MIT102

Business Ethics
& Corporate
Governance

Kanchan Tolani
Course Content

– Unit I: Ethics an Introduction: Concept of ethics, Types of Ethics, Values & Ethics
– Meaning & Types of Values, Ethical Action–Morals, Morality, Moral
development pyramid, Beliefs & their Role. Business & its stakeholders. Social
Responsibility – Concept of CSR. Ecological Concerns – Air, Water, Land Pollution.
– Unit II: Ethical Decision Making: Normative Framework –Principle of personal
benefit, Principle of Social Benefit, Principle of Neutralization, Categorical
Imperative, Principle of Duty, Principle of Justice and Principle of Lawfulness.
Approaches / Theories of ethics –Kant's Deontological theory, Mill & Bentham's
Utilitarianism theory, Aristotle's Virtue based ethics – Case studies on
inspirational life stories of individuals.
Continued…

– Unit III: Business Organizational Ethics: Ethics in Business – Myth & Reality,
Need and Importance of Business Ethics, Approaches to Business Ethics, The
Indian Business scene; LPG & Global trends in business ethics, Code of Conduct
in Business, Ethical Dilemmas, Professional ethics.
– Unit IV : Corporate Governance : Objectives, issues, importance and principles,
Corporate Governance codes and practice, Structure and Process of Corporate
Governance, Cadbury report, CII recommendations, OECD Principle, Corporate
Governance & Investment – ethical investing, Insider trading, Case studies –
Tata Finance, Enron case & UTI case.
Continued…

– Unit V: Ethical Issues in Marketing & HRM: Introduction; Principles of Ethical

Marketing; Ethical approaches to buyer- seller relationship; Ethics in Pricing;
Ethics in product labelling and packing; Ethics in promotion; Social and Ethical
criticism of Advertising & Media, Ethics in personal Selling. HRM & Ethics;
Privacy Issues, Restructuring and layoffs and Whistle Blowing.
– Unit VI : Ethical Issues in Industry : Ethical issues in Production management
Services, Product Design, Features, Quality standards, Safety, Obligation to
inform consumer, Ford Pinto case; Ethics Audit – Formal committees, Auditing
Process.
Course outcomes

– Understanding of basic concept of Ethics, Values and morals.

– Understanding ethical decision making using deontological and teleological
approach.
– Knowledge of business ethics and its Indian scenario.
– Concepts of Corporate Governance and its Codes.
– Understanding of ethics in Marketing and HRM and its various issues.
– Knowledge of ethical issues in industry related to its operations and products.
Unit 1

– Ethics an Introduction: Concept of ethics, Types of Ethics, Values & Ethics –

Meaning & Types of Values, Ethical Action–Morals, Morality, Moral
development pyramid, Beliefs & their Role. Business & its stakeholders. Social
Responsibility – Concept of CSR. Ecological Concerns – Air, Water, Land
Pollution.
Definition

– Ethics or moral philosophy is a branch of philosophy that involves systematizing,

defending, and recommending concepts of right and wrong conduct for human
behavior.
Branches of ethics

– Applied ethics :- Deals with ethical questions specific to practical fields.Includes bio
ethics, legal ethics, business ethics, medical ethics etc. (“Is it ethical to allow
euthanasia?”)
– Normative ethics :- determines the correct moral standards or norms. ( “Is it wrong to kill
a person?”)
– Descriptive ethics :- deals with moral values of people or society. (“How many among you
think that it is wrong to kill a person?”)
– Meta-ethics :- analyzes the truth value associated with practices  (‘What is meant by
being right?’ OR ‘What is meant by being wrong?’)
– Modern ethics :- deals with deontological & consequential aspects of moral development
 Definition of Morals

– Morals are the social, cultural and religious beliefs or values of an individual or group which tells
us what is right or wrong. They are the rules and standards made by the society or culture which
is to be followed by us while deciding what is right. Some moral principles are:
– Do not cheat
– Be loyal
– Be patient
– Always tell the truth
– Be generous
– Morals refer to the beliefs what is not objectively right, but what is considered right for any
situation, so it can be said that what is morally correct may not be objectively correct.
Ethics

– Some ethical principles are:

– Truthfulness
– Honesty
– Loyalty
– Respect
– Fairness
– Integrity
 Distinction between morals & ethics
Basis for Comparison Morals Ethics

Morals are the beliefs of the individual or group as Ethics are the guiding principles which help the
Meaning to what is right or wrong. individual or group to decide what is good or bad.

What is it? General principles set by group Response to a specific situation

Root word Mos which means custom Ethikos which means character

Governed By Social and cultural norms Individual or Legal and Professional norms

Deals with Principles of right and wrong Right and wrong conduct
Applicability in Business No Yes

Morals may differ from society to society and

Consistency Ethics are generally uniform.
culture to culture.

Morals are expressed in the form of general rules

Expression Ethics are abstract.
and statements.

Freedom to think and choose No Yes

Key Differences Between Morals and Ethics

– The major differences between Morals and Ethics are as under:

– Morals deal with what is ‘right or wrong’. Ethics deals with what is ‘good or evil’.
– Morals are general guidelines framed by the society E.g. We should speak truth.
Conversely, ethics are a response to a particular situation, E.g. Is it ethical to
state the truth in a particular situation?
– The term morals is derived from a Greek word ‘mos’ which refers to custom and
the customs are determined by group of individuals or some authority. On the
other hand, ethics is originated from Greek word ‘ethikos’ which refers to
character and character is an attribute.
Continued…

