Business Ethics and

Corporate Social Responsibility (CSR)

 Ethics
• ETHICS term is coined from Greek word: ETHIKOS which means Character or Custom or
Spirit of Community .
• Ethics is a code of behavior considered correct.
• Ethics is a science describing a set of rules of behavior.
• The study of moral obligation involving the distinction between right and wrong.
• Ethics may be defined as the set of moral principles that distinguish what is right from what is
wrong.
• Ethics is a branch of philosophy and is considered a normative science because it’s concerned
with norms of human conduct, as distinguished from formal sciences such as mathematics and
logic, physical science such as physics and chemistry and empirical sciences such as economics
and psychology.
• Ethics has a twofold objective:
• It evaluates human practices by calling upon moral standards.
• It may give prescriptive advice on how to act morally in a given situation.
Introduction (Contd.)

• Moral principles that govern a person’s behaviour or the conducting of

an activity: Oxford dictionary (2014
• The branch of philosophy that deals with morality.
• Ethics is concerned with distinguishing between good and evil in the
world, between right and wrong human actions, and between virtuous
and non virtuous characteristics of people-The American Dictionary of
Cultural Literacy (2005)
• Business Ethics: right or wrong in the workplace – value
management.
 ETHICS, MORALITY AND ETIQUETTE
• It’s hard to make a distinction between these three terms because they are closely
related.
• Morality is a differentiation of actions between those that are right and wrong. Moral
implies conformity with generally accepted standards of goodness or rightness in conduct
or character; moral is generally used to describe who people are e.g. moral person.
• Etiquette is a code that governs social behaviour within a society, class or group.
• Ethics is the philosophy of moral values.
• Ethical implies conformity with an elaborated, ideal code of moral principles. Ethical is
generally used or describe how people behave, act and conduct themselves i.e. an ethical
lawyer or ethical secretary.
• Actions are said to be ETHICAL, when actions are in harmony with morals and actions are
UNETHICAL when they aren’t in harmony with morals.
Distinction between ethics, etiquette and morality
Difference between these three terms is that
morality defines our character, while ethics points towards application of morality and
etiquette focuses on behaviour in a certain setting.
 "Without ethics, man has no future. This is to say, mankind
without them cannot be itself. Ethics determine choices and
actions and suggest difficult priorities."
― John Berger

How true the above statement is. Ethics and values are what make us
human beings. In order to lead a meaningful life (even though it is
practically impossible to achieve that perfection, among the erosion of
values, morals, and integrity), some code of conduct must be laid down
and followed honestly. People often mistake ethics to be entirely related
to the decisions revolving around your conscience; however, it is not so.
 Branches of Ethics
• Normative Ethics : Deals in how an individual and decide the correct moral action
that they should take in a situation of ethical nature.
• Meta-Ethics : This branch seeks to understand the nature of ethical properties and
judgements such as if true values can be found and the theories behind moral
principles.
• Applied Ethics : Its about applying ethical theories developed by various
philosophers in our everyday life.
• Moral Ethics : The branch of ethics raises questions like
• How people develop their morality?
• Why certain aspects of morality differ across cultures?
• Why certain aspects of morality are generally universally applicable?
• Descriptive Ethics : This branch of ethics focuses on application aspect of ethics. This
branch studies how people actually conduct in the real world in day to day life.s
 Ethical Concepts
• Ethics is the branch of philosophy that is used to evaluate human actions. Some basic ethical
concepts in business are as follows:
• Ethical subjectivism: This concept emphasizes that the ethical choice of the individual decides
the rightness or wrongness of his behaviour.
• Ethical relativism: According to this concept, no principle is universally applicable and so it would
be inaccurate to measure the behaviour of one society with another’s principles or standards.
Relativism overlooks the fact that there may be enough evidence to believe that an ethical
practice is based on false belief, illogical reasoning, and so on.
• Consequentialism: Consequentialism is based on two ideas: the concept of value and the
maximization of value. If, for example, honesty is considered a value, an act is considered ethical
only if it maximizes this value. An act, which does not maximize the said value, is not ethically
permissible.
• Deontological ethics: This concept stresses that ethical values can be developed from the
concepts of reason as all rational individuals possess the ability to reason. We may, for example,
end up causing pain unknowingly while trying to create happiness. Therefore, the ethical value
of an action cannot be determined by its consequences. Instead, it is in the motive that lies
behind the particular action.
• Ethics of virtue: This concept emphasizes those traits that give the individual a sense of
satisfaction from ethical point of view. Virtuous acts like courage, honesty, tolerance and
generosity are done as a way of living and not by chance.
 Ethical Concepts (Contd.)
• Whistle blowing: Whistle blowing refers to the attempt of an employee to disclose
what he or she believes to be illegal behaviour in or by the organization. From one
point of view, this seems to deceive the principle of honesty in business ethics, as it is
taken for granted that the employees of an organization need to be loyal to its
workings. However, when loyalty to one’s organization in particular is perceived to be
harming one’s general loyalty to mankind, the act of whistle blowing is justified.
Failure on the part of the management of the organization to fulfil its social
obligations calls for whistle blowing. It is the responsibility of the whistle blower to be
careful about revealing the organization’s secrets and to consider the harm it may
cause to his colleagues and shareholders. The steps that should be taken into
consideration by the whistle blower are:
• Ascertain the gravity of the situation before whistle blowing
• Scrutinize the purpose
• Authenticate and keep a record of the concerned information
• Determine the type of offence and to whom it should be reported
 Ethical Concepts (Contd.)
• Stick to the facts
• Determine if the whistle blowing need be external or internal
• Decide if the whistle blowing should be anonymous or otherwise
• Make sure to follow proper rules in reporting the offence
• Consult a lawyer (if required)
• Anticipate and document vengeance
• Ethical dilemmas in business: An organization’s ethical problems indicate a conflict
between its economic and social performance. This results in a dilemma for
managers. Since people handle business, it is a crucial requirement to check and
ascertain ethical behaviour at a personal level. This will confirm ethically correct
responses from the organization to the mutual actions of individuals
.
Business Ethics

