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Ethics in Business
The handout contains material on the following inputs: 1. 2. 3. 4. 5. An introduction to ethics Ethics in practice Evolution of ethical thought in India and the west Why ethics makes logical sense Society, individuals and ethics
Introduction to Ethics
Theoretical foundation –Concepts • Link between holism, ethics, business ethics and codes of conduct • Definitions of ethics in business; need for ethics in business; • Ethics and its relation to law, values, morality, religion, philanthropy; • Relativism versus absolutism • Four guidelines for ethical decision making, Practical Analyses – • Common rationalizations used for justifying ethically questionable behaviour. Mental resistance to ethicality • Basic Human Values and values as applicable to business • Evolution of a Corporate on the Ethical Dimension • Stakeholders of an organisation and their relative ranking
Linkages: The link between holism, ethics and values, business ethics and codes of conduct may be depicted through the following diagram: Holism / Healthy living for all
Ethics (norms for behaviour)
Business Ethics Codes of conduct
VESIMSR, MMS, Jan 2011 Ethics in Business - Piya Mukherjee
Holism or healthy living for all may be shown as the superset that defines every act of the individual, exemplified by “Live and let live”. The manner in which this tenet get codified differ from place to place and these then become the norms for behaviour and are called, rules or ethics. Within the category of ethics, lie the specific norms designed for business interaction, under the label of “business ethics”. Norms exclusively for organizational stakeholders such as customers, employees, shareholders, lenders, agencies, government and society, fall in this group. Although these are governed by the two above categories, there is greater scope for flexibility in their interpretation. Hence different countries have different laws, say, for insider trading, infringement of customer privacy and so on. A further sub-category of norms, subject to more frequent changes across time and place, are codes of conduct and charters of governance. As these emerge as responses to contemporary demands, their nature is topical tailor-made to deliver desired results. For example, a rash of corporate scams and frauds in the recent past have seen stringent norms for financial disclosure emerging across industries. Thus, ethics means… Text-book definitions: A set of standards, codes and values, determined from human reason and experience, by which free human actions are determined (classified) as right or wrong, good or evil. It may be described as a set of man-made principles governing human interaction and conduct, with a view to leading a “civilized”, orderly life. The term “Ethics in business” refers to those principles that guide corporate actions and decisions. Practical, yet profound perspective: Knowing what’s the right thing to do and doing it the right way. • Ethics (unwritten codes of conduct, as well as written rules which become laws) are needed to regulate human behaviour. Productive human efforts can exist only when there are ground rules to establish the “do’s and don’ts” of interactive endeavour.
It is important to distinguish between:
though not ethical (e. and often arbitrary fashion. the ritualistic aspect of religion is distinct from the universal tenets of ethics. the local. Rights . there are practices that are legal.Which decision is consistent with my values and the values of my company? 4. However. conceding that their interpretations may change depending on the context. Values form the foundation on which the principles of ethics are based. However. Jan 2011 Ethics in Business . convention and so on. While the former believes that standards change as per place and time. Consequences . though the expense may be partly or wholly fictitious) and acts that may be ethical but not legal (e. ethical principles are derived from values enshrined in traditional religions.Which decision best serves the rights of the people concerned? 3. claiming a corporate reimbursement by signing a relevant authorization. Ethics and Philanthropy – Though laudable.Which course of action is practical and feasible in the given circumstances? Common rationalizations used for justifying ethically questionable behaviour: • • 3 . Four criteria to guide ethical decision making: 1.Piya Mukherjee Ethics and law – Although there is a very high degree of overlap. Consistency . MMS. Ethics and Religion Very often. charity and philanthropy do not fall under the ambit of sound business ethics. guiding human thought and behaviour. Practicality .VESIMSR. It is perfectly possible to be totally ethical without donating to charity. the latter supports the absoluteness of values. The disadvantage of relativism is that standards are decided in a subjective. custom.g. • Are ethical standards absolute? The two schools of thought (relativism and absolutism) hold opposite points of view on this issue.g. It may be safely said that the basic principles of peaceful existence are unchanging. time.disclosing the HIV positive status of a patient to his / her family or prospective spouse) Ethics and Morality and Values – Values may be defined as positive attitudinal and behavioural traits.Which course of action will do the most good and the least harm? 2. interpretation of these principles change as per place.
