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Introduction to Business Ethics Lecture- 1

Prof. C. Anand IBS, Hyderabad

Contents
This deals with:I. Introduction to Ethics, Business Ethics, Morals & Values II. Theories of Ethics III. Conflicts in Decision Making from Business, Legal and Moral Points of View.

1. Introduction to Ethics, Business Ethics, Morals & Values

Ethics: It deals with human behavior. It assesses whether a particular act or decision taken by an individual is moral or not and also what is right and what is wrong. Ethics is the science of morals, moral principles and recognized rules of conduct. It is a systematic knowledge about moral behavior and conduct of human beings.

Business Ethics: Business Organizations are sub-systems of societal systems. They are also instruments of society to produce goods and services. They affect and are affected by the society. They can not function effectively if the Society is not healthy. Hence organizations should positively contribute to society's health. Some organizations violate basic principles and laws on child labor, human rights, discrimination, fair wages and consumers interests. They compromise on safety and quality standards producing goods that are dangerous.
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1. Introduction to Ethics, Business Ethics, Morals & Values

Irregularities of Organizations: - Neglect of Duties and Responsibilities towards Employees and Society - Abuse of Power - Unfair Treatment (Harassment by Officials) - Misappropriation (Embezzlement, Creative Accounting, Tax Evasion) - Cheating, Bribes and Kickbacks - Damage to People, Property or Environment BE is a specialized study of moral right and wrong. It concentrates on moral standards as they apply to business policies, institutions and behavior. BE is a form of applied ethics. It includes not only the analysis of moral norms and moral values, but also attempts to apply the conclusions of this analysis to that assortment of institutions, technologies, transactions, activities, and pursuits that we call Business.
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1. Introduction to Ethics, Business Ethics, Morals & Values

Corporate Issues in BE: These are ethical questions raised about a particular company. These include questions about:Morality of the activities Policies Practices Organizational Structure Individual Issues (Morality of decisions, actions, or character of an individual)
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1. Introduction to Ethics, Business Ethics, Morals & Values

Morals and Values: Morals: Morals are the principles of right and wrong. Morality refers to the standards of conduct that are accepted as right and proper. Moral Standards deal with desired right and wrong human behavior. They focus on what ought to be done and what ought not to be done by an individual or group in a given situation. A person is morally responsible only for those acts and their foreseen injurious effects (a) which the person knowingly and freely performed and which it was morally wrong for the person to perform or bring about, or (b) which the person knowingly and freely failed to perform or prevent and which it was morally wrong for the person to fail to perform or prevent. It also means moral duty or moral obligation.
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1. Introduction to Ethics, Business Ethics, Morals & Values

Moral Reasoning refers to the reasoning process by which human behaviors, institutions or policies are judged to be in accordance with or in violation of moral standards. It involves: (i) Understanding of what reasonable moral standards require, prohibit value or condemn; (ii) Evidence or information that shows that a particular person, policy, institution, or behavior has the kinds of features that these moral standards require, prohibit, value, or condemn. A Moral Virtue is an acquired disposition that is valued as part of the character of a morally good human being and that is exhibited in the persons habitual behavior. A person has a moral virtue when the person is disposed to behave habitually in the way and with the reasons, feelings and desires that are characteristic of a morally good person: (Exp. Honesty is valued as a character trait of morally good people)
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1. Introduction to Ethics, Business Ethics, Morals & Values.)

Values, Virtues, etc. Values are the accepted principles or standards of an individual or a group. Virtue is an aspect of character or personality that an individual desires in him or others. Virtue Ethics is concerned with attaining these dispositions of character or personality that an individual desires in him or others. Nature of Business: Most Business Organizations encounter two types of ethical Problems: Overt (Bribery, theft, collusion, etc.) and Covert (Corporate acquisitions, marketing, personnel, capital investment, etc.) which have deft ethical solutions. An ideal ethical decision comprises of virtues: Right, Equitable, Good, Proper, Fair and Just. Obligations are outcome of ethical decisions, which should focus to society at large and not to individual.
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1. Introduction to Ethics, Business Ethics, Morals & Values


Relationship between Business and Ethics: There are 3 different Views of Ethics : Unitarian View (Business is a part of moral structure and moral ethics. If business to exist, morality and ethics cannot be separated from operations of business). Separatist View (Business to flourish should concentrate on its goals Profit Maximization. Morality and ethics have no role in business (Proposed by Classical Economists viz. Adam Smith and Milton Friedman). Integration View (Ethical Behavior and Business should be integrated or combined in a new area called Business Ethics (Proposed by Talcott Parsons). Business being economic entity has the right to make profits, but at the same time, it should discharge social obligations.
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1. Introduction to Ethics, Business Ethics, Morals & Values

