BUSINESS ETHICS AND

CORPORATE GOVERNANCE

UNIT-II
VIRTUE
Virtue ethics describes the character of a moral agent
as a driving force for ethical behaviour, rather than
rules (deontology) or consequentialism, which derives
rightness or wrongness from the outcome of the act
itself rather than character. For example, a
consequentialist may argue that lying is wrong
because of the negative consequences produced by
lying — though a consequentialist may allow that
certain foreseeable consequences might make lying
acceptable. A deontologist might argue that lying is
always wrong, regardless of any potential "good" that
might come from lying.
VIRTUE ETHICS
Aristotle is a pioneer of Virtue ethics.He strongly
advocated the good qualities of virtue ethics such as
comfortable nature,timeless and universal
application.Virtue ethics is primarily considering the
character,motivations and intentions of business
people.Virtue ethics reflects the excellence of human
character. Virtue ethics promotes professional
management with a human face.Virtue ethics
encourages a deontological approach by looking into
the right aspect in each and every situation.
APPLICATION OF VIRTUE ETHICS
1. Trust: confidence in the behavior of stakeholders and
there is no cost of monitoring.
2. Self-control: control of oneself from emotive behavior
and concerned with long term benefits.
3. Empathy: sharing the feelings of others,offering
courteous treatment to all and the ability to anticipate
the future events.
4. Fairness: Equitable dealing with others.
5. Learning: Gaining knowledge to make better decisions.
6. Gratitude: A sign of maturity,civility and decency.
7. Moral leadership: Attainment of peace mind,contented
heart and happiness.
ETHICAL DILEMMA
Ethical dilemma is a complex situation that will often
involve an apparent mental conflict between moral
imperatives, in which to obey one would result in
transgressing another. This is also called an ethical
paradox since in moral philosophy, paradox often
plays a central role in ethics debates.
The Ethical dilemmas are of two types:
1. Open: open type where the problem is open to
public and can be seen. For eg:-
theft,bribery,sabotage or espionage
2. Concealed: Concealed that is secret or not seen.
For eg:- capital investment or insider training, bad
HRM policies or corporate acquisitions and mergers.
Ethical Gap
The gap between society's expectations and actual
business ethics operated in a firm is called ethical
gap. The growth of awareness, role of media and
the spread of education are the important factors
contributing to the ever increasing expectation of
the consumers. Though the level of business ethics
is higher, there is no matching growth between the
society’s expectations and business ethics practices
of the business.
 Y
 
 

Levels of
Business ethics Ethical Gap
 

 
O X
Time
ETHICAL GAP ANALYSIS
Ethical leadership
Ethical leadership is leadership that is involved in leading in
a manner that respects the rights and dignity of others. “As
leaders are by nature in a position of social power, ethical
leadership focuses on how leaders use their social power in
the decisions they make, actions they engage in and ways
they influence others”. Leaders who are ethical
demonstrate a level of integrity that is important for
stimulating a sense of leader trustworthiness, which is
important for followers to accept the vision of the leader..
A Model for Leadership
There are four important variables in leadership, namely
the leader, the follower, the leadership skills and the
situation.