I’ll take them myself!”.VESIMSR. Right to subsistence. beliefs and attitudes in society. Business Ethics – A Global and Managerial Perspective. Jan 2011 Ethics in Business . “It is very minor”. to justify doing something that’s ethically questionable. Hypernorms: Personal freedom. normative theory for business ethics. this theory places itself as a global. Provide a safe workplace • Indian Approach: Values and “Disvalues” 4 . It allows for cultural diversity while maintaining certain universal norms. The three components of the theory are: Hypernorms =universal values that impose certain restrictions on all business activities. Equal dignity Macro Social Contracts: Moral free space. Ownership of property. written contract. “This is the last time I will do it”. Physical security and well-being. MMS. David J. “I deserve certain rewards. This is a social contract between the corporation and society. “I was only following orders”. since the system does not give me. “The other party deserves to be deceived / robbed…” Basic human Values . “Everyone does it”. political and philosophical thought Macro-social contracts = values and norms that function at the global level Micro-social contract = community-specific contracts that guide business activity. When an organization fulfills the contract. it can be said to have done well. “It’s not technically wrong”. but an informal agreement concerning behavioural norms that are developed from shared goals. These must be decided in order of priority.Piya Mukherjee These are statements we make to ourselves or others. Fritzsche) Proposed by Thomas Donaldson and Thomas Dunfee. The theory states that corporations exist to enhance social welfare by serving consumers.a slightly detailed look: • Western approach: Integrative Social Contracts Theory: (Source: Pages 43-47. Informed consent. “It will not be discovered”. Don’t lie in negotiations. The “social contract” in discussion is not a formal. These are basic principles fundamental to human existence. They are a convergence of religious. Free consent. Political participation. with right to exit Micro Social Contracts: Honour all contracts.
forgetfulness. hatred. a clear-headed and balanced approach to life and work is seen in individuals with predominantly “sattwa” guna. Slothful inertia points towards a “tamasic” temperament. Each individual. serenity. ethics) analyses personal inclinations and traits on the basis of which “guna” or basic human characteristic is predominant in the individual – “sattwa”. profits are sought at any cost and the achievement of goals is all that is considered in decision making and action. equitable behaviour. it falls short of understanding and using the true principles of ethical behaviour. Consistency. the values of purity. “rajas” or “tamas”. While this is an improvement on the former stage. Accordingly. Among others. delusion and confusion reign in the mental and moral fibre of the individual. sincerity. Presence of “rajas” is determined by continual dynamic action linked to results. MMS. honesty. deceit. jealousy. 2.VESIMSR. where traits such as negligence. humility. The legalistic firm – where ethics is equated to lawful conduct. The law is followed in letter. It may be surmised that the teleological theory is at work in an organization operating at this stage. fairness. often driven by motives stemming from disvalues such as greed. procrastination. vindictiveness.S. vanity. values (positive traits) and disvalues (negative traits) may be listed as follows: Values: Honesty.K. 5 . simplicity and contentment are indicative of sattwa. Jan 2011 Ethics in Business . dignity. loyalty. gentleness and sharing Disvalues: Jealousy. patience. arrogance. hypocrisy. sincerity.Chakraborty in his book. anger. humility. forgiveness. Accountability. though often not in spirit. arrogance. Integrity. generosity. suspiciousness. pride.Piya Mukherjee As analysed by Dr. Loopholes in the law are merrily exploited. The ethical evolution of the corporate The ethical evolution of the corporate may be depicted through the following sequential stages: 1. The lawyer’s word is considered final and decisions are accordingly taken. Justice. forgiveness. anger. The immoral or amoral firm – where might is right. Theory and Practice. generosity. “Tri – guna” The Indian approach to values and their application (namely. impatience. envy. according to his predominant “guna”. Values and Ethics in Organizations. sycophancy Human values as applicable to business: Transparency. kindness. covetousness. gratitude. accordingly. The focus of an organisation in this stage of ethical development is “Do what you have to but don’t get caught!” Post-facto analyses and rationalizations are often used to condone unethical acts. greed. displays the above values and disvalues.
in tandem with other members of the industry. Stakeholders of an organisation and their relative ranking: An organisation comprises a network of employees. The ethical firm . shareholders. Ethics in practice Analysing the application of ethical principles to the functional areas of Marketing. The organization moves from the narrow “prime stakeholder-centric” paradigm to the “socio-centric” paradigm. depending on the industry. Employees are routinely rewarded for refusing to act unethically. in tandem with other members of the industry. profits are tempered by the aim to serve the needs of the country / world.which represents the apex of ethical evolution in the corporate world. An organisation comprises a network of employees. they do change their positions.VESIMSR. financiers and suppliers. the situation (normal business year or depression/ recession) and the stage of growth of the company Stakeholder Responsibility of an Organisation: The term can be described as “the ethical responsiveness of business to the members of its environment”. Basic human values. A ranking of stakeholders in order of importance usually reveals customers. shareholders. fairness and profitability. Thus the SR of business is to ensure that its dealings with its stakeholders are ethical. All these elements are collectively called “stakeholders” of the business enterprise. All these elements are collectively called “stakeholders” of the business enterprise. employees. 4. regulators and the general public. financiers and suppliers. regulators and the general public.Piya Mukherjee 3. working for consumers and markets. there is an awareness of the need to work for social good in the long run. Here. customers) interests considered. through distributors and agencies. MMS. are articulated and nurtured. as applicable to persons and companies. The approach towards work is long-term in nature and from the macro perspective. advertising. Jan 2011 Ethics in Business . through distributors and agencies. Decision-making is on the basis of justice. working for consumers and markets. Not only are the prime stakeholders’ (shareholders. 6 . employees and shareholders to be the three most crucial categories. The responsive and emergent ethical firm – firms at this stage grow increasingly conscious of their duty towards various stakeholders. Inter se.
