Ethics – Greek word – Ethika or Ethos – referring to
character Broadly referring to principles of conduct governing groups or individuals and trying to distinguish between:
Right / Wrong Good / Bad Proper / Improper
BE is a form of applied ethics that examines ethical principles and moral or ethical problems that arise in a business environment
System of moral principles applied in the commercial world Moral principles concerning acceptable and unacceptable behavior by business people and organizations or corporations
B E is a normative science – as a branch of philosophy, it is concerned with norms of human conduct
Not empirical like physics and chemistry Not formal like math and logic Ethical decisions are real life and not theoretical They have an impact on people, society, culture, economy, ecology etc.
History of Ethics
6th Century BC – Pythagoras founded Orphism
5th Century BC – Socrates and Pluto 4th Century BC – Aristotle – Nicomachean Ethics Propagated theories of Virtues – essentially Good Habits
3rd Century BC – Romans developed theory of Stoicism. with principles like:
Nature is orderly and rational Man should endure and renounce worldly goods and
All other religions also had their own theories of ethics – Pre-Christian Zoroastrianism.Continued.. then
Christianity. Islam. Buddhism and Sikhism
. Hinduism. Jainism.
History of Business Ethics
1960 – Ralph Nader raised issue of consumer safety from unsafe automobiles
1965 . Vietnam war Sale of defective material Illegal political contributions
Discrimination and reverse discrimination
Trade union tyrannies
.Unsafe At Any Speed Watergate scandal.
Purpose of business?
In an economically free and
competitive society. excessive selfinterest by one will be checked by that of other
Term synonymous with Ethics
Represents a code of conduct
Is more personal than ethics
Can be applied to social contexts
E. – Prohibition against taking
human lives in the form of: Mercy killing Abortions Wars
Stages of Moral Development
Pre-conventional morality: Self focus and self interest Forms of punishment. and law and order
. obedience and relativity Conventional morality: Group focus and pressure of expectation of group from person Forms of interpersonal concordance.
Autonomous / Post-conventional morality:
Universal focus Impartial orientation
Forms of universal ethical stance and self
sacrifice Development of different individuals at different stages and rates Implications for managers
Adam Smith on ethics and morality:
Why do humans behave in generous
and noble ways? It is due to reason. the human within – the quiet judge and arbiter of our conduct
. conscience. principle.
What is important is that management
realizes that it must consider the impact of every business policy and action upon society. strength and harmony
. It has to consider whether the action is likely to contribute to its stability.
the people who made the unethical decision should be held responsible
Who is responsible for unethical conduct in business? 3 Views:
1. The employee who made the unethical
decision Corporations don’t make decisions. people do Therefore.
The corporation Employees’ decisions are made in the context of corporate policies.
2. and corporate culture Therefore.. the corporation as a whole should be held responsible 3. Both the corporation and the employees involved
.Continued. corporate norms. organizational structure.
Does the following reduce moral
responsibility? True ignorance of fact Ignorance due to negligence Ignorance of ethics True inability to do anything else
MNC entry into less developed countries:
One nation cannot control them as they operate in
multiple locations Behave more immorally in less developed countries Exploitation of natural resources in host country Exploitation of labor in host country Changes in culture of host country Luring host country nationals into buying products they cannot afford
right and equitable
. just. Value systems and ethical practices differ from society to society Decisions are ethical if they result in benefit to larger society and are unethical if they result in benefit to self only Decisions are ethical if they are proper. good. Ethics is unstructured. there is no ‘ethics’ that is universally accepted Business ethics decisions could be clear or gray. fair.Nature of Business Ethics
Ethics is omnipresent. at the same time.
Publicly traded in 1970 More than 5000 stores all over the world.Case Study – Wal-Mart
Founded in early 1960s by Sam Walton in Rogers. with more than 3000 in the US 138 million people shop at Wal-Mart each week Has had a single minded strategy of ‘Everyday Low Prices’
the US Largest private employer in the US Single largest employer in 25 US states
Controls costs through leveraging buying power as
the world’s largest retailer and by controlling labor costs
Being the single largest US importer from China 30% sale of all household goods – domestic products.Continued..
Continued.. service to customers and striving for excellence
Benefits to all:
Stockholders – financial benefits Employees – jobs Consumers – low prices Businesses – benefits through supplying to Wal-Mart
Beliefs of Sam Walton – ‘respect for individuals.