An ‘oxymoron’! – bringing together of two contradictory concepts (Collins 1994)

‘Principles of conduct within organizations that guide decision making and

behavior’ (David 2008)
Good business ethics is a prerequisite for good strategic management

‘The study of business situations, activities, and decisions where issues of right
and wrong are addressed’ (Crane & Matten 2004)
 Business Ethics
• An ‘oxymoron’! – bringing together of two contradictory concepts (Collins 1994)
• ‘Principles of conduct within organizations that guide decision making and behavior’ (David 2008)
Good business ethics is a prerequisite for good strategic management
• ‘The study of business situations, activities, and decisions where issues of right and wrong are
addressed’ (Crane & Matten 2004)
• Business ethics is nothing but the application of ethics in business.
• Business ethics is the application of general ethical ideas to business behavior.
• Ethical business behavior facilitates and promotes good to society, improves profitability, fosters
business relations and employee productivity.
• The concept of business ethics has come to mean various things to various people, but
generally it‘s coming to know what it right or wrong in the workplace and doing what’s right.
This is in regard to effects of products/services and in relationships with stakeholders.
• The social responsibility of a business requires the observing of business ethics. A business
man should not ignore the business ethics while assuming social responsibility.
 Business Ethics
• Business ethics is concerned with the behavior of a businessman in doing a business. Unethical practices
arecreating problems to businessman and business units. The life and growth of business unit depend upon
the ethics practiced by a businessman. Business ethics are developed with the passage of time and custom.
A custom differs from one business to another. If the custom is adopted and accepted by businessman and
public, that custom will become an ethic. Business ethics is applicable to every type of business.
• Business ethics means the behaviour of business while conducting a business , observing morality in
business activities.
• According to Wheeler, Business Ethics is an art and science for maintaining harmonious relationship with
society. Its various groups and institutions as well as reorganizing the moral responsibility for the rightness
and wrongness of business conduct.
• According to Rogene. A. Buchholz , Business ethics refers to right or wrong behavior in business decisions.
• Business Ethics or Ethical standards are the principles, practices and philosophies that guide the business
people in the day today business decisions. It relates to the behaviour of a businessman in a business
situation. They are concerned primarily with the impacts of decisions of the society within and
outside the business organizations or other groups who keep interest in the business activities.
• Business ethics can be said to begin where the law ends.
• Business ethics is primarily concerned with those issues not covered by the law, or where there’s no
definite consensus on whether something is right or wrong.
 Introducing Socialism in Business
Interest of Industry
Buyers Market
Better Relations with Society
Advantages to Business and Society
Need & Importance Goodwill
for business ethics Profitability
Going concern is assured
Sustainability
Survival of heated competition
Safety from legal perspectives.
 Fundamental Principles
• Integrity : Straight forward and honest in all professional and business relationships and doesn’t give false or
misleading statement
• Objectivity : Doesn’t allow bias, conflict of interest or undue influence of others to override professional or
business judgments.
• Professional Competence and Due Care :
• To maintain professional knowledge and skill at the level required to ensure that clients or employers
receive competent professional service;
• To act diligently in accordance with applicable technical and professional standards when providing
professional services.
• Continuing professional development i.e. develops and maintains the capabilities that enable an
employee to perform competently.
• To ensure professional capacity have appropriate training and supervision.
• Confidentiality :
• To refrain disclosing outside the firm or employing organization confidential information acquired as a
result of professional and business relationships without proper and specific authority or unless there is
a legal or professional right or duty to disclose and using confidential information acquired as a result of
professional and business relationships to their personal advantage or the advantage of third parties.
• To take all reasonable steps to ensure that the principle of confidentiality continues even after the end of
relationships between a professional accountant and a client or employer.
 Fundamental Principles (contd.)
• Professional Behaviour
• To comply with relevant laws and regulations and avoid any action that may bring discredit
to the profession.
• Having sufficient knowledge of relevant field.
• Non-compliance to any activity that can negatively affects the good reputation of the
profession or to bring the profession into disrepute.
• To be honest and truthful and not to exaggerated claims for the services they are able to
offer, the qualifications they possess, or experience they have gained or to make disparaging
references or unsubstantiated comparisons to the work of others.
• These involve a strict code of conduct laid down at the workplace.
• Your ethics here involve adherence to rules and regulations.
• Non-compliance to such rules may risk your reputation, as your behavior will immediately
be reported as brash and unprofessional.
• Your personal views and concerns about any topic will not be of much help in a corporate
setting, how well you follow the protocol of the company is what will matter here.
 Business Ethics
Four different levels of business ethics have been identified based on what type of business and how their
actions are evaluated.

