2 Those who listen to the word and

follow the best thereof, those

are whom Allah has guided and
those are men of
understanding
39:18
 Business Ethics
 Some timeless insights
 Definition
 Daily occurrences of ethical dilemmas
 Competitive advantage of ethical organizations
 Managing morally imperfect people
 What is the extent of unethical behaviors at work
 What type of organizations and operational areas
have ethical problems
3
 Business Ethics
 Why do good people behave unethically
 What are the costs of unethical behavior
 What is human nature

4
SOME TIMELESS
INSIGHTS
It's your attitude, not your
aptitude that will
determine your altitude in
life".
 SOMEONE WILL ALWAYS BE
LOOKING AT YOU AS AN
EXAMPLE OF HOW TO BEHAVE.
DON’T LET HIM DOWN

7
 DON’T DISMISS A GOOD IDEA
SIMPLY BECAUSE YOU DON’T
LIKE THE SOURCE

8
 REMEMBER THAT EVERYONE IS
INFLUENCED BY KINDNESS

9
 SUCCEED AT HOME FIRST

10
 FACILITATE THE SUCCESS OF
YOUR SUBORDINATES

11
BUSINESS ETHICS
 introduction
• No ethics in the society, even in the so
called ethical societies
• Friedman’s Vs Freeman’s Philosophy
• Ronald Regan/ Margret Thacher
• Corporate Scandals
Introduction
• Public’s interest in business ethics
increased during the last four decades
• Public’s interest in business ethics spurred
by the media

14
Ethics

Ethics are standards of right &

wrong that influence behavior.
Right behavior is considered ethical,
& wrong behavior is considered
unethical.

It is major concern to both managers

& employee.
15
 “Ethics is about how we meet
the challenge of doing the
right thing when that will cost
more than we want to pay”

1-16
Sources of Ethical Norms
Fellow Regions of
Culture
Workers Country

Family Profession
The
Individual
Friends Employer
Conscience

The Law Religious Society at

Beliefs Large
17
Fellow Workers
Family
Friends
Regions of Country
Profession
Employer
Society at Large
Religion

• It is one of the oldest foundations of ethical

standards. Religion wields varying
influences across various sects of people. It
is believed that ethics is a manifestation of
the divine and so it draws a line between the
good and the bad in the society
Religion

• Depending upon the degree of religious

influence we have different sects of people;
we have sects, those who are referred to as
orthodox or fundamentalists and those who
are called as moderates and liberals.
Needless to mention, religion exerts itself to
a greater degree among the orthodox and to
lesser extent in case of moderates.
Religion