Society’s Interests Profits Wants of the Consumer For example. So an ethically aware company would include this awareness along with its usual marketing strategies. – Richard De George Hence for marketing to be morally defensible. • According to Adam Smith. This apparently simple condition poses ethical dilemmas when one considers that the complexity of products and the consequent plethora of choices. but the resultant use of harsh chemicals in the detergent leads to higher water pollution. and position its product to attract the discerning consumer. 7 . MMS. • • “An organisation must satisfy society’s needs in a way that preserves or enhances the well-being of society” – Societal Marketing Concept of Laurence Feldman. purchase Electronic transactions Marketing and ethics: For a transaction to be morally defensible. markets where there is no fraud or coercion and where the participants are adequately informed about the transactions. often hamper rational decision-making by the unassisted consumer. the parties entering into it should do so freely and fully informed.VESIMSR. fulfilling of consumer wants and profits for the organisation. is an ally or an obstacle to the layperson. customers may want detergents that wash whiter. offered by marketers. personnel management Production.Piya Mukherjee Finance. so popular today. He proposes a balance of the troika of social interests. The question then becomes whether the contemporary brand of aggressive marketing. is desirable and ethically defensible. the above criteria should be satisfied. Jan 2011 Ethics in Business .
unless they are accompanied by actual product changes (e. without a real change in the product) Ensure genuine improvement / changes as claimed in ads and promotion schemes Place No artificial scarcities Transparent and consistent vendor development methods and franchising Control on distribution channel (e.g.g. “One fairly sustainable basis for differentiation (between competing companies) is the company’s civic character.Piya Mukherjee • As the redoubtable Philip Kotler says in “The Organisation of The Future”.Should conform to the stated specifications.g. a new colour / design on the package along with POP tools. The company’s civic image may be one of the most potent customer preference builders”. MMS. where necessary Creation of barriers to availability of products (e. mobile phone or credit card to be used for free entry into a shopping mall) PriceWhether the pricing of a product is ethical can be said after examining the following criteria: • Is the product a necessity or comfort good or luxury? • Is the product directly linked to human life and welfare? • Does the market have several sellers or is there a monopoly or oligopoly? • Is there a crisis situation (such as war) or are consumers living through normal times? • Is the product a pioneer in the market? • Is the product a pioneer and based on considerable Research and development? • What is the life cycle stage of the product? • What are the national and international norms regarding pricing of this product? • Is there a cartel or does the market offer a level playing field? Are there barriers to entry? Is there dumping by other nations? • • 8 . among other issues. on: • Product . An ethically inclined marketing manager would focus.VESIMSR. in terms of quality and performance Minimize “bells and whistles” which the customer does not really want / need but has to eventually pay for . the illegal sale of pharma products that are supposed to be destroyed) Ensuring that products past their expiry date are removed from the distribution system and destroyed. Jan 2011 Ethics in Business .
Statistically.adequate and factually correct labelling.Piya Mukherjee Also: Discounts. (eco-friendly packaging would be a further improvement) Promotion . Jan 2011 Ethics in Business . Others contend that ads simply tap the existing sentiment of the consumers and that consumers will change their attitudes and habits only when they are willing to do so. truthful. Though it is not denied that ads do convey information. repeated ads for a product. is aggressive without running down the competitor/s and does not use deceptive testimonials or “bait words” and intends to dissuade viewers from hazardous acts through adequate warnings A Few Contentions on Advertising by Ethicists: • “Advertising debase public taste” – some believe that ads subtly inculcate materialism and make individual equate happiness with ever-increasing consumption. Moreover. Rightful application of policies related to warranties. during a live telecast of a popular sports tournament). without enhancing the value / utility in any way. does not deliberately mislead. buy-back and “sale” should be authentic. defective products should not be knowingly clubbed with good ones.g. There should be no deliberate loopholes in product guarantees and warranties. are other aims. shown at frequent intervals. on the basis of advertised product information.the genuineness (of implementation) of promotion schemes Compliance with legislation Advertising and Ethics: Responsible and ethical advertising is fair. MMS.VESIMSR. accurate. an overdose of visual or aural stimuli in the form of ads becomes counterproductive. • • • Packaging . does not offend public sentiment (is not in bad taste). Defenders say that ads transmit information on the nature and availability of products. such advertising aggravates the “use-and-throw” lifestyle that is socially and ecologically harmful. Overall consumption in the economy may also be increased and shifting of choices. the elements of exaggeration. as the consumer simply “blocks out” these ads as “white noise” (e. buy-backs and after-sales service should be enforced. hype and aggression do add to the vicious circle of reenforcement of materialistic ambitions at the cost of personal growth. While ads do mirror real life aspirations. “Advertising leads to wastage of resources” – some believe that ads simply add to the selling cost of the product. • 9 . The ad spends on such advertising are thus a wasted selling cost. the correlation between higher ad spends and higher sales is not very clear.