Leader Followers

Leadership Skills Situation

Three Types of Leadership
There are three types of leadership, namely amoral
leadership, value- based leadership and ethical
leadership.
1. Amoral Leadership:-An amoral leader is more
concerned with the achieving of goals than with the
ethical values. He is neutral to ethical values. Amoral
leadership is not accepted by ethical and value-based
societies.
2. Value-based Leadership:-This type of leadership is
bridging the gap between ethics, values and
leadership. Values are taken as the basis of leadership.
3.Ethical Leadership:-John William Gardner states that
an ethical leader should have the following minimum
objectives:
a) Realising the human potentials.
b) Balancing the individual needs with the
organisational needs.
c) Defending the fundamental values of the
organisation.
d) Installing a sense of initiative and responsibility in
individuals.
Tasks of Ethical Leadership
The following are the important tasks of ethical leadership.
1. A good ethical leader should use sound moral judgement.
2. The ethical leader articulates the purpose and values of
the organisation.
3. The ethical leader should be able to connect ethics with
business.
4. The ethical leader should be able to find the best people
and develop them.
5. Ethical leader should consider change as an opportunity.
6. An ethical leader shows that ego and pride can prevent
the growth of any business.
Transactional Leaders and
Transformational Leaders
1. A transactional leader is only interested in the day-to-day
transactions. He is independent and thinks only about the nature
and volume of transactions.On the other hand,a transformational
leader is independent in the sense that he cares for other
stakeholders including the immediate colleagues and customers.
2. A transactional leader is trying to protect the individual rights
while a transformational leader is meeting social obligations.
3. The transactional leader has pragmatic goals while a
transformational leader has idealistic goal.
4. The transactional leader somehow wants to achieve the results not
very much bothering about the means.In this way,he believes that
ends justify the means.But a transformational leader has a
deontological orientation,namely the means justify the ends.
5.Social contract is the behaviour strategy of
transactional leader.On the other hand,inactivation of
personal virtues and empowerment of others is the
behaviour strategy of transformational leadership.
6.The nature of ethics of transactional leadership is to
emphasise on purpose and particulars.On the other
hand,the nature of ethics of transformational
leadership is to emphasise on duty and universals.
Power of Leaders
Leaders have power and influence.Power refers to the
influence that leaders are having over their colleagues and
subordinates.
1. Expert Power:-This refers to a person’s knowledge in a
particular field.The credibility may come from
knowledge,education,experience and exposure.An
experienced advocate in a law firm influences others by
his expert power in dealing with different cases.
2. Referent Power:-This power refers to the understanding
that both are benfitted by an action.In other words,the
goals of both the persons and department are the same.
Functions of an Ethical leader
A good leader has to build the team as a cohesive group and to develop the best of
each and every individual.
The following are the funtions of an ethical leader.
Task Needs
 Defining the task
 Making the plan
 Allocating work and resources
 Controlling quality and tempo of work
Group Needs
 Setting standards
 Maintaining discipline
 Building team spirit
 Encouraging and motivating the group
 Better and continous communication
 Constant training for the group
Individual Needs
Attending and solving personal problems
Appreciating the individuals
Counseling when there is a need
Whistle Blowing
Whistle blowing is defined as “the attempt of an employee or former
employee of an organisation to disclose what he or she believes to be
wrong doing in or by the organisation.” Whistle -blowing can be
internal,external,personal and impersonal.
JUSTIFICATION OF WHISTLE-BLOWING
There are certain situations when the whistle blowing can be
justified.There are:
1. Whenever and whereever the product/service of the firm will cause
considerable harm to the public.
2. Whenever an employee feels serious threat or harm to him or anybody
he should report to the firm.
3. Before reporting any subject an employee should have documental
evidence which should convince an impartial observer about the
necessity of whistle blowing.
4. If an immediate boss does not care for report (whistle blowing) the
employee should go up to the highest level to present his case.
5.There is always some risk involved in whistle blowing.
Wrong types of Whistle Blowers
There are certain types of whistle blowers who do it on false
accusations and with ill intentions.
1. In case of disclosing business secrecy,inventions,future plans
and some specific specialised practices which may be
confidential and of exclusive company usage.
2. Whenever an employees remarks are irrelevant to the
organisations work and product.
3. In case of wrong accusations which cannot be proved and
which are made in vengeance only end up demoralizing the
employees.
4. When an employee is complaining against transfer,demotion
or discharge when such action is taken on the basis of routine
performance appraisal.
Precautions before Whistle Blowing
Whistle blowing has consequences of
moral,legal,personal,economic,family and career demands.
 Be clear about your intentions and likely consequences.
 Compile documents to support your case.Do not depend upon
hearsay.
 Allegations should be stated appropriately with documents and to
be sent to the right person/position.
 Preferably take the internal route.If it does not work then try
external route.
 Whistle blowing can be done openly or anonymously.
 Decide if it is appropriate to take action immediately,after
sometime or later or during the service.
 Consult a lawyer about possible legal battle and defence
mechanism.
Actions to prevent Whistle Blowing
The following action will reduce or prevent external
whistle blowing.
1. Create an effective internal grievance system so that
both present and past employees have no reasons to
complain.
2. Appreciate employees and even adopt reward system
for solving problems through grievance redressal
system.
3. Keep special officers in each unit to study and evaluate
wrong doings by various employees.
4. Punish with heavy fines or retrenchment of employees
who indulge in unlawful and corrupt practices.
Trade Secrets
“Proprietary information” or “Trade secrets” consist of
nonpublic information that
a) Concerns a company’s own activities,technologies,future
plans,policies,or records and that if known by
competitors would materially affect the company’s
ability to compete commercially against those
competitors;
b) Is owned by the company(although it might not be
patented or copyrighted) because it was developed by the
company for its private use from resources it owns or was
purchased for its private use from others with its own
funds;
c)The company indicates through explicit directives,security
measures,or contractual agreements with employees that it
does not want anyone outside the company to have that
information.
For example,if a company,using its own engineering and
laboratory resources,develops a secret process to
manufacture computer diskettes that can carry more
computer data than any other company’s disks,and it takes
explicit measures to ensure that process is not known to
anyone else,detailed information about that process is a
trade secret.
THANK YOU