Books

Sr. No Author/s Name of the Publisher Edition

Book &
Year of
Publica
tion
T-01 A.C. Business Pearson 2nd
Fernando Ethics and edition,
Corporate 2012
Governance
T-02 Daniel Business Oxford 2010
Albuquerqu Ethics: University
e Principles Press
and practice
 Reference Books
S. Author/s Name of the Book Publisher Edition
No.

R-  Murthy, CSV Business Ethics Himalaya Ist edition,

01 and Corporate Publishing 2017
Governance

R- SK Mandal Ethics in Business Tata McGraw 2nd

02 and Corporate Hills edition,2012
Governance

R- Ferrell, Fraedrich, Business Ethics Cengage Learning 11th

03 Ferrell edition,2017

R- Rupani, Riya Business Ethics Himalaya 4th edition,

04 and Corporate Publishing 2015
Governance
 Evaluation
Weightage

A Continuous Evaluation Component 20% (C.E.C.)

(Assignments/Presentations)

B Internal Assessment 30% (I.A)

C End-Semester Examination 50% (External

Assessment)
 Module 2
Ethical Dilemma
• Ethical Dilemma and Essence of Decision Making
• Ethics Meaning and structure of Ethical Dilemma in business,
• Sources of Ethical Problems,
• Managing Ethical Dilemmas;
• Understanding Decision making,
• Model of Cognitive Moral Development,
• The Process of Making Good Ethical Decision;
• Dynamics of Ethical Leadership.
ETHICAL DILEMMA
 Quality or Quantity: When Incentives Don’t
Match Your Values
Frank, a recent Santa Clara University graduate, landed a sales job for
a Silicon Valley tech company. He is part of a team that qualifies sales
opportunities. After talking to potential customers, Frank decides
whether or not they are quality leads. If they are, he refers them to an
account executive (AE) to close the deal, saving the company precious
time and money in avoiding low probability contracts. If not, he will
not pass them on and the sales opportunity is not pursued.

Account executives (AE) expect prescreening of potential leads in

order to maximize their time. Each referral Frank passes to the AE is
added to a tally that counts toward his target monthly total, and there
is a monetary bonus for all sales staff members who reach their
monthly quota.
This creates some controversy among Frank's team members, who are
faced with conflicting incentives; pass on low quality leads to hit your
quota, or focus on quality and risk missing the monthly target. The
pressure to "hit your number" comes from both the monetary incentive
and management, who benefit when their sales team hits their quotas.
To further complicate matters, since each sales representative self-
reports how many leads they passed along, they can inflate their
numbers in order to reach the monthly target goal: a common
occurrence among Frank's coworkers.

As Frank tries to adjust to his new job, he is finding it difficult to

balance his own moral compass with the pressure of hitting his
monthly number.

Reference: Rickling, N. (2013). Quality or Quantity: When Incentives Don’t Match Your Values. Markkua Center for Applied
Ethics, Santa Clara University
Immoral Management
 Immoral management not only lacks ethical principles but also is actively opposed to ethical behaviour.
This perspective is characterized by principal or exclusive concern for company gains, emphasis on
profits and company success at virtually any price, lack of concern about the desires of others to be
treated fairly, views of laws as obstacles to be overcome, and a willingness to "cut corners".
Moral Management
 In contrast to immoral management, moral management strives to follow ethical principles and
percepts. While moral managers also desire to succeed, they seek to do so only within the parameters of
ethical standards and the ideals of fairness, justice, and due process. As a result, moral managers pursue
business objectives that involve simultaneously making a profit and engaging in legal and ethical
behaviours.
Amoral Management
 The amoral management approach is neither immoral nor moral but, rather, ignores or is oblivious to
ethical considerations. There are two types of amoral management:
 Intentional: Amoral managers do not include ethical concerns in their decision -making, or
behaviour, because they basically think that general ethical standards are more appropriate to other
areas of life than to business.
 Unintentional: Amoral managers also do not think about ethical issues in their business dealings,
but the reason is different. These managers are basically inattentive or inactive to the moral
implications of their decision-making, actions, and behaviour.
Overall, amoral managers pursue profitability as a goal and may be generally well meaning, but
intentionally or unintentionally they pay little attention to the impacts of their behaviours on
others.
Ethical Dilemma

 An Ethical Dilemma is a moral situation in which a choice has to be made

between two equally undesirable alternatives. Dilemmas may arise out of
various sources of behaviour or attitude, as for instance, it may arise out of
failure of personal character, conflict of personal values and organizational
goals, organizational goals vs social values, etc.
 A Business Dilemma exists when an organizational decision maker faces a
choice between two or more options that will have various impacts on the
organization’s
 profitability and competitiveness and
 its stakeholders.
Eg: news reporters may willingly hide a sacrilege a mob committed in a place
of worship if they feared that it would result in a communal frenzy and
mass slaughter.
 SHARE HOLDER

SOCIETY
EMPLOYEE

Ethical dilemmas in business can best be explained by the above triangle with
the stakeholders as its vertices. The stakeholders in this case can be broadly
classified into shareholders, employees and the society at large.
Structure of Ethical Dilemma
Sources of Ethical Problems
 I. Failure of Personal Character
People whose personal values are not desirable may embezzle funds, steal
supplies from the company, take unjustified leave, shirk obligations to fellow-
workers, take bribes for favoring suppliers use inside information for their
personal benefit and to the detriment of others.