or is not appropriate in his milieu (e.g. the impact of cable television with ads on colas. bait ads. However. competitive pricing and so on. This is treated as violating the individual’s right to being treated as a rational person. “Advertising is often deceptive” – perhaps the most common grouse of ethicists is that ads are often deceptive. This may lead to a reduction in market competition. deceptive mock-ups. word-of-mouth campaigns. through revaluation of assets) Treatment of special accounts (e. contingent liabilities) 10 . no window dressing of the Balance Sheet (e. ads that copy famous brands or logos and ads that disparage competitors. Jan 2011 Ethics in Business . Subliminal ads too circumvent human reasoning. this can be countered with market savvy tactics.VESIMSR. as companies with smaller financial strength find themselves unable to penetrate a market dominated by a large player. that may block all media space and thereby stop entry to a newer market entrant.Piya Mukherjee • “Advertising leads to the creation of entry barriers” – this refers to the huge ad campaigns mounted by financially strong companies. ‘Advertising manipulates human desires” – proponents of this statement believe that ads cleverly manipulate the psyche of the consumer.g.g. who may move towards inappropriate spending on such products). such as POP promotions. ads with misleading words. MMS. • • Finance and ethics Ethical issues are linked broadly to the following aspects of corporate finance: • • Raising resources Deployment of resources legitimate source Legal and fair process. no misrepresentation of raising them end-use of funds should match pre-determined purpose • Level of risk taken. to make him desire their product. This means the consumer is lured to purchase what the advertiser wants him to purchase not something that is necessarily good for him. on viewers in rural markets. should be at par with stated objectives of company. deferred revenue expenditure. The counter argument is that supply creates its own demand. involving untrue / misleading testimonials. and acceptable to prime stakeholders No laundering of money through sister companies No personal misuse of corporate funds Accounting consistency Transparency. even when it is clear that the product will not improve the quality of his life.
g. mentoring. Promotions. job rotations 4. redressal of grievances. counselling) to be created and practised Ethical issues related to personnel and human resource management usually pertain to the following areas: 1. institutional stakeholders. consistently communicated and enforced • Decisions to be in synch with stated policies. Appraisals and training 5. working conditions. certification norms and the rules of this act. transfers. exceptions to be minimized • Fair hearing (formal and informal) to be given to any aggrieved parties in a dispute • Norms. Future re-casting of these statements could mean imprisonment for the CEOs and CFOs.Piya Mukherjee • GAAP Internal norms and audits must encourage honesty. newer and tighter norms for transparency and accountability have come into force in the international scenario. Administration of benefits. Recruitment. trade unionism 6. non-discriminatory policies to be created. not merely to large. collective bargaining.VESIMSR. but also to minority stockholders • Since the passing of the Sarbannes-Oaxley Act in USA in July 2002. Some of these involve: • The CEO will personally have to testify to the accuracy of the annual financial statements. Discipline enforcement. Personnel management and ethics Basic guidelines: • Fair. • Companies listed on the NASDAQ with headquarters and operations not in USA will also have to follow listing norms. Pay and perks. safety 3. induction 2. not deviousness Payment of taxes and Charges timely and accurately Communication of financially-sensitive information to the market – to be done on a consistent basis. voluntary retirement schemes 11 . Jan 2011 Ethics in Business . incentives. especially of integrity. to be adhered to by the top management • Employee-friendly systems (e. job fit. MMS.
for product modifications • In the case of hazardous products. at the drawing-board stage. existentialism A few ethics-related concepts from the Vedas. vendor and distributor (merit based choice) • Use of clear and consistent policies while transacting with them • Transparent bidding and tender system • Determining prices and rates on commercial bases (no cartelisation) Evolution of Ethical Thought • • Teleology and deontology. the Upanishads and the Mahabharata Teleology and Deontology. if need be. durability and performance norms must be more than adequately met (e.g. production. MMS. Jan 2011 Ethics in Business .Piya Mukherjee Purchase. use of “six sigma” process) • Quality checks should be sufficient in frequency and stringency • Potential defects must be addressed before launch of the product. dealer. Existentialism: 12 . quality and ethics The production and operations-related areas of management are linked to ethics in the following ways: For production: • The product or service must conform to its stated specifications • Safety.VESIMSR. regulations pertaining to quality must be strictly adhered to For purchase and distribution: • Integrity in the choice of supplier. customer complaints regarding non-performance of the product must be considered.