• Fundamentally however all the religions

operate on the principle of reciprocity
towards ones fellow beings!
Culture
Culture is a pattern of behaviors and values that
are transferred from one generation to another,
those that are considered as ideal or within the
acceptable limits. No wonder therefore that it
is the culture that predominantly determines
what is wrong and what is right. It is the
culture that defines certain behavior as
acceptable and others as unacceptable.
Culture
• Human civilization in fact has passed
through various cultures, wherein the moral
code was redrafted depending upon the
epoch that was. What was immoral or
unacceptable in certain culture became
acceptable later on and vice versa.
Culture
• During the early years of human development
where ones who were the strongest were the
ones who survived! Violence, hostility and
ferocity were thus the acceptable.
Approximately 10,000 year ago when human
civilization entered the settlement phase, hard
work, patience and peace were seen as virtues
and the earlier ones were considered otherwise.
Culture
• These values are still put in practice by the
managers of today!
• Still further, when human civilization witnessed
the industrial revolution, the ethics of agrarian
economy was replaced by the law pertaining to
technology, property rights etc. Ever since a
tussle has ensued between the values of the
agrarian and the industrial economy!
Law
• Laws are procedures and code of conduct that
are laid down by the legal system of the state.
They are meant to guide human behavior
within the social fabric. The major problem
with the law is that all the ethical expectations
cannot be covered by the law and specially
with ever changing outer environment the law
keeps on changing but often fails to keep pace
Law
• In business, complying with the rule of law
is taken as ethical behavior, but
organizations often break laws by evading
taxes, compromising on quality, service
norms etc.
Law
• Rules and regulations ought to be same
for everyone. Everyone needs to attend
office on time irrespective of their
designation, distance of their home from the
workplace, salary or status. An individual
cannot come to office late just because he is
the team leader and his team is already
present and working on his behalf.
Law
• If a day’s salary of a clerk is deducted for coming
late to work, it should be the same for the
marketing manager as well.
• Company’s policies need to be communicated
clearly to each and every one. There should be
transparency at all levels of hierarchy. Employees
are the backbone of any organization and thus
they must have a say in company’s goals and
objectives.
Law
• An organization ought to respect its
employees to expect the same in return.
Rules and regulations should not be too
rigid. Don’t expect an employee to attend
office two days before his marriage date. If
an employee is not well, please do not ask
him/her to attend office unless and until
there is an emergency.
Law
• Management must not forget that money is
a strong motivator for employees.
Everything is important, be it career,
growth, job satisfaction but what is most
important is employee’s salaries. Do not
unnecessarily hold their salaries for a long
time unless and until there is really shortage
of funds.
Law
• In case of marketing and sales employees,
conveyance and mobile bills must be cleared at
the earliest. Do not ask for unnecessary bills and
documents.
• Organization should not expect employees to
attend office 365 days a year. It is the
responsibility of human resource professionals to
prepare the holiday calendar at the beginning of
the year and circulate the same.
Law
• Let employees enjoy their respective festivals
and come back to work with positive energy and
smile. Infact allow them to go in the festive
mood two days prior to the D day. Ask them to
organize pre festival bashes at the workplace. Let
them dress in colourful attires and have fun.
Trust me, work never suffers this way. Rather,
employees feel attached to the organization and
strive hard to deliver their level best every time.
Law
• Give employees the space they require. Key
responsibility areas need to be communicated
to the employees on the very first day of their
joining. Roles and responsibilities need to be
assigned as per an individual’s expertise and
experience. Do not expect an employee with
one year experience to head the marketing
team. Employees need to be trained well.
Law
• Give employees the space they require.
Organizations need to give at least six
months time to the new employees to adjust
in the new environment.
• It has been observed that most of the times
employees crib when they are underpaid.
Make sure employees get what they
deserve.
Law
• Salaries should be decided in the presence
of the employee and also keeping in mind
an individual’s role in the organization,
his/her gross salary in the previous
organization, responsibilities within the
current system and of course his/her years
of experience.
Law
• One of the major reasons as to why
employees quit their jobs after a year or so
is poor appraisal system. Increments ought
to be directly proportional to the amount of
hard work an employee puts in through out
the year and also his/her performance.
Unnecessary favours are against the
workplace ethics.
Law
• Do not be too strict with your employees. Do
not block all social networking sites. Blocking
face book and Whatsapp is not the ideal way to
ensure employees are working and not wasting
their time. Even a 24 * 7 check would not
prevent employees from wasting their time
unless and until they realize it themselves. The
moment, you are strict with something, people
would tend to do the same more
Law
• Give employees the space they require.
• It has been observed that most of the times employees crib when they are underpaid.
Make sure employees get what they deserve.
• Salaries should be decided in the presence of the employee and also keeping in
mind an individual’s role in the organization, his/her gross salary in the previous
organization, responsibilities within the current system and of course his/her
years of experience. One of the major reasons as to why employees quit their jobs
after a year or so is poor appraisal system. Increments ought to be directly proportional
to the amount of hard work an employee puts in through out the year and also his/her
performance. Unnecessary favours are against the workplace ethics.
• Do not be too strict with your employees. Do not block all social networking sites.
Blocking face book and Orkut is not the ideal way to ensure employees are working
and not wasting their time. Even a 24 * 7 check would not prevent employees from
wasting their time unless and until they realize it themselves. The moment, you are
strict with something, people would tend to do the same more
 Public’s Opinion of Business Ethics

• Gallup Poll finds that only 17 percent to 20

percent of the public thought the business
ethics of executives to be very high or high
• To understand public sentiment towards
business ethics, ask three questions
– Has business ethics really deteriorated?
– Are the media reporting ethical problems more
frequently and vigorously?
– Are practices that once were socially acceptable no
longer socially acceptable?

