BUSINESS ETHICS

 The concept of business ethics is the specialization of such study where the business
establishment determines what the moral right for the organization is and also assesses
the wrong in conduct of the business and set standards in-order to ensure that people in
the organization follow.
 The concept of business ethics is decided by the business institution itself. There is no
regulatory body to determine the right or wrong. This implies that the institution culls out
the ethical standards i.e. right or wrong on the basis of best interest of the business. Thus,
Business Ethics is a self evolving concept.

I. RELEVANCE OF ETHICS
Submission 1: Should we have business ethics?
 Why should an organization contemplate/ think like this? Is it a requirement? Should the
management concentrate not concentrate at the final objective of the business?
 The ethical standard determined by the business must lead to profit maximization. But if
the ethics hinders the business itself, then the question is should the business abandon the
principle or hold on to the business because the principle is important than the profit.
 The answer is that profit maximization is incidental because the principle is more
important. The ideal situation is where the business gives more importance to ethics,
treating ethics as primary goal with profit maximization being secondary or incidental.

At what stage the business institutionalizes ethical standards?

 It can be done at any stage. The business can do it in arbitrary manner or in a planned
manner. Supposing, when the organization attains a market foothold with wide customer
recognition then it might decide to implement ethics. Thus, as and when the organization
grows, they start creating a perception that organization is creating a puristic form of
business practice. Thereby creating a better image in the market and makes the
stakeholders believe in the business practice of the organization. This, as a whole leads to
evolvement of the organization.

 Business ethics is a dynamic study. There is no straight jacket formula. This creates
inconsistency and difference in interpretation of ethics. Every business tries to have a
 discussion of what is considered as an ethical conduct of business. Then, it tries to
implement it as far as possible.
 Example – Johnson and Johnson try to disseminate the principle of ethical practice
followed by the organization and try to make the stakeholders adherent to those
principles.
 Example – a start-up may not take a hardened stand on ethics because they have to deal
with such situations where they would let go ethics. But as they grow
 Example – HUL changed the name of ‘Fair and Lovely’ to ‘Glow and Lovely’ after the
huge public outcry.
o The company did so to calm the negative public opinion and again make it profitable
product. Thus, it was not a result of the ethical practice because ethics are
implemented within the organization and what HUL did was purely profit oriented
move.
o However, making assertion that ‘Fair and Lovely’ would make the user fair is a
question of ethics. If a consumer after using the product is not satisfied then will it be
a question of ethics. The answer must be affirmative because the practice of the
business in not ethical. The brand makes unsubstantiated claims and assures people of
fair skin.
o Since the organization has only changed the nomenclature without making any
substantial change, then such would be pursuant to ethical practice in general.

Assessment of business ethics:

 The concept of Ethics is very interpretative i.e., people may interpret ethics in their own
way and may try to influence others well.
 People sometimes inculcate the personal ethics in the organizational ethics and that
becomes a practice.
 Concept of business ethics in the organization may influence others in the organization
and ensure that others also think that the that particular thing is right.
 But how to know whose ethics are right and whose ethics are wrong? Or How to assess
business ethics?

 There are two ways to assess business ethics-.

 i. Normative study of ethics (First Method)
 Assess whether the course of action initiated leads to broad conclusions which
conclusions are good for everyone (i.e., larger good for larger no. of people).
 The expression “course of action” refers to a practice or standard undertaken by a person.
 Here, an attempt is made to determine “what should or ought to be” rather than “what is”.
Attempt has to be made to investigate what is right or wrong, without any bias or any
broad conclusion
 Investigation: Ask the person why is he saying so.
 Example – Napster used to provide pirated music at their online portal for free. Their
business practice harmed the business of the Music Companies that used to compose and
sell that music.
ii. Descriptive study of ethics
 It is not necessary to reach out to conclusion or give any broad conclusion.
 It is important to attempt to describe what is right or wrong. Here, we only have to
describe the information and let the reader reach the conclusion.
 No investigation is undertaken here.
 Also, the education, the cultural background and family upbringing helps in determining
the business ethics.

II. MORALITY AND ETHICS

1. Indoctrination
 Everyone holds some value of what is right and what is wrong based on certain value or
thought process acquired by us during the course of time. This thought process is
indoctrinated into us over the time.
2. At childhood phase
 It is at the childhood stage that a person can be indoctrinated of what is right and wrong.
 The thought process indoctrinated at the childhood stage remains with us throughout our
life.
3. Questioning the morality of the action
 Can we as a person question the morality of our family, of the people we work with or
our friends and like institutions?
  Family is the institution we live in and get acquainted with the term morality at the most
basic stage. However, will we question the actions of the relative in a questionable
relationship or wrong actions of our close relative?
 So there are the issues relating to value belief system when it comes to the institution like
family, friends, marriage or work.

