is shaping a society with social purposes. Jamshedji Tata, the
founder of TATA group and his sons believed that the real purpose of Industry was
to go beyond the creation of wealth to the building of a new society through proper
allocation of wealth. It was from this vision that Tata Institute of Social Science
was born. JRD Tata conducted his business in a very socially responsible way. He
wanted to bring an industrial revolution to an economically backward India. The
specific goals of JRD Tata was to establish a hydro electric power project at
Bombay as a cheap source of energy, the steel industry at Jamshedpur and the Indian
Institute of Science at Bangalore to provide Scientific & Technical education.
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Corporate Governance
Corporate means legally united into a body so as to act as an individual and
Governance means control. So Corporate Governance is nothing but the way by which
corporations are controlled & directed. CG refers to guidelines, procedures, rules
for decision making. It is means of achieving targets on corporate affairs. It also
deals with how to measure performance. The origin of CG took place in UK in 1990.
Some of the factors that drives CG are a. The majority of shares were from
Institutions rather than ndividuals. Institutional investors like pension funds
owned big amount of capital which represents the savings and pensions of lakhs of
people so if the company is not being managed well the needy people would be in
trouble. b. As global operations were speeded up, it came up as a tool for
attracting foreign investment. c. Due to competitive pressure, the no of false
documentation, fraud cases and unethical practices were increasing. d. It was
thought that the companies would undermine the social, ethical 07/26/12 81 &
environmental concerns in the era of privatization
Factors Behind the Origin of Corporate Governance – 1. In this era of
globalization, when expansion, innovation, diversification of the business is
happening at a rapid rate, foreign investors have become very careful about
investing their money. So in order to attract foreign capital, you need to practice
CG 2. Government of India has also implemented strict rules / laws to be followed.
3. The no of institutional investors has increased so there is a need felt to
safeguard their interest. 4. Increase in investigative journalism in business 5. No
of international events like joint ventures, mergers, takeovers have lead to the
mandatory practice CG.
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Important Issues of Corporate Governance 1. Social responsibility 2. Multiple
divergent expectations of shareholders 3. Economic, Social & Environment
obligations are also important for organizations. 4. Fair business deals &
corruption Corporate Governance in India The corporate world in India comprises of
two parts 1. Public Sector 2. Private sector
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Private Sector – In India the broad categories of shareholder for private sectors
are • Promoters • Financial Institutions • Individual investors Any private sector
board consists of three types of directors • Promoter director • Professional
director • Institutional nominee
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Public Sector – The firms where equity shares are owned wholly(51% or more) by Govt
of India ( in the name of the President of India) are in the category of Public
Sectors. The board of Public Sectors would comprise of • Functional directors •
Govt. directors • Outside directors Professionalization of Corporate Governance In
order to bring about reforms to CG the following have been developed.
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• Distinguish Management from Control: It means that control needs to be separated
from management. Some of the components of Management & Control are
Control Ratification – Proposals developed in the initial stages are evaluated and
if found suitable they are approved Monitoring – Assessment of executive’s
performance and implementation of proper reward systems Management Initiation –
Proposals for managing the resources of the firm are developed Implementation –
Execution of the approved proposals.
•Active role of institutional investors: Institutional investors can contribute

effectively towards improvement in CG as they have a higher stake. •Expand role of
non-executive directors: To improve the quality of CG, the role of non-executive
directors must be enlarged since they can provide rich experience & good
objectivity in monitoring corporate 07/26/12 86 behavior. CII has recommended a
code of CG which are related to non-
– Non E.D should occupy at least 30% board seats – Limit on the number of boards on
which a person can serve – An audit committee having at least 3 non ED must be set
up and given access to all information – Degree of accountability must be higher
than at present – All non E.D must be compensated well for their time & effort
• Proper & Timely information to the Board: The board of

directors must get full information about long term plans, budgets, competitive
developments, quarterly results etc
• Size of the board: Lipton & Loesch have done some excellent
research & provided the result with optimum size of the board as 10-12
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87
• Improve accounting & Reporting Practices: Accounting
reports are important means of information for shareholders, creditors, & investors
of any company. SEBI has brought in some improvements in corporate accounting &
reporting practices. Further improvements are required like
a)
b)
Business line reporting: Financiers should et integrated
information about profitability of different diversions of a single company. Group

