VALUES AND ETHICS IN BUSINESS

Management Principles and their Applications (MPA)

Presentation
Submitted by: Adab Mehta
Submitted to: Prof Anjali Bennet
Introduction:
These days while recruiting companies not only want your better IQ but also a sound EQ i.e.
emotional quotient. There is urgent need to have well aware human resources in the
organization to ensure proper behavior and inculcate the much-needed ethics and values.

Ethics essentially involves how we act, live, lead our lives, and treat others. Our choices
and decision-making processes and our moral principles and values that govern our
behaviors regarding what is right and wrong are also part of ethics.

The term ‘Business Ethics’ refers to the system of moral principles and rules of the
conduct applied to business. Business being a social organ shall not be conducted in a way
detrimental to the interests of the society and the business sector itself. Every profession or
group frames certain do’s and do not’s for its members. The members are given a standard
in which they are supposed to operate. These standards are influenced by the prevailing
economic and social situations. The codes of conduct are periodically reviewed to suit the
changing circumstances.

According to John Donaldson

“Business ethics in short can be defined as the systematic study of ethical matters
pertaining to the business, industry or related activities, institutions and beliefs. Business
ethics is the systematic handling of values in business and industry.”

There is no unanimity of opinion as to what constitutes business ethics. There are no

separate ethics of business but every individual and organ in society should abide by
certain moral orders.

Case Study: Sexual Harassment

No subject in recent memory has stirred so much confusion. Managers and employees are
asking basic questions such as:
 Was it all right to say I liked her dress?
 Is it okay to ask him out to lunch to talk about that project?
 Should I just stop touching anybody, even if it's only a congratulatory pat on the
back?
One point that all the experts seem to agree on is that sexual harassment is not really about
sex. It's about power - more specifically, the abuse of power.
Ninety percent of Fortune 500 companies have dealt with sexual harassment complaints.
More than a third have been sued at least once, and about a quarter have been sued over and
over again. What are organizations doing to eliminate sexual harassment? Most are taking a
three- prong approach.
 First, they're establishing formal policies that show the company is serious about the
problem. Honeywell, for instance, publicizes its policy against sexual harassment in a
handbook given to every employee and on posters placed in conspicuous places.
AT&T warns its employees that they can be fired for repeatedly making unwelcome
sexual advances, using sexually degrading words to describe someone, or displaying
sexually offensive pictures or objects at work.
 Secondly, organizations are investing in training. The most effective training appears
to be workshops where participants get a chance to talk to each other, instead of just
listening to a lecture or watching a video. In classes where men and women are asked
to compare their impressions of the same hypothetical situation, real revelations can
occur.
 Finally, organizations are establishing clear procedures for handling complaints when
they arise. Typically, employers choose an impartial ombudsperson, usually in the
human resources department, to hear and investigate charges before lawyers get
involved. When complaints are found to be legitimate, organizations then are taking
"immediate and appropriate action". Depending on the circumstances, this can range
from transferring the harassed or the harasser to a different department, to docking the
harasser a couple of weeks' pay, to firing the guilty party outright.

This clearly shows why the concern for ethics and values in a workspace requires urgent
attention and due importance should be given to it.

Importance of Business Ethics:

1. Satisfying Basic Human Needs: Being fair, honest and ethical is one the basic
human needs. Every employee desires to be such himself and to work for an
organization that is fair and ethical in its practices.
2. Creating Credibility: An organization that is believed to be driven by moral values is
respected in the society even by those who may have no information about the
working and the businesses or an organization. Infosys, for example is perceived as
an organization for good corporate governance and social responsibility initiatives.
This perception is held far and wide even by those who do not even know what
business the organization is into.
3. Uniting People and Leadership: An organization driven by values is revered by its
employees also. They are the common thread that brings the employees and the
decision makers on a common platform. This goes a long way in aligning behaviors
within the organization towards achievement of one common goal or mission.
4. Improving Decision Making: A man’s destiny is the sum total of all the decisions
that he/she takes in course of his life. The same holds true for organizations.
Decisions are driven by values. For example an organization that does not value
 competition will be fierce in its operations aiming to wipe out its competitors and
establish a monopoly in the market.
5. Long Term Gains: Organizations guided by ethics and values are profitable in the
long run, though in the short run they may seem to lose money. Tata group, one of
the largest business conglomerates in India was seen on the verge of decline at the
beginning of 1990’s, which soon turned out to be otherwise. The same company’s
Tata NANO car was predicted as a failure, and failed to do well but the same is
picking up fast now.
6. Securing the Society: Often ethics succeeds law in safeguarding the society. The law
machinery is often found acting as a mute spectator, unable to save the society and
the environment. Technology, for example is growing at such a fast pace that the by
the time law comes up with a regulation we have a newer technology with new
threats replacing the older one. Lawyers and public interest litigations may not help a
great deal but ethics can.

