Business Ethics:

Ethics & the Ethical Dilemma

Prof S Patanjali
 Cognizant
In February 2019, Cognizant Technology Solutions (Cognizant), an American information technology (IT)
outsourcing company, was ordered to pay a total of US$28 million in penalties to the U.S. Securities and
Exchange Commission and the US Department of Justice.

Two former Cognizant executives allegedly approved bribes to senior government officials to the tune of
$3.6 million via a third-party construction company (L&T, reports suggest). The bribe was for getting
clearances to construct the IT major’s 2.7 million square foot new campus KITS in Chennai in 2014. This issue
dates back to 2016 when Cognizant first revealed it was conducting an internal investigation into what it
termed as “improper payments.” Executives named in the alleged include Gordon Coburn and Steven E
Schwartz.
These pacts have always existed and they continue to be
informal in nature.
No poaching agreements are legal as long as they do not restrict
an individual’s right to seek employment.
. . . there is no law that prevents two entities from entering into
such agreements, so long
as they are not dominant players in that sector.
 Ethics
Albert Einstein:

“Relativity applies to Physics, not to Ethics”

Ethics – A Game?
Theoretical Foundations of Ethics

&

Models of ethical decision-making

Unitary Perspective

Ethical
Dilemma Single normative consideration
for solving the ethical dilemma

‘Lens’ of ethical theory

Pluralistic Perspective

Ethical
dilemma

“Prism” of
ethical theories

Variety of normative considerations in

solving the ethical dilemma
 Theories of Moral Reasoning
First:

1. Most economic decisions are choices where the decision maker could have chosen
otherwise

2. Every such decision/ action affects people, and the alternative decision would affect
them differently

3. Every decision is embedded in a belief system that presupposes some basic values or
their abrogation
 Teleology (Consequentialism)
 Considers an act as morally right or acceptable if it produces the desired result or
consequence

 Philosophies
 Egoism: Defines right or acceptable behavior in terms of its consequences for the
individual
 Utilitarianism: Promotes the belief that one must make decisions that result in the
greatest total utility
• Types of utilitarians - Rule utilitarians and act utilitarians

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 1) Utilitarianism:
We judge human actions in terms of its outcomes, therefore:
a) The best outcome either maximizes the interest or contributes to the happiness of
the greatest number;
b) Or at minimum, reduces harm, all things considered

 Any decision must be impartial, treating each person equally but not more than equally
 Ideally no decision is acceptable that increases harms of any sort, even to a small
number of people
 An ideal decision is one that maximizes the pleasure, preferences, desires, interests or
well being of the greatest number
 Deontology (Non-consequentialism)
 Focus lies on the rights of individuals and the intentions associated with a particular
behavior rather than its consequences

 Contemporary deontology has been influenced by Immanuel Kant

 Types of deontologists - Rule deontologists and act deontologists

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 2) Deontology or Rule-based Morality

 The morality of an action should be based on whether that action itself is right or wrong rather
than on the consequences of the action, which we may not be able to control

 The best moral choices are those that are done from a sense of principle; and
 That reasonable people would agree was right

 That respect everyone or at least does not denigrate human dignity

 One can override standards (example, everyone has a right to life) only when one has good
reason (example, in self-defense) because they appeal to another standard: equal rights include
the right to my life and freedom
3) A Rights Approach
 (derived from Rule based Morality) - human beings have some moral rights,
simply because of being human;
 For example, the right to be treated with respect and dignity
 Managerial decision making must question any corporate goal that
contributes negatively to human well being or contributes harm to human
dignity
 Ordinarily, any decision that weakens human rights is not acceptable, even if
it brings economic benefits

“Positive Rights” (welfare rights - “Negative Rights” (not to be

minimum standards are needed to interfered with, harmed, threatened)
enjoy the rights to life and freedom)
Right to personal security & safety, Right to life, liberty, self respect . . .
right to a decent standard of living, to
education
 Virtue Ethics
 Argues that ethical behaviour:
 Adheres to conventional moral standards
 Considers the judgment of a matured person with good moral character in a given
situation

 Virtues that support business transactions

 Trust, self-control, empathy, fairness, truthfulness, learning, gratitude, civility, and
moral leadership

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 4) Virtues Ethics
 Business, just like any other human undertaking is a part of society;
 Often ignored is the character, virtue of the managers who make decisions;
 Managers need to see themselves as good citizens of the community;
 Good moral character is essential for good business people and therefore of ethical conduct of business;
 Manager should avoid doing business with other managers who consistently exhibit or proactive
negative virtues