Accounting: International accounting standards classify investor companies in 3
categories.
Subsidiary companies Jointly controlled companies Associate companies Hence it is
required that firms prescribe different accounting reporting treatments for these
investments to reflect their financial Implications. 07/26/12 88   
c) Tax effect accounting: It eliminates the effects of timing differences in tax
liability while arriving at reported earnings. In India companies account for taxes
as and when they are payable so it is difficult to calculate reported earnings. d)
Earnings per share reporting: EPS is a very commonly used term in stock market
analysis. In India there are no accounting standards prescribed for compiling EPS,
no uniformity in the ways EPS is computed. But as we know that the practical
significance of EPS is great, it is essential to formulate sound standards to
calculate & report EPS in India. How to achieve good corporate governance In the
new millennium big accounting scandals like Enron, Tyco & WorldCom have shown the
failure of financial accounting system, corruption & weak corporate governance.
Corporations are realizing the role of good CG in the success of their business,
they have started taking steps in improving the balance. According to a recent
survey, 70% of companies are using technology tools to get accuracy in financial /
accounting matters. 07/26/12 89
ANAO – Australia’s National Audit Office suggests five key operating
principles that demonstrate different dimensions of corporate governance which are
1. 2.
Leadership: The basic fundamentals of CG are leadership & direction. The CEO / MD &
other directors should follow good CG practices Management Environment: Should
ensure the following
• • • • • Sound business planning with clear objectives Yardsticks for performance
measures, evaluating performance with feedback Clear cut division of work &
responsibilities Establish an ethical framework Ensure right decision about
workforce
1. 2. 3.
Risk Management: Effective risk management practices Monitoring: Monitoring of

Quality systems, adherence to plans & procedures.
Monitoring helps to ensure best practices by continuous improvements.
Accountability: Accountability is measured by effective internal & external

reporting on conformance & performance against set 07/26/12 90 objectives.
Ethics in Marketing
Marketing is a task of creating, promoting & delivering goods & services to
consumers & businesses. Common Unethical Practices: • Duplication of original
brands • Inadequacy of warranty offering • Poor quality products • Unsafe products
• Unauthorized mfg of hazardous products • Products which are not bio-degradable
leading to environmental pollution • Discrimination in pricing • Differentiation in
prices • Excessive mark up in prices • Misleading / deceptive advertisement • False
promises • Lower the dignity of women • No fairness, transparency in relation with
suppliers & retailers • Artificial scarcity 07/26/12 91
Ethics in Marketing
Factors behind Ethical Practices: 1. To Collect the Power by Society: Society gives
the power to marketers, which they earn by their own efforts & influence. So they
should utilize their power in socially responsible & acceptable manner. 2. Goodwill
of the Organization: Goodwill, reputations are big assets for any organization. As
marketing executives represent the whole organization, they need to build up the
image of company as highly ethical & carry out business in a dignified manner. 3.
Government Regulations: Sometimes government regulations have an impact on the
ethical behavior of organizations. Therefore to avoid excessive regulations,
companies need to become self regulatory by living up to ethical practices. 4.
Build up Transparency: Buyers become more suspicious while buying dubious products
due to lack of transparency. High level of transparency convinces public that they
are aware of their social responsibilities. 07/26/12 92
Ethics in Marketing
Important Issues in Marketing Ethics 1. Product: This is the first & important
element in marketing. A product is anything that can be offered to a market to
satisfy need or want. The manufacturer knows more about the product than the buyer.
Hence they must be careful to not to break the trust of the buyer. Some of the
important factors to be considered are
a) b) c) d) e) f) Idea initiation Planning & screening of product design Product
development Marketing strategy Introducing the product in the market Decline stage
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Ethics in Marketing
2. Ethics in Pricing: Price is a critical element in marketing which produces
revenues. It communicates to the market the company’s intended value propositioning
of its product. Companies generally do not go for a single price but a price
structure that has some variations according to purchase timing, order levels,
geographical demands, market segment requirements like
   Price discounts Discriminatory pricing Geographical pricing
There are four major areas of unethical pricing practice like  Price
discrimination: It occurs when a company sells a product at two or more prices that
do not reflect a proportional differences in costs but becomes unethical when
sellers offers different price terms to different people within the same group. 
Predatory pricing: Selling below the cost when just having the 07/26/12 94
intention to destroy competition
Ethics in Marketing
• Deceptive pricing: Deceive the customers to show them the wrong pictures about
the prices by
a) b) Low price offers Inflated price
•
– –
Price Fixation: Prices are fixed at certain levels either by