Normative and Business Ethics:

Normative ethics refers to the field of ethics concerned with our asking how should and
ought we live and act? Business ethics is applied ethics that focuses on real-world
situations and the context and environment in which transactions occur—How should we
apply our values to the way we conduct business?

Business ethics is the behaviour of a businessman while conducting a business, by

observing morality in his business activities. It is an art for maintaining , harmonious
relationship with society, its various group and institutions as well as reorganising the
moral responsibility for the business conduct.

The need for business ethics include:

• Survival of business unit
• Growth of business unit
• Earning goodwill
• Improving the confidence
• Maintaining inter-relationship
• Dealing with social problems

Ethics and business ethics continue to gain influence in corporations, universities, and
colleges nationally and internationally. No longer considered a luxury but a necessity,
business ethics has awakened a need in the
public consciousness due to crises in many areas.

Values vs ethics – a distinction:

 Sometimes some people consider values and ethics synonymous and use them
interchangeably. However, the two have different meanings.
 The major distinction between the two is that values are beliefs that affect an
individual's judgmental ideas about what is good or bad. The ethics is the way the
values are acted out.
  Ethical behavior is acting in ways consistent with one's personal values and the
commonly held values of the organization and society.

Dimensions of Ethics: The Individual Level

Ethics is personal and unique to each individual. Ethical decision-making also involves other
individuals, groups, organizations, and even nations—stakeholders and stockholders—as we
later explain. Kenneth Goodpaster and Laura Nash characterized at least three dimensions or
levels of ethics that help explain how
individual and group values, norms, and behaviors of different stakeholders interact and
respond with the aim of bringing fairness

Ethical principles:
o Ethical principles generally are codified into laws and regulations when there is
societal consensus about such wrongdoing, such as laws against drunk driving,
robbery, and murder.
o These laws, and sometimes unwritten societal norms and values, shape the local
environment within which individuals act and conduct business. At the individual
level, a person’s values and beliefs are influenced by family, community, peers and
friends, local and national culture, society, religious—or other types of—communities,
and geographic environment. It is important to look at individual values and ethical
principles since these influence an individual’s decisions and actions, whether it be
decisions to act or the failure to act against wrongdoing by others.
Ethical principles vs values:
Ethical principles are different from values in that the former are considered as rules that are
more permanent, universal, and unchanging, whereas values are subjective, even personal,
and can change with time. Principles help inform and influence values

Terminal and instrumental values:

Terminal values are desired goals, objectives, or end states that individuals wish to pursue.
Examples of terminal values—at a higher level—are freedom, security, pleasure, social
recognition, friendship, accomplishment, comfort, adventure,
equality, wisdom, and happiness.
Instrumental values are preferred means of behavior used to obtain those goals.
Examples of instrumental values are being helpful, honest, courageous,
independent, polite, responsible, capable, ambitious, loving, self-contained, and forgiving.

Ethical dilemmas (i.e., situations and predicaments in which there is not an optimal or
desired choice to be made between two options, neither of which solves an issue or delivers
an opportunity that is ethical) often originate and occur from an unawareness of how to sort
out and think through potential consequences of our actions or inaction. Becoming aware and
conscious of our values is a first step toward being able to act ethically and responsibly in
order to prevent or lessen harm to ourselves or others.

Utilitarianism vs Universalism
Utilitarianism:
 A Consequentialist, “Ends Justifies Means” Approach
 The utilitarianism principle basically holds that an action is morally right if
it produces the greatest good for the greatest number of people. An action is
morally right if the net benefits over costs are greatest for all affected
compared with the net benefits of all other possible choices.
 This is broad in nature and seemingly rather abstract.
  Some limitations of this principle suggest that it does not consider
individuals, and there is no agreement on the definition of “good for all
concerned.” In addition, it is difficult to measure “costs and benefits.”
 This is one of the most widely used principles by corporations, institutions,
nations, and individuals, given the limitations that accompany it.
 Use of this principle generally applies when resources are scarce, there is a
conflict in priorities, and no clear choice meets everyone’s needs—that is, a
zero-sum decision is imminent
Universalism:
 A Duty-Based Approach
 Universalism is a principle that considers the welfare and risks of all parties
when considering policy decisions and outcomes.
 Also needs of individuals involved in a decision are identified as well as the
choices they have and the information they need to protect their welfare.
 This principle involves taking human beings, their needs, and their values
seriously.
 It is not only a method to make a decision; it is a way of incorporating a
humane consideration of and for individuals and groups when deciding a
course of action.
 As some have asked, “What is a human life worth?” Cooper, Santora, and
Sarros wrote, “Universalism is the outward expression of leadership
character and is made manifest by respectfulness for others, fairness,
cooperativeness, compassion, spiritual respect, and humility.”
 Limitations here also show that using this principle may not always prove
realistic or practical in all situations.
 In addition, using this principle can require sacrifice of human life—that is,
giving one’s life to help or save