III. CHARACTERISTIC FEATURES OF MORALITY

1. Series of injuries or benefits
 Only when there is a series of injuries or benefits involved then we question the mora;ity
of the action.
 Example – beating – if two boys fight with each other over some petty issue, we tend to
reprimand such action as the act is considered immoral or wrong. However, when a
teacher slaps a boy for not completing the homework, we tend to interpret it in a positive
light i.e. trying to teach the student a lesson.
 Thus, the interpretation of morality changes with injuries transferred and benefits
acquired.
2. Morality is not necessarily backed by legislation or law
 Morality cannot be enforced through the backing of law in the society. It is always
inherent in the society.
 A society’s interpretation of morality will vary and cannot be uniformly enforced through
the means of law.
 However, even in the absence of legislation the society or people must be able to enforce
the moral assessment of the action on the basis of the social conditioning.
3. Values of self-interest
 Morality is associated with such values that are connected to self-interest. Example – a
person’s value belief systems might be associated with repute, family respect, etc.
4. Generally the moral standards are based on impartial consideration
 Moral standards do not give any kind of partial assessment.
5. Morality is associated with emotions and vocabulary
 The power of the terms used or emotions associated is reflected in morality of the actions.
 The emotion of guilt or anger will weigh down on the interpretation of the action in a
negative light.
IV. THREE WAYS OF UNDERSTANDING THE MORALITY
1. Moral
 The person may always want to conform to the moral standards whatever may be the
situation. The person will hold on to the value belief system and apply the moral
standards to the actions.
 He would not deviate from the moral standards no matter how hard or tough a situation is.
 The people will treat everyone with equity, hold liberal views and try to do justice to
every situation.
2. Amoral
 People with amoral thinking do not give any important to ethics. They will not relate the
business transaction with ethics. For such people business and ethics are two different
concepts and they are only concerned with profit maximization.
 Such people will ignore and not contemplate anything from the morality perspective.
They don’t have any belief in the moral standards and deliberately avoid ethics. However,
such people who don’t believe in ethics, don’t engage in any immoral activity.
3. Immoral
 Such people may have a value belief system and contemplate ethics and morality.
However, they deliberately ignore and go an extra mile to maximize the profits through
any means.
 They may indulge in any activity to maximize profit although knowing the immorality of
the act. They might have an alternative nut deliberately choose to ignore it.
 While undertaking the action they are not concerned with immorality. Till the time it
benefits them, they will keep on ignoring the ethical value. They might indulge in
deceitful and malicious practice for the gain of the business.
 Their actions might not be influenced by greed or malice but
 They may also try to circumvent law to make profit for the company. Till the time their
actions are questioned they like to operate in the manner that benefit them.

Relevance of moral standards in business

How business ethics gets crystallized in business practice

 MORAL DEVELOPMENT

I. LAURENCE COLDBERG STAGES OF MORAL DEVELOPMENT –

 He was American Psychologist and propounded the stages of moral development.
 Laurence Coldberg raises the question to 72 male children: Would it be permissible for a
man to steal to save his dying wife.
 He identified three levels and each level comprises of 2 stages –

Level 1: Pre-Conventional Stage

 It talks about a child having an ability to respond to social expectations and can comply
with good, bad, right, wrong, etc.
 These rules are given by the externalities like teachers, parents, etc.
 The more the compliance the more is the association.
 Non-compliance would lead to the person harming the child to ensure compliance.
 The interpretation of good/bad, right/wrong are pre-decided.
 There is no contradiction if the child adheres to the instruction.
 If there is contradiction between the child’s act and the instructions, the elderly person
may inflict some degree of pain to ensure compliance.

Stage 1: Punishment and Obedience Orientation

 Here, the physical consequences of an act wholly determine the good or bad of the act.
 The reason as to why the child undertakes a particular act is to avoid punishment or pain.
 The child conforms to the instructions.
 The child may also show anger, repulsive behaviour, etc.
 There is little awareness in the child of what is right or wrong.
 The child may rebel. However, children from 0 - 5 years of age may not be able to rebel.

Stage 2: Instrumental and Relative Orientation

 Here, the child starts expecting something if he undertakes a particular behaviour. For
instance, if he studies properly, he may wish a reward from his parents.
 The child starts realising what would be consequence of their actions. The child begins to
assess whether the elderly person would be happy or not.
 The child starts assessing: “If I do this, would I get a reward.”
 Here, the child tries to channelize its behaviour to get a reward. They engage in
appeasement.
 They try to sacrifice, they share, they show compassion, etc.
 The child tries to demonstrate such behaviour which would please the other person or
make him/her happy. For e.g.: the child may help the mother instead of going out and
playing with friends.

Level 2: Conventional Stage

 Here, people start expecting things from their family. It is not necessary that the
expectations are always legitimate.
 The person not only expects but also stays loyal to the group to which he belongs. The
group may be family, friends, etc.
 The person tries to comply with the family-oriented thought process. He fears that if he
doesn’t conform to the family’s thought process then he may be isolated or humiliated.
 Precisely, the person tries to subscribe to the family instructions and thought process.

Stage 3: Interpersonal Concordance Orientation

 Relationships are important in this stage of development. That which is pleasing or
helpful to others is considered good while things that others disapprove of are wrong.
 In Stages 1 & 2, egocentrism was a driving factor. However, in the conventional stage,
the opinions of others dictate right and wrong.

Stage 4: Law and Order Orientation

 The right and wrong assessment by the person is determined by what the law says.
 It is believed that “being in conformity with law is right”.
 Ensure that the legal provisions are complied with. The law is not be questioned.

Level 3: Post-Conventional Autonomous Stage / Principal Stage

 The person doesn’t simply subscribe to o follow the thought process of others, be it
family, law, etc.
 The person independently an autonomously assesses the right or wrong in light of various
factors.
 The person independently decides if the legal provision is right or wrong considering the
ends of justice and righteousness in mind.
 The person may consider that the legal provision is not fair, not just or inequitable.

Stage 5: Social Contract Orientation:

 The person becomes aware of the fact that individuals hold various ideologies or though
processes which may influence one’s own though process or assessment of right or
wrong.
 The person realises that in order to develop a new thought process, there must be a social
contract i.e., a consensus among individuals to the solution. The person realises the need
of democratic consensus to bring in justice or fairness.

Stage 6: Universal Ethical Principles

 The individual considers those actions as right actions which are based on individual’s
moral assessment of right or wrong, logical coherence, universality and consistency.
 The principles decided this way are known as “ethical principles”.