– Morals are dictated by society, culture or religion while Ethics are chosen by the person himself which
governs his life.
– Morals  are concerned with principles of right and wrong. On the contrary, ethics stresses on right and
wrong conduct.
– As morals are framed and designed by the group, there is no option to think and choose; the individual
can either accept or reject. Conversely, the people are free to think and choose the principles of his life in
ethics.
– Morals may vary from society to society and culture to culture. As opposed to Ethics, which remains same
regardless of any culture, religion or society.
– Morals do not have any applicability to business, whereas Ethics is widely applicable in the business
known as business ethics.
– Morals are expressed in the form of statements, but Ethics are not expressed in the form of statements.
The setters of moral standards

– Traditions & conventions and inter-generational practices

– Various institutions, religion, social institutions setting norms
– Nomological axioms
– Knowledge, wisdom and experience
– family & friends
Kohlberg’s stage theory of moral
development
Inadequacies of the theory

– Sequential order may not be followed

– Stages may be skipped or may overlap
– It has discussed only male pattern of morality
Carol Gilligan’s theory of moral
development
– The famous story of dilemma, where a woman was suffering from a terminal disease,
and her husband, being unable to buy the only drug for his wife, was left with no option
but to steal the medicine, was used by Gilligan in the case study involving two children
Jake and Amy. The question asked to them was; should the husband named Heinz, steal
the medicine, or see his wife dying without the medicine. Jake gave a straight forward
answer; Heinz should steal the medicine to save his wife. He argued that value of
human life is far more than that of the medicine. Jake’s answer was clearly based upon
rationality. He even challenged the law against stealing as obstacle in the way of Heinz
stealing the drug. Amy’s answer to the same question put her one full stage lower than
that of Jake, as per Kohlberg’s criteria. Amy’s answer was unsure. She claimed that the
man should not steal the drug, but at the same time his wife also should not die. Her
argument was, should the man get caught while stealing would be jailed, and there
would be no one to take care of his ailing wife. She even emphasized that Heinz should
borrow money, negotiate on the price, to arrange for the medicine. Gilligan argues that
this difference in opinion between Jake and Amy is due to the fact that Amy, unlike
Jake, does not see the problem through the prism of rationality, rather care and love.
Ethical syllogism

– It is completely based on reasoning

– It states that universal moral standards with sound reasoning should form the
basis for ethics
– The inference or conclusion should be based logic
Ethical relativism & ethical
absolutism
– The need of both the theories
– Geographical & political relevance for the theories
Scope of ethics

– Ethics are related to character & human behavior

– The human ethics studied are voluntary in nature
– Ethics is a social science which gives you systematic knowledge of human
conduct
– Ethics are sets of ideal moral standard for social & human welfare
Principles of ethics

– Ego based principle

– Rule based principle
– End based principle
– Care based principle
Beliefs

– According to Lynne Rudder Baker

– Common sense has a huge role in accepting any belief
– Common sense helps immensely to apply ethics
– Common sense helps us to differentiate between right or wrong beliefs
– They help us form predictive actions
Formation of beliefs

– Commendatory belief :- from people we respect

– Existential belief :- based on belief in existence
– Beliefs adopted from role models
– Internalized beliefs
– Changed or cancelled belief
– Formed belief :- based on knowledge, research or commercials
Values

– Anything which has utility or worth

– A value is general belief which helps to differentiate between good & bad
– Values guide actions of an individual
Significance of value

– Value helps in building perception

– A clear premise helps a person to arrive at a flawless logical deduction
– It gives clarity of understanding in how to behave in certain situation
– Individual values vary from person to person depending upon their
understanding & kindness
Types of values

– Terminal values
– Personal values
– Egocentric value
– Socio-centric value
– Existential value
– Supernatural value
– Utilitarian value
– Consequentiality value
Continued …
– Religious values
– Economic values
– Social values
– Aesthetic values
– Political values
– Logical values
– Truth & non-violence
– Care & compassion
– Justice righteousness
– Kindness & sacrifice
Sources of values

– Parents and family

– Teachers & classmates
– Peer groups & friends
– Reference groups
– Culture & tradition
– Role model

– Value later on turn into ethics

Values & business

– Excellence in all fields

– Innovation in techniques
– Establishing credibility
– Providing consumers with best services
– Gathering market intelligence
– Maintaining internal & external coordination
– Creation & development of corporate values
Ecological concerns

– Poverty, resources & environment

– Economic growth & environment
– Global environment
– Impact of environmental pollution on human health
– Social cost of pollution
– Ethical issues in environmental pollution
– Management of environmental pollution
– Sustainable development
– Resolution of conflict
Global environmental issues
– Climate change
– Ozone layer depletion
– Acid rains
– Noise pollution
– Pollution of international waters
– Desertification of land
– Deforestation
– Soil erosion
– Radioactive pollution
– Loss of biodiversity
CSR- Corporate Social Responsibility

– Movement aimed at encouraging companies to be more aware of the impact of their

business on the rest of society, including their own stakeholders and the environment. 
– Corporate social responsibility (CSR) is a business approach that contributes to sustainable
development by delivering economic, social and environmental benefits for all
stakeholders.
– CSR is a concept with many definitions and practices. The way it is understood and
implemented differs greatly for each company and country. Moreover, CSR is a very broad
concept that addresses many and various topics such as human rights, corporate
governance, health and safety, environmental effects, working conditions and
contribution to economic development. Whatever the definition is, the purpose of CSR is
to drive change towards sustainability.
– CSR is the ethical behavior of a company towards society
– CSR refers to the obligations of the businessmen to pursue those policies, to
make those decisions or to follow those lines of actions which are desirable in in
the terms of objectives & value to our society (Bowen)
Types of social responsibilities

– Responsibilities towards government

– Responsibility towards society as whole
– Responsibility towards consumer
– Responsibilities towards shareholders
– Responsibilities towards employees
Code of conduct in business

– Towards law
– Towards company policy
– Towards fairness in working
– Towards internal & external customers
– For government
– By people holding higher positions