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Business Ethics

Ethics refers to a system of moral principles a sense of right and wrong and goodness and badness of actions, and their motives and consequences. Business ethics refers to the application of ethics to business. To be more specific, business ethics is the study of good and evil, right and wrong, and just and unjust actions of business.
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Two theories of related about the nature of ethics
The theory of moral unity: Advocates the principle that business actions should be judged by the general ethical standards of society. There exists only one ethical standard that applies to business and to non-business situations. Theory of amorality: Which argues that business can be amoral, and the actions of businesses need not be guided by general ethical standards?
Padmavathi. K

K .Sources of Business Ethics Religion Legal System Business Ethics Culture Padmavathi.

Built upon such varieties are many other rules of conduct. Padmavathi. The great religions preach the necessity for an orderly social system and emphasis social responsibility in such a way as to contribute to the general welfare. which are similar to the building blocks of secular ethical doctrine. K . The world’s great religions are also in agreement on fundamental principles.Religion One of the oldest sources of ethical inspiration is religion.

Cultural Experience Culture refers to a set of values rules and standards transmitted among generation and acted upon to produce behaviours that fall within acceptable limits. These rules and standards always play an important part in determining values. Padmavathi. institutional and intellectual environment. cultural. K . because individuals anchor their conduct in the culture of the group. Ethical systems began evolving to reflect the changing physical.

K .Starting from Hunting & Gathering stage Agricultural Stage Industrial Stage Padmavathi.

Law is reactive. Padmavathi. Society expects business to abide by law and obeying law is presumed to be ethical behaviour. it is binding on business. They codify ethical expectations in any changing as new evils emerge. approved by legislatures that guide human behaviour in any society.The Legal System Laws are rules of Conduct. new statutes and enforcement always lags behind the opportunity for corporate expediency. K . Whatever ethics that law confides.

Values create credibility with the public. K . Padmavathi. Values help better decision making. ethics can. Ethics and profits. Law cannot protect society.Why is Ethics Important? Ethics corresponds to the basic Human needs. Values give management credibility with employees.

Padmavathi. They are Leadership Strategies and Policies Organizational Culture Individual Characteristics.Factors Determining Ethics: Four factors are responsible for encouraging ethical behaviour or depressing standards of conduct. K .

Factors shaping corporate ethics Leader’s example strategies / Policies. Average Compromised Padmavathi. K . Elevated Ethical Performance Organization Culture individual characteristics.

K .Ways of managing ethics Top Management Corporate Culture Ethical Behaviour Legal System Training programmes Others Ethics Hotline Codes of Ethics Ethics Committees Padmavathi.

Industrial Business and Ethics Two ethical issues are prominent in International Business. Bribery has been at the root of Corruption in many countries. Padmavathi. Bribery and Corruption Work Practices and Work Remuneration Bribery is a deliberate attempt to persuade someone (Usually in position of power and authority) to act improperly in favour of the briber by offering money or gifts or any other material gain. bribery and corruption and work practices and worker remuneration. K .

Benign Bribe is one which benefits an economy by expending and simplifying procedures. thereby reducing prices and improving society’s welfare. reducing bureaucracy and reducing or eliminating unnecessary costs.Two ethical issues Cont… Malign Bribery leads to a widespread corruption and decline in public morals. such an act might be considered as an attempt to bribe for personal gain and might therefore be considered unlawful. In some middle east countries.S. Corruption is understood as the abuse of public office for private gain. it would be host as a token of appreciation for the time and consideration given. however. Padmavathi. K . The issue of bribery is defined and practiced. In Britain and U.

High level and scope of government involvement in and regulation of economic activities make the officials become corrupt.Roots of Corruption Where the legal framework and other anticorrupt institutions are weak or non-existent. Padmavathi. K . particularly when their salaries are low. High levels of confidentially prevailing with regulatory agencies leads to unethical practices.

Proper disclosures and Informations. K . Impact on local social institutions. Child labour. Environmental Protection. Following Local Laws. Impact on local economies. Safety of working conditions. Raw material depletion. Customers Stock Holders Employees Fair return on investment Fair Wages.Areas of ethical and social responsibility concerns for the multinational Stakeholders Affected Ethical or Social Responsibility Issue Product safety. race. colours or creed. Host Country Society in General Padmavathi. Fair price. Discrimination by sex.

Padmavathi. K .Work Practices and workers Remuneration One of the main reasons for international firms to invest in production facilities abroad is to take advantage of the availability of relatively low cost labour in order to remain competitive in international markets. Ex: Child labour Low Wage Exploiting workers in Third World Countries.

People’s notions of right and wrong vary considerably among societies.Corporate strategy of the MNC must contain ethical orientation. The wise corporation knows this and acts with care and understanding. historical periods and ethnic groups. religions. Padmavathi. Accept responsibility for nurturing ethical attitudes caused by the company. Business pressures that lead employees into unethical practices are a common problem. Respect human value diversity that is found among people and groups at home and abroad. K . Ways exist for reducing these episodes. An ethics-centered strategy requires a firm to do the following Pursue business goals within the bounds set by society’s values and moral principles. and the community. in the workplace. Business policies and decisions that show disrespect for these cherished beliefs are generally condemned by most members of general public.

The figure gives a single model of the relationships among national culture.National differences in Ethics and Social Responsibility Cultural differences affect the social and ethical practices of MNC’s considerably. Padmavathi. social institutions and business ethics. K .

Laws and Legal Systems) Important ethical issues for Business (Equal rights for women) Management practices to monitor & control ethical behaviour in organizations (Code of ethics) Cultural norms and values (norms for gift giving) Padmavathi. K .Institutional and Cultural effects on Ethics and Management Key social institutions (Religion.

international managers need only follow local ethical conventions. it is okay for an MNC to follow local practices. Ethical Universalism This principle holds that there are basic moral principles that transcend cultural and political boundaries. even if it is illegal at home. This implies. This is called ethical convergence. Ethical Convergence Cultural differences notwithstanding there are growing pressures on international businesses to follow the same rules in managing ethical behaviour and social responsibility. Padmavathi. Ethical relativism means that when doing business in a country. if bribery is not unethical in a society.Ethical Relativism or Ethical Universalism Ethical Relativism means that each society’s view of ethics must be considered legitimate and ethical. Business actions should be judged by the general ethical standards of society. There exists only one ethical standard that applies to business and non business situations in a given society. K .

Code of conduct for an MNC Respect Basic Human Rights and freedom. K . Protect the Environment. Maintain High standards of local political environment. Transfer Technology. Consumer protection. Minimize any negative impact on local economic policies. Padmavathi. Employment Practices.

Decision Flowchart for an MNC International Manager. like his or her counterpart in domestic business faces ethical dilemmas. K . Padmavathi.

K .Decision Flowchart for an MNC.Is the Behaviour or its Consequences In violation of Host or Home Country Laws? Legal Analysis No In violation of international Agreements? No In violation of the Company’s ethical code? Organisational ethical analysis No Consistent with company culture? Yes Yes Stop Stop Yes Yes Stop Stop Yes Cultural sensitivity ethical analysis Consistent with local culture norms? No Stop Personal ethical analysis Yes Consistent with personal moral beliefs? Yes No Stop Do it? No Stop Padmavathi.