1. The Society Level, which defines ethical behavior and assesses the effect of business on society.

2. The Industry Level, which suggests that different industries have their own set of ethical standards (e.g.,
chemical industry vs. pharmaceutical industry).

3. The Company Level, under which different companies have their own set of ethical standards.

4. The Individual Manager Level, at which each manager and other corporate participants are responsible
for their own ethical behavior.

CONSEQUENTLY, one feasible way to judge ethical behavior is to focus on determinants of business ethics
and behavior such as corporate culture, incentives, opportunities, and choices.
 Types of Ethics

• Personal Ethics

• Professional Ethics

• Business Ethics
 Individual Influences
Age and gender
Research suggests:-
Aged people are more ethical than young
Female are more ethical than men
National and cultural characteristics
People from different cultural backgrounds likely to have different beliefs about right and wrong, different values, etc. and this will inevitably lead to
variations in ethical decision-making across nations, religions and cultures.
Hofstede (1980; 1994) influential in shaping our understanding of these differences – our ‘mental programming’
a) Individualism/collectivism
b) Power distance
c) Uncertainty avoidance
d) d) Masculinity/femininity
Education and employment
Educated people are more ethical than illiterate. Ex: research reveals that business students not only rank lower in moral development than
students in other subjects such as law, but are also more likely to engage in academic cheating, such as plagiarism.
Relationship between employment experience and education and ethical decision making is still unclear
 Ethical Values, Issues and Choices
Ethical values: shared beliefs about right and wrong, good and bad
Govern the behaviour of a person or a group

Ethical issues: problems or dilemmas which present a conflict of values

Pay a ‘living wage’ or personal financial gain

Ethical choices: decisions about which option to take in response to a

dilemma
Difficult decisions, because each option has its own drawbacks
 PROFESSIONAL AND LEGAL ETHICS
Professional Ethics is concerned with one’s behaviour and conduct when carrying out professional
work. It is codified and varies across different cultures.
Legal Ethics is the standard of conduct within the legal profession and is codified in the Advocates Act