Horizontal price fixing: price fixing at artificially high levels Vertical price
fixing Price fixing agreements between manufacturers & retailers or between
manufacturers & distributions. It says that product will be sold at the
manufacturer’s suggested price and will not be discounted by the retailer or
wholesaler
3.
Ethical promotion: Promotion plays an important role in marketing of any product /

service. Generally comprises of sales promotion, advertising, sales force, public
relation, direct mail etc.
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Ethics in Marketing
Case Study Breast milk is a natural, safe & free human product. Breast feeding
creates a strong maternal bond between mother & child and is designed to protect
the baby against a number of conditions such as pneumonia & diabetes. Not only are
these, but women who breastfeed themselves are protected from breast & ovarian
cancers. In this modern world, many women feel awkward in breast feeding and
sometimes the medical staff do not have the time to provide adequate training to
teach new mothers how to breast feed. Now, the infant formula is the obvious
alternative. However this product is derived from cow’s milk, which is not designed
for humans. Though it can supplement the diet of a hungry baby, or help a working
mother during the day, but it should not be marketed as an option, that can replace
breast milk entirely. The working mothers easily get convinced with the formula
manufacturers, as the infant formula is much easier and more convenient to use. In
developing nations, the area of breast feeding is very pathetic, sad and &
uneducated one. The big powerful multinationals that control the world’s infant
formula market take all the advantages of the poor and uneducated in order to
increase their own profits.
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Ethics in Marketing
The World Health Organization has a marketing code, endorsed by UNICEF which bans
all promotion for baby formula milk – both through advertisements and through
health workers and midwives, but these powerful companies pay little more than lip
service to it. As the data says, in the developing world, one baby dies every 30
seconds from unsafe bottle feeding. These MNC’s which enjoys almost 40% of the
world wide infant formula and try to capture more & more. They send their
representative to developing countries who give free samples of formula to
hospitals & health workers. The mother is encouraged by these health workers along
with the medical staff to use infant formula by providing free sample and therefore
discouraging breast feeding obviously promoting their products by free gifts &
incentives to local health officials. Other kind of promotion of their products is
in the form of posters on the walls of clinics, some advertisements in magazines
etc. As the company’s main aim is to encourage mothers to use the formula, they
never provide adequate information about formula feeding. They do not teach these
women about sterilizing the bottles they use. So the uneducated & unaware mothers
use un-sterilized bottles & dirty water mixed with the infant formula which causes
severe diarrhea & dehydration in the babies resulting in death also. Very soon,
after the infants have become dependant on the formula and the mother’s milk has
dried up, the free samples stop coming.
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Ethics in Marketing
The only option is to buy the infant formula at high prices. The majority of the
families cannot afford this. So either they go without food themselves and feed
their babies or just dilute the powder to make it last longer. Again the babies
will be suffering from malnourishment and often lose their lives. These company’s
do not follow WHO codes according to which they are required to put labels on
formula products in the appropriate language. They actively promote the use of
infant formula as opposed to breast milk and always try to make as healthy a profit
as possible. Do you regard these marketing practices as ethical? Explain your view.
-----------------------------------------------------------------------------------
Marketing ethics is a sub-set of business ethics and examines the moral issues
relating to marketing decisions made by organizations. Its roots can be traced to
the 1960’s, marketing ethics is believed to have come of age only in 1990’s.
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Ethics in Finance
• There is a close relationship between ethics & finance. • High finance is the
particular area where most of the breakdown of ethical norms occur. • The basic
foundation of business is trust
Finance
Financial market • Commodity markets •Currency markets •Option markets Financial
operations & services • Financial planner •Tax adviser •Stock broker •Insurance
agents
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Ethics in Finance
Some common unethical activities in finance 1. Unsuitability : Insurance agents,
brokers and other sales persons cheat innocent investors by recommending unsuitable
securities / financial products 2. Deception : Most common unethical practice by
strengthening the return & minimizing the weakness & risk factors. Sales person,
agents, advisers deceive the public using the misleading statement like tax free or
0% interest etc. They make public unable to make rational choices among so many
alternatives. 3. Inappropriate and excessive trading : This situation arises when
broker keeps an intention to generate commission rather than benefits to client in
the standing of having control over the clients account
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Ethics in Finance
4. Fraud & manipulation in markets: By law all the participants in the financial
markets are the same. So fairness in our dealings is desired. Fraud means when a
company fails to report proper information and manipulation of buying / selling of
securities to misguide investors. Investors have to rely on information available
to them which is hard to verify. 5. Unequal Bargaining Power : The principle of
equal bargaining power says that all parties have relatively equal bargaining
power. 6. Insider Trading : The act of buying / selling a company’s stock based on
inside information about the company is called insider trading. Insider trading is
illegal as well as unethical. A person who practices Insider trading enjoys the
unfair advantages over the other general public. Ethics in finance is about far
more than trust. Finance would be impossible without ethics since the very act of
placing our assets in 07/26/12 101 the hands of other people requires immense
trust.
Ethics in Human Resources Management
A. Ethics in Job Design: An understanding of job design can help executives to
design & redesign job in such a way that it positively affects employee motivation.
It includes
Work simplification Job rotation Job enlargement Job enrichment Job sharing
Independent work teams Dejobbing Empowerment
B. C. D. E. F. G. H.
1. 2. 3. 4. 5. 6. 7. 8.
Ethics in Human Resource Planning Ethics in Recruiting & selections Ethics in

