“A report on ethical principles for business executives”

(In partial fulfillment of the requirement of the degree of MASTERS OF

BUSINESS ADMINISTRATION (MBA))

SUBMITTED TO: SUBMITTED BY:

DR. PARNEET KAUR MANPREET SINGH SEKHON

SCHOOL OF MANAGEMENT ROLL NO:19421097

What is business ethics: The concept has come to mean various things to
various people, but generally it's coming to know what it right or wrong in the
workplace and doing what's right -- this is in regard to effects of
products/services and in relationships with stakeholders. Wallace and Pekel
explain that attention to business ethics is critical during times of fundamental
change -- times much like those faced now by businesses, both nonprofit or for-
profit. In times of fundamental change, values that were previously taken for
granted are now strongly questioned. Many of these values are no longer
followed. Consequently, there is no clear moral compass to guide leaders
through complex dilemmas about what is right or wrong. Attention to ethics in
the workplace sensitizes leaders and staff to how they should act. Perhaps most
important, attention to ethics in the workplaces helps ensure that when leaders
and managers are struggling in times of crises and confusion, they retain a
strong moral compass. However, attention to business ethics provides numerous
other benefits, as well (these benefits are listed later in this document).

Note that many people react that business ethics, with its continuing attention to
"doing the right thing," only asserts the obvious ("be good," "don't lie," etc.),
and so these people don't take business ethics seriously. For many of us, these
principles of the obvious can go right out the door during times of stress.
Consequently, business ethics can be strong preventative medicine. Anyway,
there are many other benefits of managing ethics in the workplace. These
benefits are explained later in this document.

Managing Ethics in the Workplace

Organizations can manage ethics in their workplaces by establishing an ethics
management program. Brian Schrag, Executive Secretary of the Association for
Practical and Professional Ethics, clarifies. "Typically, ethics programs convey
corporate values, often using codes and policies to guide decisions and
behavior, and can include extensive training and evaluating, depending on the
organization. They provide guidance in ethical dilemmas." Rarely are two
programs alike.

"All organizations have ethics programs, but most do not know that they do,"
wrote business ethics professor Stephen Brenner in the Journal of Business
Ethics (1992, V11, pp. 391-399). "A corporate ethics program is made up of
values, policies and activities which impact the propriety of organization
behaviors."

Bob Dunn, President and CEO of San Francisco-based Business for Social
Responsibility, adds: "Balancing competing values and reconciling them is a
basic purpose of an ethics management program. Business people need more
practical tools and information to understand their values and how to manage
them."

Developing Codes of Ethics

According to Wallace, "A credo generally describes the highest values to which
the company aspires to operate. It contains the `thou shalts.' A code of ethics
specifies the ethical rules of operation. It's the `thou shalt nots." In the latter
1980s, The Conference Board, a leading business membership organization,
found that 76% of corporations surveyed had codes of ethics.

Some business ethicists disagree that codes have any value. Usually they
explain that too much focus is put on the codes themselves, and that codes
themselves are not influential in managing ethics in the workplace. Many
ethicists note that it's the developing and continuing dialogue around the code's
values that is most important.
Ethics Training
The ethics program is essentially useless unless all staff members are trained
about what it is, how it works and their roles in it. The nature of the system may
invite suspicion if not handled openly and honestly. In addition, no matter how
fair and up-to-date is a set of policies, the legal system will often interpret
employee behavior (rather than written policies) as de facto policy. Therefore,
all staff must be aware of and act in full accordance with policies and
procedures (this is true, whether policies and procedures are for ethics programs
or personnel management). This full accordance requires training about policies
and procedures.

A Framework for Ethical Leadership

In answering questions regarding the development of their ethical frameworks,
the participants in the study also revealed what they most valued in their
ongoing practice of ethical leadership. As the participants’ insights merged, a
framework for ethical leadership surfaced. The overall framework is made up of
four value perspectives and each of the value perspectives is formed by
approaches valued by the participants in their ongoing practice of ethical
leadership. The term, value perspective, was developed to retain the integrity of
both the study’s purpose and the questions asked to generate the data. The first
research question asks, “What aspects of ethical leadership are valued by those
who consider themselves ethical leaders?” The participants were not asked
about the development of their leadership qualities, behaviors, or competencies;
the interview questions asked them to discuss how they had developed
the values upon which their most difficult decisions were based. Hence, the data
that emerged represented the participants’ perspectives on what they valued in
their exercise of ethical leadership. A value perspective is not a value in and of
itself; it is a conduit through which the participants were able to connect their
values with their decisions and actions. The concept of the value perspective
may be one way in which this study contributes to the growing body of
knowledge on ethical leadership.