Least admired corporation Has been charged with manipulative pricing and
marketing Control of labor costs through paying only minimum wages Very less healthcare benefits provided as an employer Charged with illegally requiring workers to work overtime without pay Has been charged with employee discrimination
Suppliers then need to outsource to keep costs low so that they can supply to Wal-Mart Significant contributor to practice of sweat-shops
Has been charged with employing illegal immigrants to
keep labor costs low Has been responsible for closing down small time businesses in smaller towns who find it difficult to compete on basis of prices Harms suppliers by making them bid for low prices against each other – reverse auction.Continued.
Need for BE
Protect interests of those related to business
Check malpractices Create an identity associated with ethics
Make people conscious about their rights
and responsibilities Increase customer confidence Avoid exploitation
Factors influencing BE
Personal code of conduct and behavior Standards of superiors
Country’s ethical climate
Most ethical decisions have long range
consequences They have multiple alternatives They involve trade off between cost incurred and benefits received They have mixed outcomes They are voluntary actions
colds and headaches
Developed by a German
pharmaceutical company Grünenthal in the 1950s Was found to act as an effective tranquilizer and painkiller and was proclaimed a "wonder drug" for insomnia.
the wonder drug was found to be effective on morning sickness..Continued.
Also. more than 10. so thousands of pregnant women took it to relieve themselves of morning sickness during the first 2 trimesters of pregnancy
In the late 1950s and early 1960s.000 children in 46 countries were born with deformities such as phocomelia as a
consequence of thalidomide use Early research findings not taken seriously enough
but pregnant women vacationing in Europe had access to it..
US had not permitted the drug due to
inadequate testing.Continued. In 1968 Chemie Grünenthal executives were tried for involuntary manslaughter
. Free samples distributed to physicians – ethics issue.
It was used in hindsight to strengthen the argument that doctors would interpret the word to mean either the final stage of pregnancy or from conception to delivery
By this time the company stated that Thalidomide was not recommended for use during pregnancy as such
The qualifying term obstetrics was employed.
Responsibility towards shareholders:
Safety of investment Maximizing dividends Participation in management Information to shareholders Retaining public image
Responsibility towards consumers:
Production as per requirement Prompt and adequate service
Adequate research and development Testing of products Innovation Improvement
Responsibility towards workers / employees:
Fair wages Security
Opportunities for development
Proper working conditions Trade union rights
Responsibility towards community and
Government: Abide by laws and regulations Cooperation Improvement of community standards by spread of education and through other help
Drivers of CSR
Globalization and market forces Social awareness and education
Laws and regulations
Crisis and consequence
British American Tobacco and McDonalds Reeks of corporate hypocrisy and insincerity as companies claiming to promote CSR simultaneously engage in harmful activities
Purpose of corporations is to maximize
returns of shareholders CSR with questionable motives – BP.
Types of Ethics
Philosophical Foundations of Ethics:
Ethics is a brainchild of philosophy Philosophy is a study of thoughts and
morality Ethics: Normative ethics Meta ethics
or what is goodness and bad
.Normative and Meta Ethics
Normative ethics tries to discover criteria or rules with which moral judgments can be made – how
ought one act. morally speaking? Meta Ethics tries to look at what is right and what is wrong.
Normative ethics has the following theories:
Relativism Teleological theories
Egoism Utilitarianism Deontological theories Immanuel Kant’s Categorical Imperative
Ethical standards must be regarded as relative to
and dependent on individual and society No action can be judged right or wrong or good or bad by a universal standard that applies to all people at all times Cultural relativism says that no standards can judge morality of a particular culture
Relativism – Continued..
This approach ensures that we
acknowledge diversity and are ready to face the challenges of it professionally It is the opposite of ethical absolutism which holds that morally right behavior is cross cultural and holds good across all kinds of society
Teleological theories determine rightness and wrongness of actions by looking at the end of the action The ends or consequences of an act determine whether an act is good or evil It is consequentialist in nature
Teleological theories: Derived from the Greek word ‘Telos’ meaning End.
then it is Egoism
.. Egoism: If the good produced is supposed to benefit only the agent of action.Continued.
. gave the concept of Utility to the world
. and legal and social reformer. an English Philosopher.