training & Development Ethics in career development Ethics in performance
evaluation Ethics in wages & salary administration Ethics in Layoff’s 07/26/12
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Ethics in Human Resources Management
Ethical Guidelines: We have seen how ethics is involved in each and every corner of
HRM. Hence some guidelines have been evolved to help the HR professional to handle
ethical issues in much better ways. 1. Ethical Leadership 2. Professional
responsibility 3. Fairness & Justice 4. Professional development 5. Conflict of
Interest 6. Use of Information
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Ethics in Information Technology
• Ethics in IT have opened up new issues & dimensions • IT has no geographical
boundaries, but application & usage of IT may affect differently in different
culture / environment. Computer Ethics: This was founded by Proff. Norbert Wiener
in early 1940’s during world war 2 when he was helping to develop an aircraft
cannon capable of shooting down fast Warplanes. He along with his colleagues
created a new branch of science called Cybernetics – the science of information
feedback system. He foresaw revolutionary social & ethical consequences.
07/26/12 104
Technology Ethics: This is relatively new and interesting subject. Some of the
ethical issues are 1. Think ethically about human biotechnology 2. Taking
responsibility for E-waste 3. Unprofessional emails 4. Use of cloning 5. Cyber smut
– from blocking software to legislation, addressing children’s access to
objectionable material on internet 6. Invasion of privacy on internet
07/26/12
105
These are various ethical issues involved in IT which can be categorized into four
groups a) Accessibility b) Privacy c) Property d) Accuracy
07/26/12
106
Environmental Ethics
ENVIRONMENT
Natural Resources Land Air Water Fuels Fauna & Flora Raw materials Minerals
Man-made Resources People Heritage Socio economic Structure
Environmental ethics: This deals with how to keep a balance between business &
environment. Due to rapid spread of environment consciousness, the traditional
perception about trade-off’s between environment quality & economic growth is
07/26/12 107 also changing.
• Pollution:
– – – – – air pollution water pollution noise pollution earth warming ozone
depletion
• Role of ethics in Environmental Protection