II. Conflict of Personal Values and Organizational

Goals

• The company uses methods or pursues goals unacceptable to the

manager.

Reported case: George Couto, an employee of Bayer AG, exposed that Bayer AG
used to re-label Cipro and sell it to another pharmaceutical company, Kaiser
Permanente, with a different identification number so that it could claim more
money from the Medicaid programme.
 III. Organizational Goals Versus Social Values
Johnson & Johnson cleared all retail shelves of its Tylenol analgesic within days
of the discovery that some containers have been poisoned.
https://www.youtube.com/watch?v=jtuvgAkKGqM

IV.Personal Beliefs Versus Organizational Practices

Ethical dilemmas in organizations arise when they employ multi-racial and
multi-religious employees. Several organizations are accused of racial
discriminations and gender bias in the work place and have been paying fines of
billions of dollars or opting for out-of-court settlements https://www.youtube.com/watch?v=cwtl93lJyHM
https://www.youtube.com/watch?v=6TJa3_F0Ldw

V. Production and sale of hazardous but popular products

• Where does the ethical burden lie, when business sells products known to be
actually or potentially harmful to society?

• Is the principle of caveat emptor in mercantile law to be adapted suitably?

• Should individual rights and free choice override social costs.
•
 VI. Other Ethical Challenges
•Price fixing and profiteering due to monopoly, and often by artificially created
scarcity.
•Shifting unfair shares to the producer stakeholders and employees.
•Discriminatory wage structure.
•Using up too fast, scarce and irreplenishable industrial resources and
raw materials.
•Shifting or locating business at the cost of society.
• Overtime working women and children in factories.
Managing Ethical Dilemmas
Organizations have started to implement ethical behaviour by the
following actions:

• publishing in-house codes of ethics

• employing people with a reputation for high standards of
ethical behaviour at the top levels
• Starting to incorporate consideration of ethics into
performance reviews
• Starting to reward ethical behaviour
• Conducting an ethics audit
 Code of Personal Ethics for Employees

Most company codes list the following values being expected from
their employees:
• Respect confidential information to which you have access.
• Maintain high standard of professional responsibility.
• Avoid being placed in situations involving conflict of interest.
• Act with integrity.
• Do not be biased against anybody or anything.
• Maintain professional relations based on mutual respect
for individuals and organizations
• Be committed to the goals of the organization.
• Do not give up your individual professional ethics
 How to Create an Ethical Working
Environment?
• Make the decision to commit to ethics.
• Recognize that you are a role model by definition, by your action, and
by
your values.
• Assume the responsibility for instilling ethical behaviour.
• Articulate your values.
• Train your staff.
• Encourage open communication.
• Be consistent.
• Abide by the laws of the land
 RESOLVING ETHICAL DILEMMAS

Two approaches in resolving ethical dilemmas:

Teleological (result oriented) –The moral character of actions

depends on the extent to which actions actually help or hurt
people. Actions that produce more benefits than harm are ‘right’.

Deontological (action oriented) - the rightness or wrongness of an

action based on properties intrinsic to the action, not on its
consequences
 RESOLVING ETHICAL DILEMMAS
1. ANALYSE THE CONSEQUENCES
One should find answers to questions like who all will likely benefit/be harmed
from the action. What is the nature of ‘benefits’ & ‘Harms’.

2. ANALYSE THE ACTIONS

Analyze how the proposed actions measure against moral principles such as
‘honesty, fairness, equality etc.

3. MAKE A DECISION
Analyze the options carefully and make a rational decision.
A FRAMEWORK OF ETHICAL DECISION MAKING

Michael Josephson has constructed the following components of good

choices:

1. Take Choices Seriously

2. Good Decisions are both Ethical and Effective

3. Discernment (the ability to judge well) and Discipline

 The Process of Making good Ethical Decisions
Recognise and identify the kind of ethical issue you need to resolve
Recognise the ethical issue; seek answers to questions such as the nature of
the issue, the conflict it has raised and how the decision would impact the
larger community.

 Pause and Think

Pause for sometime on the ethical issue; think ahead, reflect on the consequences
that are likely to follow.