46
Action sequence
A CASE STUDY
The battle over dividends: Dodge versus Ford Motor Co.
Henry Ford stopped paying special dividends to his stockholders and his
Ford Motor Company amassed a cash surplus of $60 million. Ford
announced his intention to use this extra cash to build more plants to
increase output, while increasing worker pay and cutting prices for
consumers. “My ambition is to employ still more men, to spread the
benefits of this industrial system to the greatest possible number, to help
them build up their lives and their homes,” Ford said. “To do this we are
putting the greatest share of our profits back in the business.” The
company’s stockholders didn’t necessarily agree with Ford’s vision and
two of them , John and Horace Dodge sued Ford Motor Company to
force it to resume paying special dividends. The case made it to the
Michigan Supreme Court. What can be the likely outcome?
A CASE STUDY
The Michigan Supreme Court refused to
interfere in Ford’s expansion plans but
upheld a lower court ruling and ordered the
release of $19 million in special dividends
to stockholders. Notably, the court said, “A
business corporation is organized and
carried on primarily for the profit of the
stockholders.
A CASE STUDY
The powers of the directors are to be employed for
that end . . .” But the court also noted that
directors have discretion “to be exercised in good
faith” to use their best judgment in deciding on
“the infinite details of business, including the
wages which shall be paid to employees, the
number of hours they shall work, the conditions
under which the labor shall be carried on, and the
prices for which products shall be offered to the
public.”
A CASE STUDY
The Dodge brothers used the money they
earned from their Ford shares to start their
own automotive company, the Dodge
Brothers Company — now a part of
Chrysler.
DO LEGAL AND ETHICAL HAVE
SAME MEANING?
Ethics and the Law
• Law often represents an ethical minimum
• Ethics often represents a standard that
exceeds the legal minimum
Frequent Overlap

Ethics Law

53
Does Ethical Behavior Pay?
• Enron’s unethical behavior cost many
organizations & people great deal of money
directly, but it also hurt everyone in stock market,
& general economy
• Enron is no longer company it was, & its auditor
Arthur Andersen lost many of its clients & had to
sell parts of its business due to unethical behavior.
• From individual level, you may say that former
Enron CEO Kenneth Lay & other made millions
for their unethical behavior but what use when
they were in jail?
Does Ethical Behavior Pay?
• Crescent Bank, Altaf Saleem
• Mehran Bank Scandal
• Bank of Punjab Scandal
• Chairman OGRA
 Daily occurrence of ethical
dilemmas
• Starting the day
• Arriving late at work and ending with
unfinished tasks
• Dealing with people
• Traffic issues
• Treating everyone at home
What is an ethical
organization?
 Competitive advantages of
Ethical Organizations
– Attract and retain high quality employees
– Attract and retain high quality customers
– Attract and retain high quality suppliers
– Attract and retain high quality investors
– More reliable information
– Higher product quality
– Need less employee supervision
Managing Morally Imperfect People