Ethical Principles in Businesses from an Indian Perspective

Essentially, any businesses that run in India comprises of these ethical principles.

Integrity

Whenever there is great pressure to do right instead of maximizing profits, this

principle is tested. The executives need to demonstrate courage and personal
integrity, by doing what-what think is right.

These are the principles, which are upright, honorable. They need to fight for their
beliefs. For these principles, they will not back down and be hypocritical or
experience.

Loyalty

No ethical behavior can be promoted without trust. And for trust, loyalty needs to
be demonstrated. The executives need to be worthy of this trust while remaining
loyal to the institutions and the person. There should be friendship in the time of
adversity and support and devotion for the duty.

They should not use or disclose personal information. This leads to confidence in
the organization. They should safeguard the ability of a professional to make an
independent decision by avoiding any kind of influence or the conflicts of interest.
So, they should remain loyal to their company and their colleagues. When they
accept the other employees, they need to provide a reasonable time to the firm and
respect the proprietary information attach to the previous firm. Thus, they should
refuse to take part in any activity that might take the undue advantage of the firm.

Honesty

The ethical executives are honest while dealing with their regular work. They also
need to be truthful and do not deliberately deceive or mislead the information to
others. There should be an avoidance of the partial truths, overstatements,
misrepresentations, etc. Thus, they should not have selective omission by any
means possible.

Respect and Concern

These are two necessarily different forms of behavior in the organization. But they
go in tandem that is why they have been put under one principle. When the
executive is ethical he is compassionate, kind, and caring.

There is one golden rule which states that help those who are in need. Further,
seek their accomplishments in such a manner that the business objectives of the
firm are achieved.

The executives also need to show respect towards the employee’s dignity, privacy,
autonomy, and rights. He needs to maintain the interests of all those whose
decisions are at stake. They need to be courteous and treat the person equally and
rightly.

Fairness
The executives need not be just fair in all the dealings, but they also should not
exercise the wrong use of their power. They should not try to use over each or
other indecent manners to gain any sort of advantage. Also, they should not take
undue advantage of anything or other people’s mistakes.

Fair people are inclined more towards justice and ensure that the people are
equally treated. They should be tolerant, open-minded, willing to admit their own
mistakes. The executives should also be able to change their beliefs and positions
based on the situation.

Leadership

Any executive, if ethical, should be a leader to others. They should be able to

handle the responsibilities. They should be aware of the opportunities due to their
position. The executives need to be a proper role model for others.

ETHICAL PRINCIPLES FOR BUSINESS EXECUTIVES

In business, how people judge your character is critical to sustainable success

because it is the basis of trust and credibility. Both of these essential assets can
be destroyed by actions which are, or are perceived to be unethical. Thus,
successful executives must be concerned with both their character and their
reputation.

Abraham Lincoln described character as the tree and reputation as the shadow.
Your character is what you really are; your reputation is what people think of
you. Thus, your reputation is purely a function of perceptions (i.e., do people
think your intentions and actions are honorable and ethical) .while your
character is determined and defined by your actions (i.e., whether your actions
are honorable and ethical according to the 12 ethical principles:

1. HONESTY. Be honest in all communications and actions. Ethical

executives are, above all, worthy of trust and honesty is the cornerstone of trust.
They are not only truthful, they are candid and forthright. Ethical executives do
not deliberately mislead or deceive others by misrepresentations,
overstatements, partial truths, selective omissions, or any other means and when
trust requires it they supply relevant information and correct misapprehensions
of fact.

2. INTEGRITY. Maintain personal integrity. Ethical executives earn the

trust of others through personal integrity. Integrity refers to a wholeness of
character demonstrated by consistency between thoughts, words and actions.
Maintaining integrity often requires moral courage, the inner strength to do the
right thing  even when it may cost more than they want to pay. The live by
ethical principles despite great pressure to do otherwise. Ethical executives are
principled, honorable, upright and scrupulous. They fight for their beliefs and
do not sacrifice principle for expediency.