Stages of Ethical Consciousness in Business:

Stage 1: Law of Jungle (Business run on Brute Strength) Stage 2: Anything for Profit ( For profit anything like false representation, bribery, tax evasion is resorted to) Stage 3: Profit Maximizing in the Short-term (Believes good business is good ethics) Stage 4: Profit Maximizing in the Long-term (Shift in focus from business to ethics. Ethical aspects supervised) Stage 5: Stakeholders Concept (Concentration on profits with service to stakeholders and good to society). Stage 6: Corporate Citizenship (Higher level of ethical consciousness and redefines mission of business in society).
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II. Theories of Ethics


II. Theories of Ethics: Ethics is the field of enquiry. Morality is the object of that enquiry. Ethical Theories are divided unto 3 areas viz. 1. Metaethics, 2. Normative Ethics and 3. Applied Ethics. They are described below:1. Metaethics: It deals with ethical issues. It is the study of the origin and meaning of ethical concepts. It deals with the following 3 issues: Metaphysical Issues (Deals with the question whether moral values exist independently of humans or they are simply human conventions); Physiological issues that deal with the psychological basis of the moral action; and Linguistic issues that deal with the meaning of the key moral terms we use.
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II. Theories of Ethics


Normative Ethics: This branch of Ethics guides human conduct. It sets out certain moral standards that help us to determine what is right and what is wrong (Exp. The golden rule that we should treat others the same way that we want others to treat us). Other Normative Theories agree that if a moral principle is to be accepted, it must be: Prescriptive: Implies that Action is obligatory or Command. Universal: Applicable to any person Overriding: Should be primary consideration in assessment Public: Presupposes social interaction Practical: Must be achievable by an average individual in ordinary circumstances.

2.

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II. Theories of Ethics


The 3 Normative Theories: (i) Teleological Ethical Theory: Teleological means thinking rationally about ends. It holds that an action is considered morally correct if the consequences of that action are more favorable than unfavorable. If the good consequences are greater than the bad consequences, the action is morally right. The drawback of this theory is that it is difficult to quantify the consequences of our actions. Consequentialists have offered three definitions of good. Each of these definitions gives us different moral theories. They are: Egoism: An action is morally right if the consequences of that action are more favorable than unfavorable to the individual performing the action. Utilitarianism: An action is morally right if the consequences of that action are more favorable than unfavorable to everyone. Altruism: An action is morally right if the consequences of that action are more favorable than unfavorable to everyone except the individual.

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II. Theories of Ethics


(ii). Deontological Ethical Theory: They focus on fundamental duties/obligations. The duties are to God, to Oneself and to Others. (iii) Virtue Ethics: (Proposed by Greek Philosopher Aristotle). Virtue is defined as any disposition of character or personality that an individual desires in himself or others. In other words, virtues are those dispositions of character, which an individual considers to be good. Virtue Ethics is concerned with attaining these dispositions. It emphasizes on character development rather than on abstract moral principles that guide actions. 3. Applied Ethics: This deals with specific, often controversial moral issues (such as abortion, infanticide, cloning, testing drugs on animals). Businesses too face controversial moral choices like misleading advertisements, insider trading, bribery, corruption, etc. Ethical behavior is important for long-term success in business.
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III. Conflicts in Decision Making


(From Business, Moral & legal Points of View)
Conflicts in Decision Making Conflicts/Problems/Dilemmas in decision making in business arise because the nature of business is very complex. Some of these issues pertain to: Pricing, Advertising, and Promotion, working condition, environment, customer service, workforce reduction, community relations and supplier relations. To resolve such conflicts, etc. and for proper decision making, some degree of analysis is required which we call Multiple Analyses. These Multiple Analyses have three methods of analysis: Economic, Legal and Ethical (Moral).

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III. Conflicts in Decision Making


(From Business, Moral & legal Points of View)
Multiple Analysis: Economic Analysis: Market Economy has a limited number of resources and when consumers are supplied with highest quality of goods at lowest possible costs, these resources should be used as effectively and efficiently as possible. Legal Analysis: A democratic society can establish its own rules. If people and organizations can follow those rules, the members of society will be treated as justly as possible. Ethical (Moral) Analysis: The underlying belief is that if all the rational men and women in a society acted on the same principles of either beneficial or consistency, then the members of that society would be treated as fairly as possible. ****

- The End-

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