INTRODUCTION TO ETHICS AND MORALITY

Modern times philosophers have divided ethical theories into 3 general subject areas:
1. Meta-Ethics-origin of ethical principles :: Ethical values are either ‘other-worldly’ or ‘this
worldly’ creations.
Issues arising in Meta-Ethics:
• Egoism Vs Altruism
• Emotion Vs Reason
• Male Vs Female Morality
2. Normative-how we arrive at moral standards i.e. right or wrong conduct.
3. Applied Ethics-examination of controversial issues with tools of meta & normative ethics.
 Points of Difference
Personal Ethics Professional Ethics
Grooming They are developed over a period of time. They can be They are also shaped over time, but depend a great deal on the company
instilled during your childhood by your parents and people or organization that you work for. They can be developed as you undergo
close to you, they can be developed through life-altering experiences related to business, education, law, politics, or any other
experiences, or even meeting certain people in life and professional setting. They can be developed through corporate deals,
exchanging ideas with them. Some values can also be contracts, workshops, etc.
inherited, or can be developed after a spiritual experience.
Satisfactio They satisfy your personal needs; they only influence your They satisfy your corporate needs. Your professional career is influenced
n behavior with people you know personally. They define who by these rules, and the more stringently you follow them, the better
you are and help you take decisions, and hence, control your professional you will be. These values help satisfy the need to feel
attitude towards the people you care about. Whenever you capable of making fair decisions regarding your position in your
take any decision keeping these values in mind, you invariable workplace.
think of how it is going to affect you, your behavior, or your
family and friends.
Results Following these ethics result in a clear conscience, positive The results are more predictable, common, and obvious in this scenario.
attitude, and a contented spirit. This is because you are Following these ethics may result in you being honored as a diligent
following them for yourself and your loved ones. If you fail to employee and sincere worker. Not following them may result in being
follow these principles that you yourself have laid out, you blacklisted in the organization, attract legal issues, loss of money and
will end up feeling guilty, remorseful, with a sense of failure, reputation, etc. These are followed more for the sake of your colleagues,
and lack self-esteem. These consequences may vary from bosses, and society.
individual to individual.
Reliability They rely only on the individual. They are designed by the They rely on the organization. They are formulated and laid down by the
person himself, to make his life more orderly and disciplined, organization, and they need to be upheld by whoever works there,
and he depends on them to define his life. irrespective of his designation or salary. The same rules need not be
applied outside the workplace, they are confined within the company,
and they need to followed with utmost decorum.
 What are the attributes of an ethical culture?

Sense of employee responsibility.

Freedom to raise concerns without fear of retaliation.

Managers modeling ethical behavior and expressing the importance of integrity.

An understanding by leadership of the pressure points that drive unethical

behavior.

Processes to find and fix these areas of pressure.

 What are the six principles of business ethics and conduct?
 Comply with a written code of business conduct.

 Provide sufficient training to all personnel within their organization regarding personal responsibility under the
code.

 Encourage internal reporting of violations of the code with the promise of no retaliation for such reporting.

 Self-govern their activities by implementing controls to monitor compliance with all applicable laws and
regulations.

 Share their best practices in implementing the DII principles through participation in an annual Best Practices
Forum.

 Be accountable to the public, particularly through the completion of an annual Public Accountability
Questionnaire.
 Theories of Business Ethics
• Descriptive business ethics theories seek to describe how ethics decisions are actually made in business, and
what influences the process and outcomes of those decisions.
• Normative theories provide us what business people should do, whereas descriptive theories seek to tell us
what business people actually do and why they do it.

Stages in ethical decision-making:

