Business Ethics

Dr Safdar A. Butt

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What is ethics?
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Doing the right thing. Doing it the right way. Doing it for the right reason.

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Business Ethics
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Planning & Leadership
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Aim at doing the right thing
Do it the right way Do it for the right reason

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Organizing
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Control
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Evolution of Business Ethics
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Business
Historically not known to be ethical  Profit before any thing else
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Ethics
Religious influence  Social influence
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Why Business is being ethical now?
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Stricter laws and regulations Watch dogs Realization that ethics is profitable

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How to enforce Ethics
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Law Industrial and professional codes Internal codes Wanting to be ethical

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Law
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Words of law and spirit of law Law cannot create honesty Law cannot cover every thing.

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Professional Codes
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Lesser force than law. Professional associations e.g. ICAP force their members to follow ethics, or face expulsion. Professionals work for companies and force companies to follow ethics. Industrial associations also exhort their members to be ethical.

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Internal Code
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The most compelling reason for a company to be ethical is its own board. A company can become ethical only if its board is willing to face the consequences and pay the price of honesty. Setting up a formal policy on ethics is essential. Ethics should be part of every thing that a company does. Doing certain things in name of ethics is not enough.
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Advantages of BE
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Improve in image Higher productivity Access to more and cheaper capital Helps society; society helps company Every one is a winner

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Impact on Employees
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If the company is honest, employees tend to be honest as well. This means better work environment, better productivity, higher efficiency. Honest companies have lesser frauds and thefts. Ethical companies attract better quality of staff. Ethical companies are able to retain good staff.

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Characteristics of an ethical organization
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Formal code of ethics Regular interaction with stakeholders Obsessively fair to all Managers responsible individually; do not hide behind collective responsibility charade Employee see a purpose in their work Non-bureaucratic procedures
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Roots of individual unethical behavior
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Pressure of work and family life Poor communication between company and employees Poor leadership of the company Heavy work load; long working hours Undue pressure / targets Politics, favoritism Personal traits & circumstances
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Handling these causes
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All these causes can be handled by a good management team by:
Fairness and equal treatment of all employees  Reasonable load of work  Reasonable targets  Good HR practices
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Aspects of corporate unethical behavior
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Bribery Coercion Conflict of interest: company & others Tax evasion Insider trading Lack of regard for the society

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How to enforce ethics in a company?
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Decide to be ethical Ethical decision making as norm for all operations. Draw up a formal Ethics Policy and let it be part of normal operational manuals.

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Ethics Policy
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Avoidance of conflict of interest at all levels Honesty and integrity Fairness in dealing with every one Acting in good faith Compliance with law Encouraging ethical reporting: whistleblowing

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Pakistani Scene
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Companies are not willing to be ethical Those that are willing cannot afford to be ethical. Those that can afford, are not allowed by the situation. One has to bribe even to get one’s rights

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Rectifying the situation
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Principal causes:
Company policies  Unethical industrial climate  Rampant corruption in government
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Solution:
Bigger companies should start; others will follow  Gradually the business climate will change  Once business is honest; government will have to get honest.
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Thank you
Dr S A Butt

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