 Make Sure of Your Goals

Be clear on goals, both short-term and long-term, weigh options clearly

 Get Your Facts Right

• Gather all facts concerning the issue
• Verify the uncertain facts
• Get additional information
 Evaluate choices from Different Ethical Perspectives
• Make a list of options that attempts to accomplish the goal.
• Test each option against various ethical perspectives such as rights,
justice, virtue
or common good
• Find out which option will produce the most good and do the least
harm to
others.

 Consider the Consequences

• Ensure that there is no unethical option
• See that your option is consistent with all core ethical values
• Analyse the possible consequences of each of the options for each
stakeholder
• Ensure that the end result causes more good than any harm
 Make a Decision
Prepare a criteria derived from the facts gathered. Create a decision
criterion including the financial outcome, if any. Rate the appropriate action
against your list of criteria. Talk to a person whose judgment you respect.

 Act, and then Reflect on the Decision Later

• Implement the decision
• Evaluate the consequences.
 Moral
Decision(s)

Moral
Manager(s)

Moral
Organization
 CASE

 Assume that you are the Personnel Director for a

manufacturing firm that is undergoing a major change in
direction. The change involves the hiring of young, energetic
workers and you have some difficult decisions to make. The
firm is building two new technologically advanced plants and
it will close four of its old plants out of five. Rattan is a 56
year old production worker who has been with your firm for
10 years. In your opinion, he is not fit being retained, but he
is not old enough to be sent out with any retirement benefits.
 You must decide whether to place Rattan in the only
remaining old plant the company has left or fire him
Influences (Factors) on Ethical Decision
Making
 Three major influences that have an impact on employees’
decision making in business
 Personal Moral Standards
 Trustworthiness
 Respect
 Responsibility
 Fairness
 Caring
 Citizenship
 Work place ethics
 Nature of Ethical issues
Managing Organizational Ethics
Factors Affecting the Morality of
Managers
Society’s Moral Climate
Business’s Moral Climate
Industry’s Moral Climate

Superiors
Superiors
Policies
Policies

Individual
Individual
(One’s Peers
(One’spersonal
personal Peers
situation)
situation)
Improving Ethical Climate

Ethics Effective
Ethics
Programs Communic
Audit
& Officers ation

Realistic
Objectives
Top
Ethics
Managem
Training
Ethical ent
Decision- Leadersh
making ip
Processes
Whistle-
Discipline blowing
Codes of Mechanism
of
Conduct s
Violators
(“Hotlines”
)
Common Causes of Unethical Behavior

 Pressure
 Fear
 Greed
 Unethical Behavior of superiors
 Following boss’s directives
 Unethical Behavior of one’s peers in the organization
 Formal organizational policy (or lack of one)
 Helping the organization survive
 Meeting schedule pressures
 Pressure of overly aggressive business/financial objectives
 Advancing own career
 Personal financial needs
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
Levels at Which Ethical Issues May Be
Addressed
 Personal level—situations faced in personal life (income tax,
doing kid’s homework, etc.)
 Organizational level—workplace situations faced as
managers and employees (cutting corners, etc.)
 Industrial level—situations confronted as professionals (the
practices of stockbrokers, accountants, etc.)
 Societal and international levels—local-to-global situations
confronted indirectly as a management team
The Role of Organizational Ethics
in Performance

35
 Lawrence Kohlberg’s Six stage of Moral Development
Individuals tend to change their decision priorities after their formative
years. The continuous changes that take place in a person’s moral
development, an organization's formal structure, corporate culture
including ethics training, have a bearing on his or her attitude towards
ethical decision making.

Level 1. Pre-convention Morality

Stage 1 - Obedience and Punishment

The earliest stage of moral development is especially common in young
children, but adults are also capable of expressing this type of reasoning. At
this stage, children see rules as fixed and absolute. Obeying the rules is
important because it is a means to avoid punishment.

Stage 2 - Individualism and Exchange (Self Interest)

At this stage of moral development, individuals evaluates behaviour on basis
of fairness to him or her. Also known as stage of reciprocity because one’s
decision and behaviour is based on what one gets in return.
Level 2. Conventional Morality

Stage 3 - Interpersonal Relationships (conformity)

Often referred to as the "good boy-good girl" orientation, this stage of moral
development is focused on living up to social expectations and roles. There is
an emphasis on being "nice," and consideration of how choices influence
relationships. In this stage people tend to live up to what is expected of them by
those close to them.