VESIMSR. Existentialism: This theory emerged in Europe (primarily Germany and France) as an intellectual revolt against the limitations of both. community and at the work place. “Deon” stands for duty. “The world is one family” extends the above concept into the realm of day-to-day decision making in the family. In Greek. This approach leads us to the maxim: “The greatest good for the greatest number” Hedonism . since it gives a sound foundation to the entire exercise that seeks to codify the 13 . Jan 2011 Ethics in Business .which focuses on the benefit of the final results. teleology and deontology.Piya Mukherjee Traditional western theory on ethics begins with an understanding of the following approaches to ethics: • Teleology :. at the cost of desired goals. This concept is of great importance to the manager involved with corporate governance and the rights of stakeholders. Proponents of this theory opine that the former causes the individual to act as per individual passions and inclinations (especially hedonism) while the later might lead to a slavish adherence to rules. (“Telos”. in Greek.This theory believes in an act being ethical if the ends obtained are useful / beneficial / good. The means are not considered significant in the ethical analyses. The purpose of the action is all that is seen. since all persons affected by the decisions are treated as kinsmen and there is a sincere attempt to balance the rights and stakes of each person or group of person. than on the ends. • Indian Approach: Some Useful Concepts: • Vasudaiva Kutumbakam This concept. means ends or purposes) Two well-known offshoots of this theory are the principles of: Utilitarianism . and “What is good for me is ethical for me” • Deontology:. which means.which is aimed exclusively at the benefit of the decision-maker / leader. An acceptance and assimilation of this concept often leads to ethically sound decisions. The limitation of this theory is that it is not concerned about ends.This theory places a far greater importance on the means. Hence this stands for a means driven theory and is usually supported by religious thinking. Hence the Theory of Existentialism is focussed on individual behaviour that profits all people concerned. MMS. The two prime tenets of this theory are: freedom and responsibility. This approach leads us to maxims / opinions like: “Might is right”.
such as pride. through the teachings of Krishna to Arjuna. delusion and confusion reign in the mental and moral fibre of the individual. serenity. often driven by motives stemming from disvalues such as greed. envy. “rajas” or “tamas”. Presence of “rajas” is determined by continual dynamic action linked to results. Moreover. may be interpreted as thought. procrastination. hatred. This leads to a calm approach towards work. accordingly. with an equally sure detachment from the ultimate outcome of the work. motives arising from negative states of thinking and feeling. the values of purity. Slothful inertia points towards a “tamasic” temperament. Among others. a clearheaded and balanced approach to life and work is seen in individuals with predominantly “sattwa” guna. this important concept reminds the doer of the work to focus on the work alone and remain detached from the fruits of the outcome. variables that may or may not ultimately affect outcomes are not allowed to contaminate the spirit of work. arrogance. honesty. impatience. yet. Perhaps this is best explained through the term “detached involvement” meaning a high. displays the above values and disvalues. with a clear tilt towards what is best and desirable for all. pride. Law of Karma (“Karma” here. jealousy. MMS. shareholders.Piya Mukherjee duties of an organisation towards its customers. are nipped in the bud. the ego of the doer is not to link himself to the actual results of the work. since all energies are concentrated on work. Consequently. regulators and other stakeholders. Jan 2011 Ethics in Business . Perfectly epitomised in the Mahabharata. covetousness. ethics) analyses personal inclinations and traits on the basis of which “guna” or basic human characteristic is predominant in the individual – “sattwa”. sincerity. • Tri . generosity. vanity and a lust for power. selfless though sincere. forgiveness. or an effect of past actions or both). kindness. forgetfulness. according to his predominant “guna”. simplicity and contentment are indicative of sattwa. 14 . suspiciousness. distributors. uncompromising degree of involvement and commitment towards the task on hand. stress finds no place in the life of such a manager. rather than what might fetch short-term rewards to the doer of the action. egoism. The goals and the means are both given significance. with the added element of tempered dynamism.guna The Indian approach to values and their application (namely. Ethical behaviour is believed to stem from a predominantly sattwic temperament. Accordingly. anger. where traits such as negligence. humility. word or action that is either a cause of subsequent actions. Each individual. • Nishkam karma This helps in the sound understanding of the art and science of work.VESIMSR. employees. suppliers.
Thus the maxim “Do unto others as you would be done unto” finds relevant usage here. victim versus perpetrator type of unethicality. MMS. which takes care of the rights of others. there is no mutual cancellation. like effect • The effect returns to the source of the cause • Each cause produces its own effect. Acknowledging these debts accordingly leads to a selfless. This seemingly simple. The five types of debts incurred by every individual at birth and throughout life are deva rin (debt to the gods and higher forces of energy). monetary versus non-monetary and intangible forms of unethicality Principles for working around systemic obstacles – individual and collective Resolving ethical dilemmas – guidelines for the individual Whistle-blowing • • • 15 . instead of merely taking more from society. The focus is thus on one’s own duties and responsibilities. Society. nri rin (debt to humanity at large) and bhuta rin (debt to plants. Ethical codes that are derived from this concept are thus invariably based on the idea that good leads to good and evil begets only evil.which has the following prime tenets: • A cause at present must produce some effect in future • An effect at present must have had a cause in the past • Like cause. • Panch Rin This explains how each individual has specific duties towards five categories of people / existence.Piya Mukherjee This means understanding and working with the moral law of cause and effect (Doctrine or Law of Karma) . Individuals and Ethics • Typical responses of the individual when faced with institutionalised unethicality. clearhearted attitude towards work. yet amazingly foolproof system works as the law of conservation of moral energy. Jan 2011 Ethics in Business . rishi rin (debts to those who have taught the sacred). owing to whom one has physical existence). Thus the concept seems to suggest working from the paradigm of giving back to society. pitri rin (debt to the ancestor.VESIMSR. animals and such living creatures).