The Aristotelian virtues:

1. Community or social responsibility

2. Excellence
3. Public identity
4. Membership and loyalty
5. Integrity
6. Good judgment; and some add a seventh:
7. Integration or wholeness
 5) Social Justice:
 Justice is about fairness, consistency, equity, impartiality: therefore:
a) Treat similar cases similarly and treat people as equals except when they have relevant
differences; and
b) Give each person his or her due

 Justice is an ideal which we aim for, may not always be possible;

where there is a clear case of injustice that must be avoided

 Business depends on the fairness of the market process and believe unequal economic
distribution is because of effort, contribution, market factors and fair competition:
 To enforce this fairness, we depend on laws and regulators
Types of Justice

© Cengage Learning

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Therefore:
1. Any decision, process, procedure should :
a) Treat each person as an equal
b) Give each person his or her due

2. Any outcome that is a result of an unfair process or procedure should be

subject to review and revision

3. Any process, which appears to be fair, but produces an unfair outcome should
be subject to review

4. A moral decision must be an impartial, logically and be publicly defensible

5. Any business decision that increases harm, promulgates vices, or creates more
injustices, cannot be acceptable
 Ethics Quick Test
Here is an “ethics quick test” when you are faced with an Ethical dilemma:

1. Is the action legal?

2. Is it right?
3. Who will be affected?
4. Does it fit the company’s values?
5. How would I feel afterwards?
6. How would it look in the newspaper?
7. Will it reflect poorly on the company?
 Nash’s 12 Point Prescription
1. Have you defined the problem accurately?

2. How would you define the problem if you stood on the other side of the fence?

3. How did this situation occur in the first place?

4. To whom and to what do you give your loyalty as a person and as a member of the
corporation?

5. What is your intention in making this decision?

6. How does this intention compare with the probable results?

7. Whom could your decision or actions inspire

 Nash’s 12 Point Prescription

8. Can you discuss the problem with the affected parties before you make your
decision?

9. Are you confident that your problem will be as valid over a long period of time as
it seems now?

10. Could you disclose without qualm your decision or action to your boss, your
CEO, the board of directors, your family, society as a whole?

11. What is the symbolic potential of your action if understood? If misunderstood?

12. Under what conditions would you allow exceptions to your stand?
Framework for understanding ethical
decision-making

Individual factors

Recognise Make moral Establish Engage in

moral issue judgement moral intent moral
behaviour

Situational factors
 Influences on ethical decision-making
Two broad categories:

 Individual factors - unique characteristics of the individual making the

relevant decision

 Situational factors - particular features of the context that influence

whether the individual will make an ethical or unethical decision
 Age and gender

 Age
Results contradictory
However experience may have impact

 Gender
Individual characteristic most often researched
Results contradictory
 Education and employment

 Type and quality of education may be influential

 ‘Amoral’ business education reinforces myth of business as amoral

 Psychological factors
Cognitive moral development (CMD) refers to the different levels of reasoning that an
individual can apply to ethical issues and problems, depending on their cognitive
capacity.

An individual’s locus of control determines the extent to which they believe that they have
control over the events in their life
 Personal values, integrity & moral imagination
Personal values
‘An enduring belief that 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’

Personal integrity
Defined as an adherence to moral principles or values

Moral imagination
Concerned with whether one has “a sense of the variety of possibilities and moral
consequences of their decisions, the ability to imagine a wide range of possible issues,
consequences, and solutions”
 Moral Framing
The same problem or dilemma can be perceived very differently according to the way that
the issue is framed
 Language – an important aspect of moral framing
(using moral language likely to trigger moral thinking)
 For example, studies show that if people are prompted to frame a situation only in
terms of money or economic interests, they often leave out ethical considerations.
 Ex: Plagiarism v. Stolen v. “copy – pasting” from the internet
Fraud Schemes

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The Fraud Triangle

The Fraud Triangle highlights three factors that are present in every situation of
fraud:
1.Motive or Pressure – the need for committing fraud (need for money, etc.);
2.Rationalization – the mindset of the fraudster that justifies them to commit fraud;
3.Opportunity – the situation that enables fraud to occur (often when internal
controls are weak or nonexistent).
 Ethical Leadership
 Ability to create an ethical culture by motivating employees and enforcing
organizational policies and norms

 Involves:
 Helping employees implement shared ethical values
 Supporting others in incorporating an ethical culture into their daily decisions

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Seven Habits of Strong Ethical Leaders

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Any Questions / Reflections?