The good produced should benefit maximum number of people Jeremy Bentham.Continued.
Continued. Also known as “The Greatest Happiness Principle".
His basic principle was that: The right act or policy was that. or ‘The Principle of Utility’
. which would cause "the greatest good for the greatest number of people"..
. its contribution to pleasure or happiness among maximum persons
It is the idea that the moral
worth of an action is solely determined by its contribution to overall utility.e.
Traditional Utilitarianism holds that an
action is right from an ethical point of view if and only if the sum total of the utilities produced by that act is greater than the sum total of the utilities produced by any other act the agent could have performed in its place
Which thereby means that only one action
is right Immediate and foreseeable cost and benefit analysis of each action needs to be taken into consideration That alternative that produces the greatest sum total of utility must be chosen as the ethically most appropriate action
Case Study – Ford Pinto
Late 1960s – US cars manufacturers
were in danger of being overshadowed by Japanese car makers Lee Iaccoca.000. of Ford ordered engineers to build a car that was ‘not to weigh an ounce over 2. then President .000 pounds and not cost a cent over $2.’
where it became vulnerable to being punctured in case of a rear end collision of more than 30 miles per hour. possibly burning the trapped passengers
Normal time for a car from conception to production is 43 months Pinto was brought to the shopfloor in 25 months Testing after design and initial production revealed a serious defect in the placing of the gas tank Design required the gas tank to be placed behind the rear axle.Continued.
Production was none the less. continued on grounds that:
Design met with all applicable legal and governmental
standards then Government regulations required that the gas tank remains intact in case of a rear end collision of less than 20 miles per hour Ford Managers felt that the car was comparable in safety with other cars in the same segment Cost benefit analysis showed that it was more beneficial to go ahead with production
$11 per unit Total cost .5 million Cost of design modification .000 each 180 injuries valued at $67000 each 2100 cars valued at $700 each
Modification would prevent loss of: 180 burn deaths valued at $200.Analysis of cost benefit
Autos to be produced – 12.
In monetary terms.15 million This is a utilitarian view of cost benefit analysis
Argument is that it is not correct to spend $137 million of society’s money to provide a benefit that was valued at $49. the modification would have the
benefit of preventing losses with a total value of $49.Continued..
After about 60 deaths in the following decade and numerous burns cases..
. This one lawsuit was three times what Ford executives and engineers had estimated their final cost would be. and lawsuits involving millions of dollars.5 million units of the car in 1978 In February of 1978.Continued. a California jury created a nationwide sensation when it awarded the recordbreaking sum of $128 million in a lawsuit stemming from a Pinto accident. Ford recalled 1.
beauty.Problems of Measurement
Measuring utility is in itself a challenge How can the utilities that different actions have for different people be measured and compared? Some costs and benefits are intractable to measurement – like value of health and life Some costs and benefits cannot be immediately and reliably predicted What is a cost and what is a benefit? Who and how do we measure the value of non economic goods – love. freedom etc.?
Using low wage foreign workers in response to price competition Retaining market share by decreasing capital cost Laying off some US workers in the process and retaining some Refusing to use low wage foreign workers might end up in a situation where US workers also are laid off and foreign workers don’t benefit in any case. for whom the income might be essential
Derived from the Greek word ‘Deon’
meaning obligation or duty It is an approach to ethics that judges the morality of an action based on the action's adherence to a rule or rules Deontologists look at rules and duties
Immanuel Kant’s Theory
To act in the morally right way. and good without qualification
. people must
act from duty It was not the consequences of actions that make them right or wrong but the motives of the person who carries out the action The highest good must be both good in itself.
such as pleasure.indeed nothing even beyond the world .Continued.can possibly be conceived which could be called good without qualification except a good will. fail to be either intrinsically good or good without qualification Nothing in the world ..
Those things that are usually thought to be
good. intelligence etc.
There are some moral rights and duties that
all human beings possess. regardless of any utilitarian benefits that might arise out of them Categorical Imperative: Everyone should be treated as a free person equal to everyone else
. at least in principle
First formulation of Kant’s Theory of CI: An action is morally right for a person in a certain situation if. in any similar situation Universalizability – the person’s reasons for acts must be reasons that everyone could act on. the person’s reason for carrying out the action is a reason that he or she would be willing to have every person act on.Continued. and only if.
and only if. in
performing that action..Continued. the person does not use others merely as a means for advancing his interests. but also respects and develops their capacity to choose freely for themselves
Second formulation of Kant’s Theory of CI:
An action is morally right if.