I might as well do it”. “This is too small a matter to discuss. Non-monetary type – all forms of unethicality. Bribes. in spite of having ethical options within reach (e. he is able to arrive at a healthy. word and deed). paying grease money at a hospital in an emergency) Yet. he would bear in mind the fact that there would be a price to be paid in future for this deed.Piya Mukherjee Typical responses of the individual when faced with institutionalised unethicality: The typical responses of the individual in such situations may be: a) Rationalizations – “Everyone is doing this anyway. or clarity and purity in his thought. monetary versus non-monetary and intangible forms of unethicality Victim type – can think of no solution to a dilemma that achieves the goal without compromising on principles. coercion. (e. Jan 2011 Ethics in Business . and that he may not be able.g. “One person cannot change the system” c) Indifference – “Everything goes”. very quickly. it isn’t a scam!” b) Resignation – “What’s the use?”. holistic solution. would accrue to him. Moreover. if faced with a similar crisis. such as deception. it must be clearly understood that an ethically sensitive person would never rationalize such a choice of action. “To each his own”. denial of equal 16 . Perpetrator type – chooses the unethical option / approach as it is seen to bring money / power / status or some such desired result.VESIMSR. demand for bribe / grease money for transactions that are anyway supposed to be done as part of one’s work) Monetary type – this refers to unethical acts that are manifested in their currencyquantifiable forms. hence individual may choose to achieve results (say. financial frauds and grease money are invariably in this category. so that next time. to predict the manner in which this price. or consequence. even at the time of taking the decision to deliberately do the unethical act. MMS. unfair discrimination and their subsets like favouritism at the workplace. On the contrary. theft.g. at that point of time. in a life and death situation and ignore the ethical dimension. “Why should I bother if I am not directly harmed?” Victim versus perpetrator type of unethicality. he would seek to train himself further along the ethical dimension (and increase the sattwic element.
friends. the individual is in turn able to discharge his debts and obligations to the Universe.Piya Mukherjee opportunities where warranted. Jan 2011 Ethics in Business . How best can I use my available resources (answer 1) to arrive at the desired goal (answer 3)? It may help to remember these… • • • Examine your own motives. More significantly. by engaging in such a process. MMS. Work only if you are sure your motive is clear (i. Be willing to treat the exercise as a personal lesson in patience / determination / ingenuity. Let these and your direction for work be determined instead by what you think is the best way of reaching the most appropriate end result. skills and talents. what would I like the situation to be / how would I want the issue to be resolved? 4. Such an approach will allow the process as well as the end result to gain quality. acquaintances who may help if need be) 2. Be prepared for delays and obstacles.VESIMSR. when faced with systemic unethicality is this: sustained individual progress is impossible without the progress and well being of the environment. When things are tough.. What is the specific issue I feel strongly about? (this would be an exercise in accurately identifying the specific unethicality that has caused a disturbance / dissonance in the individual or organization) 3. enthusiasm or drive. Don’t allow short-term outcomes to determine your morale. Don’t assume people or systems will support you simply because you are working on worthwhile cause. you are not addressing an issue merely because you stand to gain). Checklist of questions for the individual / organizations: 1. What are my resources? – time available. systemic unethicality must be steadily weeded out. are non-monetary and sometimes intangible in nature. support systems (this includes family. knowledge and experience. mental and emotional energy. finances. For the latter to happen. remind yourself of these: “This too shall pass”. Ideally.a brief look: 17 . This will allow you to step out from the judgmental approach (“He / she / they should be doing this” “How dare they behave in this way”) which invariably leads to frustration and loss of mental and emotional clarity and energy. nepotism. back-biting and so on. Principles for working around systemic obstacles – individual and collective: The primary rationale for working towards ethicality.e. • • Whistle-blowing .
Jan 2011 Ethics in Business . Hence the dilemma gets sorted out in favour of whistle-blowing. Types – internal (announcing to top management) or external (telling the media. transfers. Don’t act hastily – consider the consequences of the action on people’s jobs and so on 4. the industry and the competitors) Used when – individual values clash against low standard of organizational values Rules: 1. Prepare to follow through till the end. whistle-blowing needs conscience and courage Apparent dilemma – job loyalty versus whistle-blowing This gets sorted out when one realises the true definition of corporate loyalty. the actions or conditions in a firm which are illegal and / or harmful to the stakeholders of the firm. A note of caution – examine your own motives before blowing the whistle. Are you doing this for personal glory? As a measure of vindictiveness? To “get even” with someone? Or because you genuinely believe in setting something right? Only the latter gets a clean chit on the moral front. Expect the worst – demotions. character defamation and loss of the job 6. Get support from others. First follow the usual channels of communication and hierarchy 3. Have provable facts 2. don’t make empty threats that you cannot or will not carry out 5.Piya Mukherjee Meaning of the term – making known to outside agencies. working for the best long-term interests of all stakeholders of the firm. MMS. Why Ethics makes good business sense An analysis from the macro as well as micro points of view • • • Common unethical practices and their adverse impact on the economy Trusteeship and the Gandhian principles of wealth management Wisdom leadership –Concepts from the Indian ethos Macro Perspective: Basic contention: 18 .VESIMSR. namely. if possible At the individual level.
