Business Ethics

Learning Points: What is business ethics? Morality & Ethics Why is business ethics important? Globalization: a key context for business ethics? Sustainability: a key goal for business ethics?

What is ethics and Morals?
Ethics vs Morals • Any action can be judged as ‘right’, ‘fair’ or ‘proper’ basing on moral standards which differ from person to person, time to time and place to place- example, a frog caught by a snake. Rama refusing Sita after the defeat of Ravana. • Moral judgements are relative judgements • Most of the times, what is moral or immoral depends on various religious tenets of the world- example, cow slaughter. • Ethics aims at defining highest good of man and strives for maximum good for maximum number of people

Ethics and Morals
Morals • Deals with principles of Right or Wrong • Moral implies “Custom”determined by group or authority like religion • Morals are absorbed from family, friends, school, religion and associations • Morals work on smaller scale Ethics • Deals with what is Good and Bad • Ethics implies “Character” which is personal attribute • Adopted/ absorbed by taking reasonable actions/ decisions at appropriate situations • Ethics has wider scope

equal remuneration etc. • Ethics is concerned with the study of morality and the application of reason to elucidate specific rules that determine right or wrong for a given situation leading to ethical theories.What is ethics and Morals?. values. .cont • Morality is concerned with norms. and beliefs embedded in social process which define right and wrong for an individual or a communityRama banishing Sita after the Dhobi’s episode.example fair treatment of women or recognizing women on par with men.

Potential solutions to ethical problems .The relationship between morality. ethics and ethical theory Ethics rationalize s morality … … to produce ethical theory … Morality Ethics Ethical theory …that can be applied to any situation.

• Etimology. ‘ethikos’ which means ethos or character. • A code of conduct governing a group. . ethics is a “system of moral principles.What is ethics?. Ethics is • a treatise or science of morals.Latin ‘ethicus’ or in Greek. • A group of moral principles or set of values. rules and conduct”.cont • As per Oxford Dictionary.

injuring or killing a person for self defence as against cold.  It deals with human conduct which is voluntary and not forced by circumstances.example.What is ethics?.cont Nature of ethics:  It deals with human beings only.  It is a social science.blooded murder .since it is concerned not with factual judgements but with judgements as what ‘ought to be’.since it studies moral behaviour and conduct  It is a normative science.since they alone can distinguish what is good and evil.

1994). such as is not against ethics or vice versa. people and enviornment. trustworthiness and co-operation (Collins & Watson.obligations to society.What is business ethics? • Business ethics is not an oxymoron. • Everyday business activities require the maintenance of basic ethical standards. • A business is considered ethical if it tries to reach a trade off between economic objectives and social obligations. .

and decisions where issues of right and wrong are addressed for the given situation. . activities.cont Definition of Business Ethics: • Business ethics is the study of business situations.What is business ethics?.

regulations. Many times ethics leads to codification of law.Ethics & Law • Law is the codification of ethics into specific social rules. • Ethics.example taking care of old parents • Many moral issues are not explicitly covered by law. therefore begins where law ends. there is no law preventing experimentation of drugs on animals. . • The law deals more of what not to do than of what to do. It leads to ETHICAL DILEMMAS. in many countries. and proscriptions.example.

finance. engineering where specific procedures and facts are learnt.Ethics & Law. the BE operates in grey area and aims at taking better decisions. in BE we learn as to how to take decisions for largest public goodeconomical and environment friendly . .continued • Where law is absent. • Unlike subjects such as accounting. in a way better decisions.

Ethics & Law.continued • In majority of cases law and ethics match (prohibition of insider trading/child marriages) • In some cases they are independent of each other (Gambling is legal in some cases but not ethical. Drinking alcohol may be illegal in some states but it not considered unethical by many people) .

Ethics and the law Ethics grey area Law .

3. process etc. BE helps in understanding and addressing the situation.example. 2. BE. Business has potential to provide major contribution to is increasing day by day and viewed by many with uneasiness. Power and influence of business in society. Business mal practices have potential to inflict harm on communities and environment. by suggesting moral decisions. . tries to improve the human condition. engaging child labor in Shiv Kashi. money bag politics.Example.Why is business ethics important? 1. BE addresses the ethical issues involved in production.

Why is business ethics important?continued 4. 5. BE provides the means to appreciate and understand the challenges in tune with society and ecology. Continued occurrence of ethical infractions. Evaluating different ways of managing business ethics 8. Interesting and rewarding subject – since it addresses the problems of society and deals with life situations. BE provides necessary intellectual tools to deal with each situation. Increasing demands from stakeholders.BE diagnoses reasons and try to address the root problems 7. Lack of business ethics education or training lead to ethical problems. . 6.

11.Business depends on customers and it cannot remain immune while the rest of the society is destroyed. Use of society’s resources by Business demands an implied demand for social responsibility by the Business 10. Give.take relationship .Why is business ethics important?continued 9. Long term orientation.

Globalization and ethics What is globalization? • According to Scholte (2005) globalization is not: – ‘internationalization’ – cross border transactions – ‘liberalization’ – means trade de-regulation which is there for a quite long years. and relations. and political activities. lifestyle and ideas. processes. – ‘westernization’ – western ideas getting implanted in developing countries. – ‘deterritorialization’ . – ‘universalization’ – means increasing spread of products. • Globalization is: a process which diminishes the necessity of a common and shared territorial basis for social. economic.

• MNCs are centre of attention. the Asia catches cold and vice versa.they pitch developing countries against each other by the dangle of FDI.Effects of Globalization • In globalised environment if USA sneezes. . • Markets are inter dependent • Confidentiality is difficult to maintain.favor low tax and low level of environmental regulation & restricted human rights etc.