• Jones model provides the most comprehensive model of ethical decision-making. According to this individuals
move through a process whereby they:
• Recognise a moral issue
• Make moral judgment about that issue
• Establish an intention to act upon that judgment
• Finally act according to their intentions.
• The model distinguishes between knowing what is the right thing to do and actually doing something about it;
or between wanting to do the right thing, and actually knowing what the best course of action is.
 Relationship with Normative Theory
• The role of normative theory in the stages of ethical decision-making is primarily in
relation to moral judgement. Moral judgements can be made according to
considerations of rights, duty, consequences, etc.
• However, the issue of whether and how normative theory is used by an individual
decision-maker depends on a range of different factors that influence the decision-
making process
Influences on ethical decision-making
• Two broad categories: individual and situational
• Individual factors: The unique characteristics of the individual actually making the
relevant decision.These include factors which are given by birth and those acquired
by experience and socialization.
• Situational factors: The particular features of the context that influence whether the
individual will make an ethical or unethical decision. These include factors
associated with the work context and those associated with the issue itself.
 Myths in Business Ethics
• Business ethics is more a matter of religion than management.
• Our employees are ethical, so we don’t need attention to business ethics.
• Business ethics is a discipline best led by philosopher & academics.
• Business ethics is superfluous-it only asserts the obvious: ”Do good!”.
• Business ethics is a matter of a good guys preaching to the bad guys
• Business ethics in the new police person on the block.
• Ethics can’t be managed.
• Business ethics and social responsibility are the same thing.
• Our organization is not in trouble with the law, so we are ethical.
• Managing ethics the workplace has little practical relevance
 Cognitive Moral Development
• The gradual development of an individual’s concept of
• right or wrong,
• conscience,
• religious values,
• social attitudes and
• certain behavior.
• Process by which children learn their moral beliefs and develop moral reasoning for making decisions regarding what is
right or wrong.
Pre-conventional: individuals define right and wrong according to self interest and expected rewards and punishment from
authority.
Conventional:
• Individuals live up to what is expected of them immediate peers and those close to them.
• Needs of Laws and society are the defining features.
• “Don’t steal” because it is against the law.
• Good behaviour is motivated to maintain the affection and approval of friends and relatives.
• Understand that standards are set for the current social system, not getting that there is self-interest involved (e.g., no such
thing as a bad law).
Post-conventional: Individuals go beyond identifying with others’ expectations, and assess right and wrong according to the
upholding of basic rights, values, and contracts of society.
 Stage #1: Obedience and Punishment Orientation

• Morality is based upon the physical punishment that follows an action, rather
than right or wrong. The concern is for self - "Will I get into trouble for doing
(or not doing) it?" Good behavior is associated with avoiding punishment.
e.g. The child won’t grab the candy at the supermarket for fear of being slapped

Possible answers for Kohlberg’s dilemma by children of Stage 1

• For stealing: If you let your wife die, you will get into trouble. You’ll be blamed
for not spending your money to save her and there will be an investigation of
you and the druggist for your wife’s death.
• Against stealing: You should not steal the drug because you’ll be caught and
sent to jail if you do. If you do get away, your conscience would bother you
thinking how the police would catch you at any minute.
 Stage #2: Relativist Orientation

• The concern is "Whats in it for me?" Action is judged right if it helps in

satisfying ones needs or involves a fair exchange.
• E.g.A mother tells her child: “If you are quiet at the mall, I will buy you an ice
cream.”
• Possible answers for Kohlberg’s dilemma by children of Stage 2
• For stealing: If you do happen to get caught you could give the drug back and
you wouldn’t get much of a sentence. It wouldn’t bother you much to serve a
little jail term if you have your wife when you get out.
• Against stealing : He may not get much of a jail term if steals the drug, but his
wife will probably die before he gets out so it won’t do him much good. If his
wife dies, he shouldn’t blame himself. It wasn’t his fault that she has cancer.
 Stage #3: Good Boy/Nice Girl Orientation

• People should live up to the expectations of the family and community and
behave in "good" ways. Good behavior means having good motives and
interpersonal feelings such as love, empathy, trust, and concern for others.
• E.g. Volunteering at a nursing home is the right thing to do.
• Possible answers for Kohlberg’s dilemma by children of Stage 3
• For stealing: Nobody will think you’re bad if you steal the drug but your family
will think you’re an inhuman husband if you don’t. If you let your wife die,
you’ll never be able to look anybody in the face again.
• Against stealing: It isn’t just the druggist who will think you are a criminal,
everyone else will, too. After you steal it, you’ll feel bad thinking about how
you’ve brought dishonor on your family and yourself. You won’t be able to
face anyone again.
 Stage #4: Law and Order Orientation

• While stage three actions are more concerned with pleasing your family,
stage four is associated with following society as a whole. Emphasis is
spent on obeying laws to maintain social order.EX: If you drink and drive
your endangering the lives of others on the road, not just yourself.
• Possible answers for Kohlberg’s dilemma by children of Stage 4
• For stealing: If you have any sense of honor, you won’t let your wife die
because you’re afraid to do the only thing that will save her. You’ll always
feel guilty that you caused her death if you don’t do your duty to her.
• Against stealing: You’re desperate and you may not know you’re doing
wrong when you steal the drug. But you’ll know you did wrong after
you’re punished and sent to jail. You’ll always feel guilty for your
dishonesty and lawbreaking.
 Stage #5: Social Contract Orientation