Duty of self-improvement: A duty to improve ourselves.
.W D Ross
Duty of beneficence: A duty to help other people (improve conditions of others)
Duty of non-maleficence: A duty to avoid harming other people. Duty of justice: A duty to ensure people get what they deserve.
Duty of reparation: A duty to recompense someone if you have acted wrongly towards them.
Duty of gratitude: A duty to benefit people who have benefited us. Duty of promise-keeping: A duty to act according to explicit and implicit promises, including the implicit promise to tell the truth.
Rights and Justice
Utilitarianism is unable to deal with moral
issues related to rights and related to justice Some utilitarian actions which are deemed to be morally right, actually violate people’s rights or could be unjust to some By engaging in utilitarian acts, corporations might snatch away the right to information, choice etc. of people
Concept of Right
Right is an individual’s entitlement to
something Legal rights: Entitlements that are derived from the legal system – permission or empowerment to act in a specified way Moral rights: Entitlements that are derived from moral systems – that people have just by the virtue of being human beings
Features of rights:
Rights are correlated with duty Rights provide individuals with autonomy
in pursuit of their interest Rights provide basis for justification of actions Utilitarianism defies the Rights theory While looking at maximum utility to many. it takes away the rights of some
Case – Eli Lilly
Eli Lilly – a pharmaceutical giant. by a chemist Crucial contributions are mass production of penicillin and super-specialization in psychiatric medicine Innovations – fruit flavoring of medicines and sugar coating of pills
founded in 1876 in Indiana.
Testing of drugs is a situation which
contradicts itself: FDA requires drugs to be tested on healthy humans to determine side effects Healthy humans will not offer themselves as subjects to untested drugs Test subjects can die.
. suffer from organ failure or damage etc.Continued..
soup kitchens etc Tests running for several months ensured all three for these people Tests provided enormous benefit to society
Eli Lilly discovered a large number of
volunteers willing to take untested drugs at $85 per day plus free food and shelter Source was homeless people taking refuge in shelters..
Participants needed to give ‘informed
consent’ The people whom Eli Lilly had chosen were mostly illiterate. so even if they had signed a consent form. they had no clue what they were getting into
Justice and Fairness
These are essentially comparative terms
They are concerned with comparative
treatment is given to members given when: Rules and laws are administered Benefits and burdens are distributed Punishment is decided Groups are in competition or cooperation
Types of justice
Concerned with sharing burdens and
benefits with members of a society Individuals who are similar in all respects. should be given equal / similar benefits and burdens. relevant to the kind of treatment in question. even if they are dissimilar in other irrelevant respects
Justice as equality – Egalitarianism:
Every person should be given exactly
equal in terms of burdens and benefits Justice as contribution – Capitalist: Benefits and burdens should be distributed according to the value of the contribution the individual makes to the society.Continued.
. task. group etc..
.Continued. if it is the result of individuals freely choosing to exchange with each other the goods each person already owns
Justice based on needs and abilities – Socialism: Burdens should be distributed according to abilities and benefits according to peoples’ needs Justice as freedom – Libertarianism: Any distribution of benefits and burdens is just.
Justice as fairness – Rawl’s Theory:
Principle of equal liberty – each person’s
liberties must be protected from invasion Principle of difference – steps must be taken to improve the position of the most needy members of society Principle of fair equality of opportunity – everyone should be given an equal opportunity to qualify for more privileged positions in society
Justice of blaming or punishing a person for wrong actions
People cannot be held morally responsible for
what they do out of ignorance or inability There should be certainty before punishing about the person being actually wrong Punishment should be consistent and proportioned to the wrong
Justice of restoring a person what he / she
has lost when wronged by someone Compensation should happen only when the action causing the harm was deliberate and wrong The person’s action was the real cause of harm
previously warring countries need to be cooperative with each other Modern society – free movement of monetary capital.Building a Good Society
Society is a dynamic and ever changing body
Base level classification is Warrior Society and Industrial Society As industrialization and economic activities increase. physical capital and intellectual capital
Businesses therefore need to be wise about
instituting changes which benefit only themselves Extreme concentration on own survival could lead to a self defeating scenario of consumers lacking means to buy products and enjoy services It is therefore in the best interest of a business to build a good society
A good society is a just society where
everyone shares burdens according to capability and benefits according to contribution As Gandhiji puts it: it is a society where the poorest of the poor are just as happy as the richest of the rich
Organizations do not exist in isolation. but operate within an environment of:
Investors Suppliers Customers Government Competitors
Every action that an organization performs
is bound to have an effect on someone Businesses face ethical decisions in mere existence through: Choice of product or service Labor management Advertising and promotions
and actions stir society Adherence to ethics does not matter. but violation is noticed
Finally.Continued. businesses do a cost-benefit analysis and take most decisions depending on the result of weighing factors against each other
Businesses are more amoral than immoral Their existence boosts economy..