Ethical Relativism:
 A Self-Interest Approach
 Ethical relativism is really not a “principle” to be followed or modeled. It is
an orientation that many use quite requently.
 Ethical relativism holds that people set their own moral standards for
judging their actions.
 Only the individual’s self-interest and values are relevant for judging his or
her behavior.
 Moreover, moral standards, according to this principle, vary from one
culture to another. “When in Rome, do as the Romans do.”
 Limitations of relativism include following one’s blind spots or self-
interests that can interfere with facts and reality. Followers of this principle
can become absolutists and “true believers”—many times believing and
following their own ideology and beliefs.

Ethical theories
These can be classified into the following types:

1. Consequential Theories:
o Consequential theories of ethics emphasize the consequences or
results of behaviour.
o John Stuart Mill's Utilitarianism, a well-known consequential
theory suggests that right and wrong is determined by the
consequences of the action.
o "Good" is the ultimate moral value, and we should maximize the
most good for the greatest number of people.
o But do good ethics makes for good business? Right actions do not
always produce good consequences, and good consequences do not
always follow from right actions.
o Using the "greatest number" criterion can we imply that minorities
be excluded. Should an issue that may be important for a minority
but unimportant for the majority is ignored? These are but a few of
the dilemmas raided by utilitarianism.

2. Rule-based Theories:
o In contrast, rule-based theories of ethics emphasize the character of
the act itself, not its effects, in arriving at universal moral rights and
wrongs. Moral rights, the basis for legal rights, are associated with
such theories.
o Companies and business enterprises are more prone to subscribe to
consequential ethics than rule-based ethics, in part due to the
persuasive arguments of the Scottish political economist Adam
Smith. He believed that the self-interest of human beings is God's
providence, not the governments. Smith set forth a doctrine of
natural liberty, presenting the classical argument for open market
competition and free trade.
o Within this framework, people should be allowed to pursue what is
in their economic self-interest, and the natural efficiency of the
market place would serve the well-being of society.
 o However, Immanuel, Kant argued that individuals should be treated
with respect and dignity, and that they should not be used as a
means to an end. He argued that we should put ourselves in the
other person's position and asks if we would make the same
decision if we were in the other person's situation.

3. Cultural Theories:
o The theory emphasizes respect for different cultural values.
Cultural relativism contends that there are no universal ethical
principles and that people should not impose universal ethical
principles and that people should not impose their own ethical
standards on others.
o Local standards should be the guides for ethical behavior.
o This theory operates under the old adage "when in Rome do as the
Romans do".
o Strict adherence to cultural relativism can lead individuals to deny
their accountability for their own decisions and to avoid difficult
ethical dilemmas.

TYPES OF MANAGEMENT ETHICS—

Managerial ethics, are standards of conduct or moral judgement used by
managers of organizations in caring out their business. Archi B Carroll,
notes that three major levels of moral or ethical, judgement characterize
managers: immoral management, amoral management, and moral
management.

Immoral Management
Immoral management not only lacks ethical principles but also is actively
opposed to ethical behaviour. This perspective is characterized by principal
or exclusive concern for company gains, emphasis on profits and company
success at virtually any price, lack of concern about the desires of others to
be treated fairly, views of laws as obstacles to be
overcome, and a willingness to "cut corners".

Moral Management
In contrast to immoral management, moral management strives to follow
ethical principles and percepts. While moral managers also desire to
succeed, they seek to do so only within the parameters of ethical standards
 and the ideals of fairness, justice, and due process. As a result, moral
managers pursue business objectives that involve simultaneously
making a profit and engaging in legal and ethical behaviors.

Amoral Management

The amoral management approach is neither immoral nor moral but, rather,
ignores or is oblivious to ethical considerations. There are two types of
amoral management:

Intentional: A moral managers do not include ethical concerns in their

decision-making,
or behaviour, because they basically think that general ethical standards are
more appropriate to other areas of life than to business.
Unintentional: Amoral managers also do not think about ethical issues in
their business dealings, but the reason is different. These managers are
basically inattentive or incentive
to the moral implications of their decision-making, actions, and behaviour.