• At stage 4, people want to keep society functioning. However, a smoothly

functioning society is not necessarily a good one. Nazi Germany was a well
organized society, but nine million were murdered in the process.
• At stage 5, people begin to ask, "What makes for a good society?" They begin
to think about society considering the rights and values that a society ought to
uphold.
Possible answers for Kohlberg’s dilemma by children of Stage 5
• For stealing: The law wasn’t set up for these circumstances. Taking the drug in
this situation isn’t really right, but it’s justified to do it.•
• Against stealing: You can’t completely blame someone for stealing but
extreme circumstances don’t really justify taking the law in your own hands.
You can’t have everyone stealing whenever they get desperate. The end may
be good, but the ends don’t justify the means.
 Stage #6: Universal Ethical Principal Orientation

• As human beings we are obligated to live by the principal that “all men are created
equal” regardless of race, religion, sexual orientation, or political belief. Justice is
universal, so unjust laws must be broken.
• EX: Rosa Parks refused to sit in the back of the bus because it was an unjust law
discriminating against African Americans.
• Possible answers for Kohlberg’s dilemma by children of Stage 6
• For stealing: This is a situation which forces him to choose between stealing and
letting his wife die. In a situation where the choice must be made, it is morally right
to steal. He has to act in terms if the principle of preserving and respecting life.
• Against stealing: Heinz is faced with the decision of whether to consider the other
people who need the drug just as badly as his wife. Heinz ought to act not
according to his particular feelings toward his wife, but considering the value of all
the loves involved.
 Criticisms of Kohlberg’s theory
• Research has not supported Kohlberg’s belief that the development of abstract thinking in
adolescence invariably leads people to the formation of idealistic moral principles.
• Some cross-cultural psychologists argue that Kohlberg’s stories and scoring system reflect a
Western emphasis on individual rights, harm, and justice that is not shared in many
cultures.
• Kohlberg’s early research was conducted entirely with male subjects, yet it became the
basis for a theory applied to both males and females.
• Does moral reasoning necessarily lead to moral behavior? Kohlberg's theory is concerned
with moral thinking, but there is a big difference between knowing what we ought to do
versus our actual actions.
• Is justice the only aspect of moral reasoning we should consider? Critics have pointed out
that Kohlberg's theory of moral development overemphasizes the concept as justice when
making moral choices. Other factors such as compassion, caring, and other interpersonal
feelings may play an important part in moral reasoning.
• Does Kohlberg's theory overemphasize Western philosophy? Individualistic cultures
emphasize personal rights while collectivist cultures stress the importance of society and
community. Eastern cultures may have different moral outlooks that Kohlberg's theory
does not account for.
 Code of Ethics
All organizations, regardless of their mission (e.g., profit oriented, nonprofit) and size (large
vs. small), should establish an “Organizational Ethical Culture.” that means:

(1) Organization, which is defined as a group of individuals or entities bound to achieve a

shared goal;

(2) Ethics, which is honorable behavior conforming to the norm of the group;

(3) Culture, which is a pattern of shared beliefs adopted by the group in dealing with its
internal and external affairs.
 Ethical Dilemma :: What would you do?
 You are a strategic analyst at a successful hotel enterprise that has been
generating substantial excess cash flow.
 Your CEO instructed you to analyse the competitive structure of closely related
industries to find one the company could enter, using its cash reserve to build up a
substantial position.
 Your analysis suggests that the highest profit opportunities are to be found in the
gambling industry. You realise that it might be possible to add casinos to several of
your existing hotels, lowering entry costs into this industry.
 However, you personally have strong moral objections to gambling

Should your own personal beliefs influence your recommendations to the CEO?
 Ethical Delimma
• Does it Depend on the Situation?
• Situational Based Ethics -- what is the best possible outcome
• Rule Based Ethics --the rule is the rule, ignorance is no excuse
• People Based Ethics --the Golden Rule, Universally accepted