Types of Business Ethics
General Business Ethics: Corporate social responsibility Moral rights and duties between a company and its shareholders Ethical issues concerning relations between different companies Leadership issues – corporate transparency Misuse of ethical policies as marketing instruments
Finance and Accounting:
Misleading financial analysis
Bribery / facilitation payments
IPR / Knowledge and skills
Patent and copyright violation
Employee raiding / poaching
Bio-prospecting and bio-piracy
religion. caste.Human Resource Management
Discrimination on basis of age. gender. disabilities Illegal Unionization / union busting Issues affecting privacy of employee – surveillance Whistle blowing Fairness of contracts Compromise on occupational safety and health
price fixing. product tying etc. exclusive
dealing. Advertising – attack ads. viral. spamming Black and gray markets Marketing in schools Marketing in vulnerable groups
.Sales and Marketing:
Anti-competitive practices – dumping. harmful products Marketing strategies – bait and switch.
Production of defective. addictive and
dangerous products Production and environmental effect – pollution. Product testing ethics – animal testing and testing on economically backward groups
. New technologies – genetic modification. radiation due to microwaves and mobile phones etc. carbon emissions etc.
Responsible Business. also
known as Corporate Responsibility. Corporate Citizenship.CSR
Corporate Social responsibility (CSR). or Corporate Social Performance Form of self regulation integrated into business models
. Sustainable Responsible Business (SRB).
and voluntarily eliminating practices that harm the public sphere. communities.
.Continued. consumers.. employees.
A business is expected to take on responsibility for the
impact of its activities on the environment. stakeholders and all other members of the public sphere CSR-focused businesses should proactively promote the public interest by encouraging community growth and development. regardless of legality.
and honoring of a triple bottom line – People..Continued. Planet and Profit
Essentially. CSR is the deliberate
inclusion of public interest into corporate decision making.
Drivers of CSR
Globalization and market forces Social awareness and education Laws and regulations Crisis and consequence
Human Resource benefits by ensuring
an identity to potential recruits Risk mitigation Brand differentiation
Purpose of corporations is to maximize
returns of shareholders CSR with questionable motives – BP. British American Tobacco and McDonalds Reeks of corporate hypocrisy and insincerity as companies claiming to promote CSR simultaneously engage in harmful activities
and funded by the corporate executives who find that it serves their bottom line.Criticism
Thomson-Reuters columnist Chrystia Freeland has called CSR “a fetish encouraged by the philanthropies that feed off it.”
Consumers have been willing to pay more and buy more from companies with a CSR halo
. societies.Unit 3 – Globalization & Ethics
Globalization describes an ongoing process by which regional economies. and cultures have become integrated through a globe-spanning network of communication and execution.
economic and political activities.territorialisation
Globalisation is the increasing and progressive eroding of the relevance of territorial bases for social. processes and relations
Free flow of :
Goods and services
Labor and people
Some policy changes
Promotion of free trade: Elimination of tariffs, creation of free trade zones Reduced transportation costs, especially for ocean shipping. Reduction or elimination of capital controls Reduction, elimination, or harmonization of subsidies for local businesses Creation of subsidies for global corporations Harmonization of intellectual property laws across majority of states
Because of that:
Increasing level of uncertainty in the following areas:
Consumer demand for goods and services Supply of inputs, resources and services Government policies Nature of relations among countries Indirect repercussions of globalization like terrorism,
nuclear wars, bio-warfare, global warming, diseases etc.