3. PROMISE-KEEPING. Keep promises and fulfill commitments. Ethical

executives can be trusted because they make every reasonable effort to fulfill
the letter and spirit of their promises and commitments. They do not interpret
agreements in an unreasonably technical or legalistic manner in order to
rationalize non-compliance or create justifications for escaping their
commitments.
4. LOYALTY. Be loyal within the framework of other ethical
principles. Ethical executives justify trust by being loyal to their organization
and the people they work with. Ethical executives place a high value on
protecting and advancing the lawful and legitimate interests of their companies
and their colleagues. They do not, however, put their loyalty above other ethical
principles or use loyalty to others as an excuse for unprincipled conduct.
Ethical executives demonstrate loyalty by safeguarding their ability to make
independent professional judgments. They avoid conflicts of interest and they
do not use or disclose information learned in confidence for personal advantage.
If they decide to accept other employment, ethical executives provide
reasonable notice, respect the proprietary information of their former employer,
and refuse to engage in any activities that take undue advantage of their
previous positions.

5. FAIRNESS. Strive to be fair and just in all dealings. Ethical executives

are fundamentally committed to fairness.  They do not exercise power
arbitrarily nor do they use overreaching or indecent means to gain or maintain
any advantage nor take undue advantage of another’s mistakes or difficulties.
Ethical executives manifest a commitment to justice, the equal treatment of
individuals, tolerance for and acceptance of diversity. They are open-minded;
willing to admit they are wrong and, where appropriate, they change their
positions and beliefs.

6. CARING. Demonstrate compassion and a genuine concern for the well-

being  of others. Ethical executives are caring, compassionate, benevolent and
kind. They understand the concept of stakeholders (those who have a stake in a
decision because they are affected by it) and they  always consider the business,
financial and emotional consequences of their actions on all stakeholders.
Ethical executives seek to accomplish their business objectives in a manner that
causes the least harm and the greatest positive good.

7. RESPECT FOR OTHERS. Treat everyone with respect. Ethical

executives demonstrate respect for the human dignity, autonomy, privacy,
rights, and interests of all those who have a stake in their decisions; they are
courteous and treat all people with equal respect and dignity regardless of sex,
race or national origin. Ethical executives adhere to the Golden Rule, striving to
treat others the way they would like to be treated.

8. LAW ABIDING. Obey the law. Ethical executives abide by laws, rules and

regulations relating to their business activities.

9. COMMITMENT TO EXCELLENCE. Pursue excellence all the time in

all things. Ethical executives pursue excellence in performing their duties, are
well-informed and prepared, and constantly endeavor to increase their
proficiency in all areas of responsibility.

10. LEADERSHIP. Exemplify honor and ethics. Ethical executives are

conscious of the responsibilities and opportunities of their position of leadership
and seek to be positive ethical role models by their own conduct and by helping
to create an environment in which principled reasoning and ethical decision
making are highly prized.
11. REPUTATION AND MORALE. Build and protect and build the
company’s good reputation and the morale of it’s employees.  Ethical
executives understand the importance of their own and their company’s
reputation as well as the importance of the pride and good morale of employees.
Thus, they avoid words or actions that that might undermine respect and they
take affirmative steps  to correct or prevent inappropriate conduct of
others.

12. ACCOUNTABILITY. Be accountable. Ethical executives acknowledge

and accept personal accountability for the ethical quality of their decisions and
omissions to themselves, their colleagues, their companies, and their
communities.

Business Ethics – 
The theories of business ethics can be divided into two categories:
1. Teleological theories, and
2. Deontological theories.
1. Teleological Theories:
The term ‘teleological’ is derived from the Greek word ‘telos’ which means an
end. According to teleological theories the Tightness of an action is determined
solely by its consequences rather than by any feature of the action itself. Actions
that result in greatest possible balance of good or evil are considered ethical.
Thus, teleological theories are based on the concept of goodness.
Now the question is which is good and what is evil. In classical utilitarianism,
pleasure is regarded good, and pain is considered evil. In broader terms,
goodness is human well-being.
Bentham and Mill explained the doctrine of utilitarianism:
i. The Principle of Utility:
Jeremy Bentham (1748-1832) explains this principle as follows:
“By the principle of utility is meant that principle which approves or
disapproves of every action whatsoever, according to the tendency which it
appear to have to augment or diminish the happiness of the party whose interest
is in question – or, what is the same thing in other words, to promote or to
oppose that happiness.”
Thus, the consequences of an action are measured in terms of the pleasure and
pain caused to different individuals. Bentham suggested a procedure called
hedonistic calculus for this purpose.
Bentham’s theory is criticised for two reasons. First, it is not always possible to
measure in quantities the pleasure and pain caused by an action. Second,
pleasure does not constitute human well-being. Even pigs are capable of
pleasure and his theory is criticised as a ‘pig philosophy’ fit only for swine.
According to critics, one absurd consequence of Bentham’s principle is that it
would be better to live the life of a satisfied pig than that of a dissatisfied human
being such as Socrates. For human beings, friendship and aesthetic enjoyment
are as good as pleasure.