Effects of Globalization • Global communications. .territorialization in world economy. global products. global financial systems and market are the examples of de.

Relevance of Globalization for Business Ethics • Cultural issues • Legal issues • Accountability issues Globalization can affect all stakeholders of the corporation .

Deterritorialized economic activities demand BE in greater way since BE starts where the law ends. engaging child labour. .Relevance of Globalization for Business Ethics .Moral values taken for granted in home countries may be questioned elsewhere.Managers find it difficult reorient themselves whenever they are asked to supervise the shifted production chain to alien country due different set of local laws.cont • Cultural issues. difficulty in banning child pornography. observing pardah etc • Legal issues.example. Example. nude and semi nude ads.

the GDP of Denmark is same as the turn over of General Motors. General Motors is accountable to a few share holders where as Denmark government is accountable to entire citizens. example. Corporate accountability to the general public is the buzz word today. • There is clamour for direct accountability of MNCs to the governments.Relevance of Globalization for Business Ethics . .cont Accountability issues• MNCs are economically as powerful as many governments.

Corporations outsource production to developing countries in order to reduce costs in global marketplace . Small scale indigenous competitors exposed to powerful global players. maintenance of ethical standards. Globalization also confronts governments with corporations from different cultural expectations about issues such as bribery. leading to additional financial risks and instability.this provides jobs but also raises the potential for exploitation of employees through poor working conditions. but also greater risks. but may also meet protests about cultural imperialism and westernization. Globalization weakens governments and increases the corporate responsibility for jobs. Global products provide social benefits to consumers across the globe. welfare. etc) Government & regulation . etc. globally active pressure groups emerge with aim to “police“ the corporation where governments are weak and tolerant. Global business activities brings the company in direct interaction to local communities with possibility for erosion of traditional community life. Employees Consumers Suppliers & competitors Civil society (NGOs. Suppliers in developing countries face regulation from MNCs through supply chain management. but vulnerable consumers in developing countries may also face the possibility of exploitation by MNCs.Ethical impacts of globalization Stakeholder s Stakeholders Ethical impacts of globalization Globalization provides potential for greater profitability. corruption. Globalization can bring cheaper prices to customers. Lack of regulation of global capital markets. taxation. and philanthropy.

(World Commission on Environment and Development 1987) • Sustainability refers to the long-term maintenance of systems according to environmental.Sustainability.a key goal of BE Defining Sustainability: • Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. economic and social considerations .

Sustainability.a key goal of BE .

The need of sustainability • Environmental pollution.leading to individual & community problems • Erosion of local cultures due to Internet intrusion.due to throwaway culture • Plant closings and downsizing of staff. . transportation and use of chlorofluorocarbons(CFCs) there by depleting ozone layer.caused by production. influx of mass tourism etc. • Waste disposal.

but together we can in a global partnership for sustainable development”. 1992 talked on • perpetuation of disparities between and within nations. • the continuing deterioration of the ecosystems.The need of sustainability. • better protected and managed ecosystems and a safer. ill health and illiteracy.cont The Rio Earth Summit. more prosperous future. • fulfilment of basic needs. • a worsening of poverty. . • BE on global scale is the clear answer for all the maladies. integration of environment and development. improved living standards for all. • “No nation can achieve this on its own. hunger.

The need of sustainability.         Eradication of poverty and hunger Universal primary education Gender equality and women empowerment Reducing child mortality Improve maternal health Combat diseases such as HIV/AIDS Environmental sustainability Develop global partnership for development . viz.cont UNO emphasizes sustainability and talks of eight Millennium Development Goals.

The need of sustainability.cont Sustainability emphasizes on • The needs of future generations • Intergenerational equity and • Ethics in action at each business decision .

Triple Bottom Line theory • John Elkington has propagated the theory of TBL (Economic Value. . Environmental Value and Social Value) • "People.Sustainability. planet and profit" succinctly describes the triple bottom lines and the goal of sustainability.

A TBL business would not use child labour. would maintain a safe work environment and tolerable working hours.Triple Bottom Line theory • People. The Global Reporting Initiative (GRI) has developed guidelines to enable corporations and NGOs alike to comparably report on the social impact of a business.Sustainability. problematic and often subjective. • A TBL business also typically seeks to "give back" by contributing to the strength and growth of its community with such things as health care and education. . • Would not exploit a community or its labour force. • Quantifying this bottom line is relatively new. • Would pay fair salaries to its workers.

• A triple bottom line company does not produce harmful or destructive products example.Triple Bottom Line theory • Planet.A TBL tries to reduces its ecological footprint by carefully managing its consumption of energy and nonrenewables • Reduces manufacturing waste as well as rendering waste less toxic before disposing of it in a safe and legal manner. .Sustainability. • Life Cycle Assessment of products to determine what the true environmental cost is from the growth and harvesting of raw materials to manufacture to distribution to eventual disposal by the end user. weapons. toxic chemicals or batteries containing dangerous heavy metals.

Sustainability. .Triple Bottom Line theory • Profit.TBL approach cannot be interpreted as simply traditional corporate accounting profit plus social and environmental impacts unless the "profits" of other entities are included as a social benefits.

The three components of sustainability Economic Social Environmental .

• May all the beings be happy.Sustainability from vedic roots • "लोका समस्ता सखिनो भवनतुुः ु ॐ शननतुः शननतुः शननतुः" " Loka Samasta Sukino Bhavantu Aum ShantiH ShantiH ShantiH" • ‘May all the worlds be happy. May none suffer from grief or sorrow. May peace be to all’ .

Sustainability.of peace and prosperity. • It is paramount or supreme or number one priority for all of us to make our world worth living. . but world War IV will be fought with sticks and stones“.Albert Einstein.continued • " I do not know what weapons World War III will be fought with.

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