Globalization and Ethics
Globalization has brought forth ethics issue more
Organizations attain a competitive edge due to ethical
practices Companies need to deal with ethics as one of the backbones of corporate strategies Realization that being ethically proactive is better than ethically reactive Value creating strategies are being recognized as USPs; more than products and services
Absolute against relative Business being conducted in the same way everywhere in the world. Or.Global Ethical Issues
Global business strategies . Changing business practices according to the geographical location Bribery and corruption
Human rights Consumerism
Safety and environmental issues
Have ethics policies or mandates Appoint ethics officers to ensure
compliances Routinely have ethics audits Require suppliers to participate in the ethics programs
.Global Businesses Should:
As part of ethics.
Encourage suppliers and self to not to
participate in any human or employment rights abuses Support and respect human rights Encourage and promote diversity in organizations
A statement pertaining to ethical
conduct of employees and organization Setting of expectations Offering guidelines on handling ethical issues Creating awareness about ethics
It should be:
Given unequivocal support of top
management through word and example Explained in writing and verbally with reinforcement Doable and easy to understand and perform
Monitored with routine inspections
for compliance and improvement Backed by clearly stated consequences in cases of disobedience Should remain neutral and nonsexist
Global Good Society
Environmental perspective Take care of finite resources Encourage innovation in new material development Invest in research Economic Concentrate on long term sustainability instead of short term profits Social Social responsibilities of business
Malaria and other such diseases Ensure environmental sustainability Develop global partnership for development
UN Millennium Development Goals
Eradicate extreme poverty and hunger Promote gender equality and empower women Reduce child mortality Improve maternal health Combat AIDS.Continued..
which so many people do not get
.Unit 4 .Moral Issues in Business
Role of industry and business in the
overall degradation of ecology and environment is large Clean air and unpolluted water are basic human rights.
The activities generally considered harmful
and their repercussions are: Deforestation Burning of fossil fuel Leading to depletion of ozone layer Increase in pollution Unexplained phenomenon like acid rain Global warming
coal. natural gas Fossil fuels are non-renewable resources because they take millions of years to form. petroleum.Fossil Fuel
Fossil fuels are fuels formed by natural
processes such as anaerobic decomposition of buried dead organisms Typically. and reserves are being depleted much faster than new ones are being made
billion tonnes of carbon dioxide (CO2) per year. but it is estimated that natural processes can only absorb about half of that amount..65 billion tonnes of atmospheric carbon dioxide per year Carbon dioxide is one of the greenhouse gases that enhances radiative forcing and contributes to global warming.Continued. so there is a net increase of 10.
The burning of fossil fuels produces around 21. causing the average surface temperature of the earth to rise
Over grazing Over cropping
Soil erosion Increased ground water salinity through depletion
. automobile industries Smoke and emission Combustion of fossil fuel
processing.Continued. manufacturing. oil.
Ground pollution through dumping toxic waste
Releasing effluents into oceans and rivers Usage of fertilizers
Harm to food.. water. fish and animal life Poisons entering human food chain through edibles Increase in respiratory diseases Increasing number deformities at birth owing to pollution levels
Continued..e. air. earth and water with human intervention of substances that in turn cause harm to human beings and the environment Usually considered relative in nature
Pollution is defined as the contamination
of our living environment i.
Rising population putting pressure on natural and man-made resources Indiscriminate and unplanned growth of cities Use of motorized vehicles Industrial activities
.Causes of Pollution
Natural factors like volcanic eruptions.
floods. dust storms etc.
plants and animals
.Other related issues:
Renew – ability of resources
New discoveries in resources Resources being used faster that
created Extinction of species in fish.
Role of Business
Business and industries need to play a crucial and pro-active role in environment protection:
Use of pollution control in factories Improve methods and techniques of production
thereby minimizing waste and scrap Use of eco friendly technology Production of eco friendly products Proper enforcement of governmental laws and regulations
Proper safety measures set and adhered to
Thorough maintenance of material Training to workers
Funds. tree plantations etc. Environment related international
Social Accounting Standards
Responsibility for impact on society
Set up of certain standards:
Green Globe Certification – for sustainability in
environmental. cultural and CSR issues ISO 14000 – for environment management Social Accountability International – SA8000 for labor and working conditions