ii. The Principle of Utilitarianism:

John Stuart Mill (1806-1873) modified the principle of utility by recognising
that pleasures differ in their quality which is an important as the quantity of
pleasure. Mill concluded, “It is better to be a human being dissatisfied than a pig
satisfied; better to be Socrates dissatisfied than a fool satisfied. And if the fools,
or the pig, are of a different opinion, it is because they know only their side of
the question.”
Thus, there are two forms of utilitarianism:
(a) Action utilitarianism under which an action is right if and only if it produces
the greatest balance of pleasure over pain for everyone. For example, telling a
lie or breaking a promise is right if its consequences are better than those of any
alternative course of action. Thus, classical utilitarianism does not require
observing rules such as “Tell the Truth.”
(b) Rule Utilitarianism under which an action is right if and only if it confirms
to generally accepted rules and produces the greatest balance of pleasure over
pain.
Act utilitarianism is simple and easily understood. But rule utilitarianism is
morally more sound and does not require calculating the consequences of each
action.
The principle of utilitarianism consists of the following elements:
(1) Consequentialism – The Tightness of any action depends solely on its
consequences.
(2) Hedonism – Pleasure alone is good.
(3) Maximisation – A right action is one that creates greatest amount of net
pleasure.
(4) Universalism – Everyone’s consequences are alike.
Advantages of Teleological Theories:
These are as follows:
(i) Teleological theories are consistent with the ordinary moral reasoning.
Utilitarianism why telling the truth, keeping promise, and other acts which
provide some benefit are morally relevant.
(ii) Teleological theories provide an objective and precise method for moral
decision-making. A decision maker can choose the right course of action by
calculating and comparing the consequences of different alternatives.
(iii) Economists assume that people seek to maximise their utility or welfare.
The economic theory is based on the ethical theory of utilitarianism.
Limitations of Teleological Theories:
They are as under:
(i) Teleological theories do not consider the basic obligations. Parents have
obligations to their children and they must provide for their children even when
the money could be more beneficial for orphans.
(ii) It is not possible to measure and compare the goodness/badness of various
actions.
(iii) Teleological theories disregard rights and justice. For example, the right of
free speech entitles us to speak freely but restrictions on this right might lead to
better consequences. Similarly, discrimination violates the basic principle of
justice. But preferential rights are often given to women and minorities.
2. Deontological Theories:
The term ‘deontological’ is derived from the Greek word ‘deon’ which means
duty. Duty or obligation is the fundamental concept in deontological theories.
According to deontological theories certain actions are right not due to some
benefit to self or others but due to their basic nature or the rules underlying
them. For example, bribery by its very nature is wrong irrespective of its
consequences.
Similarly, the Golden Rule “Do unto others as you want them do unto you”
appeals to human dignity and respect for others.
W.D. Ross, the 20th century Britisher philosopher has given the following
moral rules:
(i) Duties of Fidelity — to keep promises, both explicit and implicit, and to tell
the truth.
(ii) Duties of Reparation — to compensate people for injury that we have
wrongfully inflicted on them.
(iii) Duties of Gratitude — to return favours that others do for us.
(iv) Duties of Justice — to ensure that goods are distributed according to
people’s merits.
(v) Duties of Beneficence — to do whatever we can to improve the condition of
others.
(vi) Duties of Self-improvement — to improve our own condition with respect
to virtue and intelligence.
(vii) Duties of Non-maleficence — to avoid injury to other.
Thus, deontological theories refute the argument that consequences determine
what we ought to do. Actions are right or wrong not because of their
consequences but because of our duty or obligation.
Deontological theories have the following merits:
(i) Deontological theories make sense in cases in which consequences are
irrelevant. It appears more sensible to care for relations than for consequences.
For example, it is the duty of a manufacturer to honour the warranty on a
defective product even when the cost of doing so is more than the benefits.
(ii) Another merit of deontological theories is that they consider the role of
motives in evaluating actions. For example, two people give equal amounts to
charity. Here their benefit is the same. But the action of the person who denoted
due to genuine concern for poor is better than that of the person who donated to
impress others. Thus, the motive with which actions are done determine their
Tightness.
Deontological theories suffer from the following weaknesses:
(i) Deontological theories fail to provide a precise criteria to understand our
moral obligations and to resolve moral conflict.
(ii) Ross gave no order of priority among his rules and when these rules are in
conflict there is no guide. For example, telling the truth or keeping a promise
may cause harm to someone.