• No Right Answers
• Two equally honest and ethical people can come up with different
answers.
Criteria for Ethical Decision Making
Utilitarian approach – moral behavior produces the greatest
good for the greatest number
Individualism approach – acts are moral when they promote
the individual’s best long-term interests
Moral rights approach – moral decisions are those that best
maintain the rights of those affected, including free consent,
life and safety
Justice approach – decisions must be based on standards of
equity, fairness, and impartiality; (esp. important in HR
managment)
 Common Misconduct in Organizations
• Misrepresenting hours worked
• Employees lying to supervisors
• Management lying to employees, customers, vendors or the public
• Misuse of organizational assets
• Lying on reports/falsifying records
• Sexual harassment
• Stealing/theft
• Accepting or giving bribes or kickbacks
• Withholding needed information from employees, customers, vendors or
public
 Causes of Unethical Behavior
• Pressure
• Fear
• Greed
• Convenience
• Following boss’s directives
• Meeting overly aggressive business/financial objectives
• Helping the organization survive
• Meeting schedule pressures
• Be a team player (group think)
• Rationalizing that others do it
• Resisting competitive threats
• Advancing own career
Some business practices always considered
unethical and often illegal

Misleading advertising
Misleading labeling
Poor product or service safety
Harming the environment
Insider trading
Padding expense accounts
Dumping flawed products on foreign markets

But in many other cases, the law is unclear and all choices have
elements of both ‘right’ and ‘wrong’
 Ethics at Workplace
Business Ethics

 There is increased interaction between the board of

directors, audit committees, internal auditors, external
auditors, executives, and employees in general regarding
ethical conduct in the workplace.

 Business ethics are most simply described as: a process

of promoting moral principles and standards that guide
business behavior.
Survey on Ethics and Workplace
Findings of Deloitte&Touche 2007
Survey on Ethics and Workplace
Findings of Deloitte&Touche 2007
Survey on Ethics and Workplace Findings of
Deloitte&Touche 2007
Survey on Ethics and Workplace Findings of
Deloitte&Touche 2007
Survey on Ethics and Workplace Findings of
Deloitte&Touche 2007
 Ethics from Western Perspective
Ethics are broadly described in the literature as moral
principles about right and wrong, honorable behavior
reflecting values, or standards of conduct.
Honesty, openness, responsiveness, accountability, due
diligence, and fairness are core ethical principles.
Ethics are a branch of philosophy with no clear-cut
definition of what behaviors are ethical and which are
unethical when judging one’s behavior.
 There is no general or global consensus for defining
ethical behavior for individuals, as it may change from time
to time and from one place to another place.
There is no universal measure or standard as to what
constitutes ethical behavior.
How is Ethics Related to Economics
 Philosophers and writers viewed ethics as a matter of
choice.

 Individuals must make choices in their lives. This is

important to note—businesses don't make choices.
Choices are made or implemented by individuals within
the economic enterprise.

 People in government make choices, people in

educational institutions make choices, people in
businesses make choices, people with churches make
choices; everyone is forced to make choices, and even the
choice not to choose is a decision.
 Factors influencing the ethical behavior
Ethical problems may vary from one person to another
according to the factors influencing the Ethical Behavior:

Legal Interpretations: In secular societies, legal

interpretations are based upon contemporary values and
standards according to time, country or situation.

Organizational Factors: The organization too can affect or

influence participant’s behavior based on the degree of
commitment of the organization's leader conduct

Individual Factors: Individuals come to work with different

values based on the personal values and morals, family
influences, peer influence and life experiences.
 Examples of Ethical Issues
Ethical issues may vary from one organization to another
according to the factors influencing the Ethical Behavior:

 conflicts of interest,
 quality control issues,
 discrimination in hiring and promotion,
 misuse of proprietary information,
 abuse of company expense accounts,
 misuse of company assets,
 drug and alcohol abuse,
 environmental pollution, environmental destruction,
 etc.
 Ethics at Workplace
Business Ethics

 There is increased interaction between the board of directors, audit

committees, internal auditors, external auditors, executives, and employees in
general regarding ethical conduct in the workplace.

 Business ethics are most simply described as: a process of promoting moral
principles and standards that guide business behavior.
 Ethics is different from Religion.

Ethics is not synonymous with Law.

What is not Ethical Standards are different from Cultural Traits.

Business Ethics is different from Feelings.

Ethics?
Ethics is not Science in the strict sense of the term.

Ethics is not just a Collection of Values.

Business Ethics ...

Free
Law Ethics
Choice

Legal Standard Social Standard Personal Standard

A personal responsibility?
 Integrity.

Impartiality.
Code of
Responsiveness to the public interest.
Conduct and
Ethics for Accountability.
Managers
Honesty.

Transparency.
Why is Business Ethics Important?

Companies experience ‘social blowback’ when stakeholders

perceive that they have breached their deal with society

 Good business ethics is a prerequisite for good strategic

management