bribery. unethical acts are directly correlated to poorly functioning market systems. thereby reducing productivity and wealth. the implication is that the resources spent on producing those goods have been well utilised. coercion. MMS. Explanation: The market system of distribution of resources for production of goods and services in the national economy is considered more efficient than the command system. national productivity and wealth are seen at levels far lower than the true potential for performance Common Unethical Practices in Business and the impact of some practices on the economy: • • • • • Bribery and tipping / “greasing” / paying speed money Deception Theft Unfair Discrimination Coercion Bribery: • Offering. Consequently. When such satisfaction is high. receiving. The market system (free market economy) calls for. unfair discrimination and theft) impinge upon the above three conditions of an efficient market system. giving.g. deception. among things. service. dissatisfaction means that the resources allocated for production have been sub-optimally spent and that the market system is not functioning efficiently. Hence the need for ethical conduct. soliciting of something of value (money. kickback or other asset).Piya Mukherjee Unethical behaviour harms the national economy by hindering genuine free market operations. Jan 2011 Ethics in Business . For example.VESIMSR. to influence the action of an official in the discharge of his / her duty 19 . Hence. the following conditions: a) the right to own and control private property b) freedom of choice in buying and selling goods and services (implying competition) c) easily available and accurate information about these goods and services Goods and services are purchased to satisfy one’s needs and wants. All types of unethical behaviour (e. Millions of purchases thus determine what goods and services are available in an economy. leading to dissatisfaction after purchase. Conversely. deception implies that information available to the customer is not accurate but is misleading.
falsifying / distorting research data.g.g. age . sex . intentional misleading by spoken / written falsehood.g. religion or other “group” criterion • A failure to treat all equally when no reasonable distinction can be made between those favoured and those discriminated against (Relevant criteria for discrimination usually includes merit. “ponzi” schemes) Deception reduces customer satisfaction.g. 20 . MMS. Jan 2011 Ethics in Business . misrepresentation of a product. intellectual pilferage) • May be included to include a wide range of ethical transgressions (e. using insider information. ‘creative’ accounting) • Ranges from a white lie to elaborate schemes to defraud people (e. Gift giving during Diwali). qualification.Piya Mukherjee • • • • Given to influence official to favour the bribe-giver Creates conflict of interest between the person receiving the bribe and the organisation Difficult to determine intent of gift-giver when cultural norms allow for exchange of gifts during festivals (e. as the legitimate users effectively end up paying for those who use the products / services but don’t pay. Unfair discrimination: • Unfair treatment or denial of normal privileges because of their race. misleading advertising. product counterfeiting. experience. stealing • Property may be physical or conceptual (e.g. The gift works as a bribe if its nature or value is such that it attempts to influence the receiver May be distinguished from “speed money” / “grease” which is given in the ‘normal’ course of work to speed up transactions Bribery leads to reduced quality of products /services (since something that is not sub-standard would have existed on its own merit) + increased costs (when the cost of the bribe is loaded on to the cost of the product / service) Deception: • Act of deceiving. contribution to the firm) Unfair discrimination leads to increased costs as productivity ratios worsen. price collusion and cartelisation to create economic barriers to entry in a market. misrepresenting data pertaining to a fact/ situation • Common ethical transgression (e. dishonesty in making and keeping contracts) Theft leads to increased costs.VESIMSR. sect. Theft: • Taking of something that belongs to another.
business needs the foundation of ethical behaviour A brief look at the dimension of trust: • Trust implies predictability.g. if he wants to carry other products) • May be for a one-time transaction or a series of transactions in a business relationship Coercion leads to reduced quality of products /services + increased costs Micro Perspective: Basic contentions: • To function effectively. Trust (in business) calls for two prime ingredients: . low turnover of labour and speedier change management. business needs trust (in its transactions with all stakeholders) • In turn.g. won through transparent. b) Employees and business – employees’ trust. legal and constructive (e.VESIMSR. dependability and faith • It must be noted that ethical behaviour is a necessary but not sufficient condition for trust in relationships. low collection costs. forcing a retailer to stock certain products. MMS. during transactions.Piya Mukherjee Coercion: • Controlling people by force or threat • Creates compulsions and constraints in behaviour • Could be actual. ensure high morale and performance. direct and positive (e. trust calls for ethical behaviour (between stakeholders. brand loyalty and goodwill for the company.professional competence (skills) and fiduciary responsibility (values in application) • The dimension of trust gains prominence in the following relationships between the business and stakeholders: Ceteris paribus a) Customers and business – high levels of customer trust. when direct force is used) or implied. fair and equitable policies. as well as on a continuing basis in relationships) • Hence. 21 . translate into sustainable profits and market shares. Jan 2011 Ethics in Business . earned through consistent quality-price equations of products or services.