– Resolving conflicts in both the visible & invisible areas – Intergenerational
ethics – Spiritual ethics
Environment Protection in India •The environment protection act (1986) •The

factories act, 1948 and its amendment in 1987
07/26/12 108
• Hazardous Wastes • Public liability Insurance act (PLIA) 1991 National
Environment Tribunal act 1995 • The National Environment Appellate Authority Act,
1997 • Examples of Environmental Pollution 1. Bhopal Gas Tragedy 2. Exxon Valdez
Disaster 3. Chernobyl Accident
07/26/12
109
Corruption & Ethics
The dictionary meaning of corruption is the misuse of public power for private
gain. 1. Corruption is the practice of unlawful or improper use of influence, power
or other means for personal gains 2. Corruption is the lack of integrity or honesty
Causes of Corruption 1. Individual’s perspective – motivation by personal greed 2.
Society’s Structural perspectives – due to political, social & cultural needs of
society. Corruption develops when the risk of being caught is far less than the
reward of being corrupt.
07/26/12
110
Corruption & Ethics
Some of the basic factors behind corruption are 1. Culture 2. Inadequate / low
salaries 3. Weak legal framework and absence of rules & regulations 4. Adherence to
transparency & accountability 5. Other reasons like
a) b) c) Opportunities Circumstances International phenomenon
Impact of corruption: Slows economic development • Reduces investment • • Increases

poverty Leads to poor administration • Decline in human development • Increases
discrimination & unfair treatment • Supports criminal activities • 07/26/12 111
Distorts incentives & creates uncertainties about expected profits •
Gender ethics, Sexual Harassment & Discrimination
• Discrimination – Unfair distinctions leading to unjust treatment. Not based on
merit but on other considerations like gender, economic status, racial & disability
• Sexual Harassment- a kind of discrimination directed primarily at women.
Difficult to define and hence prevent & police. It may include
– – – – – – – – – Remarks Looks Touching Jokes Attitudes Sexual comments Recurring
requests for dates Use of sexual artifacts Use of sexually explicit language
• Gender ethics - Men & women should be treated as equals. To treat them as
different would be unethical. Equality 112 07/26/12 needs to be reinforced by laws
& regulations.
Gender ethics, Sexual Harassment & Discrimination
07/26/12
113

Business Ethics

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Business Ethics

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Business Ethics

Actual Business Ethics

Response & Enforcement • Implementing an ethical program is one of the biggest

Build trust among employees

Higher productivity of the organization

Employees towards Organization

Organization towards Employees

Organization towards other Economic

Reports the unethical behavior to higher authorities in the same organization

External Reports about unethical behavior to external agencies like media,

Public Opinion Law

Competitors Industries & Mkt Std

Goals & Achievements

Evaluate alternatives using costbenefit approach

Select the best solution

Implement the chosen solution

Studies have shown that Utilitarian is consistent with objectives such as

Ethical/unethical decision making behavior 07/26/12 55

Carroll's Model: According Carroll’s, there are four categories of social

Level of Social Responsibility

a) Social Opposition: When businesses opposes society by feeling or showing no

•Active role of institutional investors: Institutional investors can contribute

• Proper & Timely information to the Board: The board of

Business line reporting: Financiers should et integrated

information about profitability of different diversions of a single company. Group

Risk Management: Effective risk management practices Monitoring: Monitoring of

Accountability: Accountability is measured by effective internal & external

Price Fixation: Prices are fixed at certain levels either by

Ethical promotion: Promotion plays an important role in marketing of any product /

Ethics in Human Resource Planning Ethics in Recruiting & selections Ethics in

Man-made Resources People Heritage Socio economic Structure

• Role of ethics in Environmental Protection

Environment Protection in India •The environment protection act (1986) •The

Impact of corruption: Slows economic development • Reduces investment • • Increases

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