• Average human being is good but not saint

• Manager has to take care of inputs from all
stakeholders
• One unethical/illegal decision can ruin
reputation or result in litigation
 What is the Extent of Unethical
Behaviour at Work
• 67% CFOs forced to misrepresent corporate
results
• 25% middle managers write fraudulent reports
• 75% employees reported stealing once
• 33% employees calling sick otherwise
• 65% MBA students cheated on class assignment
during previous year
• Most common types of misconducts
 What Types of Organizations and
Operational Areas have Ethical
Problems?
• Every organization, every operational area
• Can arise in most admired organizations
like Xerox fined for racial discrimination
 Why do good People Behave
Unethically?
• Insufficient knowledge and awareness
• Following the boss’s directives
• Meeting aggressive business or financial
objectives
• Helping organization to survive
• Meeting scheduled pressures
• Wanting to be team player
 What is Human Nature
• Social philosophers- neither good nor bad
• Psychologists- babies born with natural
desire to experience happiness
– Ways to pursue pleasure can be ethical or
unethical
– Other influences
• Islamic perspective
What babies know about right
and wrong
 Research at Yale University’s Infant
Cognition Center indicates that even very
young children have a rudimentary sense
of right and wrong. Infants and toddlers act
on their sense of morality more often than
you might expect.
What babies know about right
and wrong
 In one experiment, 1-year-olds watched a
puppet show in which one puppet slid a
ball to other puppets. One of the other
puppets returned the ball, but the third
puppet took the ball and ran away. After the
show, researchers placed the puppets in
front of the children with a pile of treats
next to each puppet.
What babies know about right
and wrong
• Researchers then asked the children to
take away a treat from one of the puppets.
The children almost always took the treat
from the “naughty” puppet, the one who ran
away with the ball. One little boy even took
the treat and then smacked the naughty
puppet’s head.
What babies know about right
and wrong
• Other experiments have shown that babies
as young as 5 months old almost always
prefer a character who helps another
character and shun a character who
hinders another. They also prefer a neutral
character to one who hinders another.
What babies know about right
and wrong
• And, perhaps most striking, when children
watch a “bad guy” being either rewarded or
punished for his behavior by another
character, they almost always prefer the
character who punishes the “bad guy.”
HOW TO AVOID SSLIPPERY SLOPE
✓ Communicate the company’s values to
employees in regular communication
vehicles, such as employee newsletters.
✓ Reward employees for outstanding ethical
behavior.
✓ Protect and reward employees who speak
up against unethical behavior.
HOW TO AVOID SSLIPPERY SLOPE
✓ Apply punishments fairly, without regard to
whether the offender is a high performer.
✓ Stress long-term sustainability over short-
term performance measures.
✓ Be as transparent as possible in all facets
of the company’s operations, including
those related to finances
71
 ‫ن‬
‫پ اکست ان ز دہ ب اد‬
THANK YOU VERY MUCH
ANY QUESTION?
 SOMEONE WILL ALWAYS BE
LOOKING AT YOU AS AN
EXAMPLE OF HOW TO BEHAVE.
DON’T LET HIM DOWN
 DON’T DISMISS A GOOD IDEA
SIMPLY BECAUSE YOU DON’T
LIKE THE SOURCE
 DO NOT LET A LITTLE DISPUTE
INJURE A GREAT FRIENDSHIP

74
 DO YOUR HOMEWORK AND KNOW
YOUR FACTS BUT REMEMBER IT IS
PASSION THAT PERSUADES
 OVERESTIMATE TRAVEL TIME BY 15
PERCENT
 WHEN YOU SAY, “I AM SORRY,” LOOK
THE PERSON IN THE EYE
 OBTAIN COUNSEL OF OTHERS

75
 PRAY. THERE IS IMMEASURRABLE
POWER IN IT
 REMEMBER THAT EVERYONE IS
INFLUENCED BY KINDNESS
 SUCCEED AT HOME FIRST
 HEAR BOTH SIDES BEFORE JUDGING
 DEFEND THOSE WHO ARE ABSENT

76
 PLAN TOMORROW’S WORK TODAY
 MAINTAIN A POSITIVE ATTITUDE
 CULTIVATE A SENSE OF HUMOUR
 BE ORDERLY IN PERSON AND IN WORK
 DO NOT FEAR MISTAKES – FEAR ONLY
THE ABSENCE OF CREATIVE AND
CONSTRUCTIVE RESPONSES TO THOSE
MISTAKES

77