belongs to society and the rewards accruing from their use must revert to society at large. • The small investor has as much a say in decisions as the large investor. • Principles: The principles of trusteeship can be traced to the concept of collective endeavour and community living. a healthy valuation of the share in the stock exchange and a high probability of garnering additional funds at competitive rates of return. lesser time being consequently spent on quality checks and order processing transactions and better chances of procurement of supplies in times of scarcity. trusteeship => element of equity. in turn aiding the business in its performance. Briefly. customers and society on the same rung as large and small shareholders. customers et al). including human. micro perspective which is often geared exclusively to suit the shareholder and top management. accountability and efficient financial running of the corporation leads to the nurturing of shareholders’ trust. • Managers are the trustees of the stakeholders and must work towards optimizing stakeholder value.VESIMSR. 22 . This ensures a continuing and steady source of funds. Trusteeship and the Gandhian Philosophy of Wealth Management • • • Trusteeship = holding and managing resources on behalf of the stakeholders of the firm.Piya Mukherjee c) Shareholders and business – transparency. placing other stakeholders such as employees. Jan 2011 Ethics in Business . funds. rather than the short-term. The idea is that all wealth. financial and technological resources. Thus the overall approach is towards the macro and the long-term perspective. by smoothening out negotiations. MMS. e) Collaborators / partners and business – trust plays an extremely significant role in this relationship. covering up for unexpected loopholes in written contracts and bringing stability to the relationship Ethical behaviour with all these (and other) stakeholders assures the corporation of a reliable base for resources (people. these are: • Resources must be held and utilised for the benefit of society. not merely maximizing shareholder value. Traditional take on wealth = tilted towards owners of corporations Therefore. d) Suppliers and business – equitable handling of transactions leads to improved reliability in terms of quality and quantity of supplies.
leads to higher profits. The Indian perspective: The wisdom of the Vedas and Upanishads point towards holistic progress. the possibility of de-motivation or deliberate inefficiency does not arise. The increasing instances of ethical transgressions on the part of leaders and CEOs indicates the need for better balance in the risk-reward relationship. This. MMS. But the reward must be in proportion to the skills and expertise supplied. generate profits. not fragmented movement in which one section gains at a cost to others. The Gandhian philosophy of wealth management is based on the principle that a wealthy man does not truly have the right to hoard wealth solely for the self. coupled with the commitment of top leadership. • “Corporations exist for profits”: They exist to fulfill the needs of society and in the process. Moreover.Piya Mukherjee Old Model • • • • Pre-determined rewards to employees Sharing of wealth with shareholders Occasional forays into philanthropy Negligible role society in policy-making • New Model Stock Options for employees. alignment of rewards with performance of company Intangible criteria of progress such as customer trust and goodwill given increasing importance Greater power with small shareholders • • Common protests against its application: • “The owner/s must be rewarded for bearing risks and supplying expertise”: Definitely. 23 . • “Trusteeship might lead to a disincentive for efficiency and efforts”: When individual and group efforts are correctly aligned with social needs. The Arthashastra of Kautilya and The Kural of Tiruvalluvar both describe the role of the king as trustee.VESIMSR. with respect to the citizens and the wealth of the land. Conviction in the utility of the concept. the cycle of give-and-take is explained at great length. would ensure efficiency as well as effectiveness. in turn. Moreover. trusteeship would still score over inequitable sharing of wealth. Jan 2011 Ethics in Business . even if profits were to be the only determinant of policies. the only right he has is that to an honorable livelihood. goodwill and trust. since better wealth management automatically leads to more lasting and stable equations with stakeholders.
It is a very difficult task to take on the role of a leader. a leader then is the person who asks. including customers and employees. He will be a source of guidance even though he may or may not have formal authority. A good manager will be one who serves others. then you are a leader. whose prime objective will be helping everyone optimise their potential. It’s the spirit of service that’s the hallmark of servant leadership. The wisdom of this approach lies in the fact that such a leader will have clarity of perspective. Profits are made in the process and sometimes act as indicators of the effectiveness of this process. Jan 2011 Ethics in Business .VESIMSR. There must not be a shade of jealousy or selfishness. never lose sight of the long-term in favour of the temporary short-term scenario and will prioritise social and organizational welfare over personal preferences. hence he is one who is willing to be a “servant of servants”. MMS.Piya Mukherjee Wisdom leadership – its meaning and relevance: “Be the servant of all.” Stephen Covey “Dashasya Dasaha” : Organizations exist to serve society by meeting its needs and wants. and do not try in the least to govern others…kill self first if you want to succeed. 24 . “What can I do to help everyone give their best in this process of meeting society’s needs and wants?” Thus it is seen that the organization serves society and the leader serves the organization. One must be a “dashasya dasah”. servant of servants and must accommodate a thousand minds.” Swami Vivekanand ”…The sixth level leader will be a servant leader. Given that any organization stands for a group of people with a collective purpose.
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