Stage 4 - Maintaining Social Order (Law and Order)

At this stage of moral development, people begin to consider society as a whole
when making judgments. The focus is on maintaining law and order by following
the rules, doing one’s duty and respecting authority. ‘Duty, respect for authority
and maintaining the social order become the focal points.
Level 3. Post conventional Morality

Stage 5 - Social Contract and Individual Rights (Human Rights)

At this stage, people begin to account for the differing values, opinions, and
beliefs of other people. Rules of law are important for maintaining a society, but
people also recognise legal and moral views that may conflict and work
towards reducing this conflict by taking decisions through rational calculation.

Stage 6 - Universal Principles (Universal accepted ethics)

Kohlberg’s final level of moral reasoning is based upon universal ethical
principles and abstract reasoning. At this stage, people follow these
internalized principles of justice, even if they conflict with laws and rules.
Person in this stage favours social ethics to organisational ethics for ethical
direction.
https://www.youtube.com/watch?v=bounwXLkme4
ETHICAL LEADERSHIP
Introduction:

 Leaders can use power for good or ill, and the leader’s personal values may be
one of the most important determinants of how power is exercised or
constrained.

 The mere possession of power, of any kind, leads inevitably to ethical

questions about how that power should and should not be used.

 The challenge of leadership becomes complex when we consider how

individuals of different backgrounds, cultures, and nationalities may
hold quite different values yet be thrown into increasingly closer
interaction.
 Ethical Leadership

Definition:

We can define ethical leadership as the process

of influencing people through principles,
values and beliefs that embrace what we have
defined as right behaviour.
Ethical Leadership dimensions can be categorized in following ways:

There are five principles that are believed to lead to the development of ethical leadership

Respect for Others

Ethical leaders treat others with dignity and respect. This means that they treat people as ends
in themselves rather than as means to their own ends. This form of respect recognizes that
followers have goals and ambitions and confirms followers as human beings who have worth
and value to the organization. In addition, it leads to empathy, active listening, and tolerance
for conflicting viewpoints.

Service to Others

Ethical leaders serve others. They behave in an altruistic fashion as opposed to behaving in a
way that is based on ethical egoism. These leaders put followers first—their prime reason for
being is to support and nurture subordinates. Service to others is exemplified through
behaviours such as mentoring, building teams, and empowering (Kanungo & Mendonca,
1996).
Justice for Others

Ethical leaders ensure that justice and fairness are central parts of their
decision making. This means treating all subordinates in very similar ways,
except when there is a very clear need for differential treatment and there is
transparency about why this need exists. In addition to being transparent, the
logic for differential treatment should be morally sound and reasonable.

Honesty toward Others

Ethical leadership requires honesty. Dishonesty destroys trust—a critical

characteristic of any leader–follower relationship. On the other hand, honesty
increases trust and builds the leader–follower relationship. Honesty means to
be open with others by expressing our thinking and our reality as fully as we
can.
This means balancing openness with disclosing only what is appropriate in
a given scenario.
Building Community with Others

Ethical leaders build community with others. This is crucial because leadership
is about influencing others to achieve a communal goal. This means that
leaders develop organizational or team goals that are appropriate for the leader
and his or her followers. These goals need to excite as many people as
possible, and ethical leaders achieve this by taking into account the goals of
everyone in the team or organization.
Styles of Ethical Leadership
The focus of ethical leadership is on the nature of a leader’s behavior. Ethical theories
examine theories about leaders’ conduct and theories about leaders character, and thus
help us to understand ethical leadership. The conduct of ethical leaders is divided into two
types: theories that stress the consequences of leaders’ actions and those that emphasize
the duty or rules governing leaders’ actions (Northouse, 2013, p. 424). These types are
known as teleological theories because they examine whether conduct is right or wrong. A
leader’s conduct can be described as ethical egoism, this states that a person should act as
to create the greatest good for herself or himself; utilitarianism, states that we should
behave so as to create the greatest good for the greatest number; and altruism, an
approach that suggests that actions are moral if their primary purpose is to promote the
best interest of others (Northouse, 2013, p. 425). The deontological perspective focuses
on the duties or actions of the leader and his or her moral obligations and responsibilities
to do the right thing.

Leaders character theories focus on who leaders are as people by utilizing virtue based
theories. Although virtues are present in one’s personality, who leaders are can change or
be influenced by others over time. In addition, if one habitually performs good deeds it
can influence their own behavior positively.
 References
 Fernando, A.C. (2012), “Business Ethics and Corporate Governance”, Pearson.
 https://newkind.com/discover-your-personal-values/
 https://2015sbctpj.weebly.com/values-and-personal-values.html
 http://palukurtynnupama.blogspot.com/2016/08/values-enshrined-in-bhagavad-gita.htm
l
 https://www.youtube.com/watch?v=7E-cwdnsiow
 Northouse, P. G. (2013). Leadership: Theory and Practice. Los Angeles:
SAGE Publications, Inc.
 https://sites.psu.edu/leadership/2012/12/06/ethical-leadership/