Overall amoral managers pursue profitability as a goal and may be

generally well meaning, but intentionally or unintentionally they pay little
attention to the impacts of their behaviors on others.

CSR (Corporate social Responsibility)

 It contributes to another form of self-regulation that goes further and
involves firms taking action to help people and the environment.
 CSR is described as “a belief that corporations have a social responsibility
beyond pure profit.”
 In other words, “Firms are social entities, and so they should play a role in
the social issues of the day. They should take seriously their ‘obligations to
society’ and actively try to fulfill them.”
 As such, corporations should employ a decision-making process to achieve
more than financial success on the assumption that CSR is integral to an
optimum long-term strategy.
 In the 21st century, sustainability and corporate social responsibility (CSR)
have become strategic imperatives for organizations as fundamental market
forces for financial viability and success, where consumers are important
stakeholders.
  Businesses worldwide develop CSR initiatives to become better corporate
citizens but also to communicate their activity to both internal and external
stakeholders.

Examples of CSR initiatives:

Factors affecting Business Ethics:

Business ethics can be influenced by mainly two factors, i.e. Internal And External.

◉ Internal factors

✔ 1. Employees and Managers:

Until you’re a one-person show, your employees are an important part of your company’s
internal environment. Your employees should be good at their jobs, whether it’s writing code
or selling products to unknown people.

Managers should be good at handling lower-level employees and superintending other parts
of the internal environment. Even if everyone’s capable and talented, internal politics and
conflicts can ruin a good company.

✔ 2. Money and Resources:

A lack of money and resources can also decide whether your company survives or dissolve.
When the cash resources of the company are too limited, it affects the number of people you
can recruit, the quality of your equipment, and the amount of advertising you can buy.
If you have an adequate amount of cash, you have a lot more opportunities to grow and
expand your business.

✔ 3. Company Culture:

A Company’s internal culture contains the values, attitudes, and priorities that its employees
live by.

A competitive culture where every employee competes with one another creates a different
environment from a company that points up collaboration and teamwork. Typically,
company culture flows from top to bottom.

◉ External factors

✔ 1. Economy:

In a lousy economy, even a well-established business may not be able to survive. If

customers no longer have their jobs or take jobs that can barely support them, they’ll spend
less on sports, recreation, gifts, luxury goods, and new cars.

High-interest rates on credit cards can dishearten customers from spending. You can’t control
the economy, but understanding it can help you spot threats and opportunities to the
economy.

✔ 2. Customers and Suppliers:

After employees, your customers and suppliers are the most important people you deal with.
Suppliers have a large impact on your costs.

The smack of any given supplier depends on scarcity: If you can not buy anywhere else, your
negotiating room will be limited.
The power of your customers depends on how untamed the competition for their dollars is,
how good your products are, and whether your advertising makes customers want to buy
from you, among other things.

✔ 3. Politics and Government policies:

Amendments in government policies can make a huge impact on your business.

The tobacco industry is one of the best examples. Since the 1950s, cigarette companies have
been ordered to place warning labels on their products, and they lost the right to advertise on
television and other mediums.

Smokers have fewer places where they can smoke legally.

The Emerging Trends In Values And Ethics in Businesses —

1. “A shift in the ‘power of voice in the story of harassment.’” The #MeToo movement
has changed everything. A clear message for corporations and ethics and compliance
officers is, “Create a corporate culture in which employees feel comfortable raising
their voices about anything from sexual harassment to feelings of being insulted. This
will allow your compliance program to resolve issues before they turn into scandals,
and preserve the integrity of your organization’s culture internally and its reputation
externally. And don’t ever tolerate retaliation.”
2. The “Glassdoor” effect (when people trust online reviews of their companies more
than what companies communicate) and the effect of trust when employee messages
go viral on social media. Companies need to create “listen-up” cultures by creating
internal reporting systems in which leadership and managers listen to and support
employees when they raise their voices for the betterment of the company. “This
ensures employees know that their report will be heard, taken seriously, and things
will change if necessary.”
3. Assisting national disasters that suddenly occur causes havoc not only for vulnerable
populations but also for unprepared organizations. Ethics and compliance
professionals learned from 2017’s natural disasters (hurricanes in particular) to update
preparation plans and test emergency hotlines, communications systems, and
employee readiness.
4. The acceleration of the need for compliance and ethics programs as economies begin
again to grow; “growth without ethics and governance does nobody any favors.
Growth with ethics and governance won’t simply be a feel-good mantra, it will be a
business imperative.”
5. Creating a “culture of compliance” in corporations (a culture of integrity and ethics)
over one of “vicious compliance” (an overreliance on laws and regulations).