Chapter 2 Normative Ethics, Ethics and Indian Management

Business Ethics: What Does It Really Mean?

Business Ethics:Today vs. Earlier Period
Societys Expectations of Business Ethics
Ethical Problem Actual Business Ethics

Ethical Problem

1950s

Time

Early 2000s
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Developing Moral Judgment

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Normative Ethics
Normative means something that guides or controls, on how things should be Aims to discover what should be the moral standards that are supported by the best reasons Normative ethics is the study of ethical action. It is the branch of philosophical ethics that investigates the set of questions that arise when considering how one ought to act, morally speaking.

Normative Ethics in Management

Teleological Theory

Deontological Theory

Ethical Egoism

Utilitarian Principle

Altruism

Kantianism

Universalism

1 Teleological theory
Derived from Greek word telos means end. Determine ethics of an act by looking to the consequences of the decision (The Ends) Teleological Theories hold that the rightness of actions is determined solely by the amount of good consequences they produce. Actions are justified on teleological theories by virtue of the end they achieve rather than some feature of the actions themselves. Thus, the concept of goodness is fundamental in teleological theories and the concept of rightness and obligation or duty are defined in terms of goodness.

Strengths & Weaknesses of Teleological theory

They provide a relatively precise and objective method for moral decision making They are in accord with much of our ordinary moral reasoning An action would provide some benefit or inflict harm. This is morally relevant reason for or against performing it. Weakness Some moral reasoning are non-teleological in character ie there are exceptions to the rule Eg- robin hood

Teleological theory-types
A Ethical Egoismmaximize persons selfinterest at the expense of others. That a person should not help others when the person will get nothing out of it. Enlightened egoism is enlightened self interest considers the long range perspective of other or humanity on the whole. Eg- competing for a job B Altruismthe principle or practice of concern for the welfare of others. It is a traditional virtue in many cultures, and a core aspect of various religious traditions, though the concept of "others" towards whom concern should be directed can vary among cultures and religions. Altruism is the opposite of selfishness Eg- Ngos - non profit

Teleological
c Utilitarianism

Is a moral philosophy, generally operating on the principle that the utility (happiness or satisfaction) of different people can be measured

Most widely understood and commonly applied ethical theory is utilitarianism. In an organizational context, utilitarianism basically states that a decision concerning business conduct is proper if and only if that decision produces the greatest good for the greatest number of individuals.
For example, a pharmaceutical company may operate by the principle that it will release any officially approved drug with some side effects as long as it helps more persons combat a particular disease than the number troubled by a minor side effect. banking, suppose a banker is considering whether it is right to foreclose on the mortgage of a widow and her children. However, suppose we had a rule that said that banks should not foreclose whenever the action of foreclosing would cause more harm than foreclosing. If that rule were adopted, then banks would be reluctant to lend money. Thus, the rule permitting foreclosure on widows is better for society than a rule that forbids such disclosure.

2 Deontological Theory
Derived from greek word deon means duty This approach believes we have a duty not to do bad Bribery is wrong by its very nature regardless of the consequences It is non-consequential theory Determine the ethics of an act by looking at the process of the decision (The means) Kantianism and universalism Eg- soldiers, WMD

Deontological Theories
1. 2. 3. 4. 5. 6. 7. Duties of fidelity: To keep promises and to tell the truth. Duties of reparation ( Compensation for war damage): To compensate people for injury that we have wrongfully inflicted upon them. Duties of gratitude: To return favours that others do for us. Duties of justice: To ensure that goods are distributed according to peoples merit. Duties of beneficence: To do whatever we can to improve the condition of others. Duties of self improvement : To improve our own conditions. Duties of non-malfeasance: To avoid injury to others.
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Strengths and weakness of Deontological Theory

This theory makes more sense in cases where consequences seem to be irrelevant It is the way they account for the role of motives in evaluating actions. Failure to provide a plausible account of how our moral obligations and resolve problems of moral conflict

Weakness No reason is provided in accepting these rule There is no order of priority to guide in cases where they conflict

Eg No moral justification for the initiation of force against another human being. This principle precludes physical violence as well as political coercion such as taxation or abridgment of speech.

Deontological Theory-types

Kantism -it is goodwill An action is morally right only if the person performing it is motivated by a good will and vice-versa. A goodwill means action done for reasons of principle from a sense of duty, nothing else. For example: If a building is on fire it is your duty to save the people inside even if the people inside are murderers. You would save the people for the sake of saving them and no other reason.
UniversalismRefers to religious/theological/philosophical universal application or applicability Eg concept of globalization- one world

concepts

with

Immanuel Kant's theory of ethics

Kant then argues that those things that are usually thought to be good, such as intelligence, perseverance and pleasure, fail to be either intrinsically good or good without qualification. Nothing in the worldindeed nothing even beyond the worldcan possibly be conceived which could be called good without qualification except a good will. It is our power of rational moral choice its presence gives humans their inherent dignity

1. 2.

There are 2 concepts of duty: Duty is just following orders imposed by somebody. Duty is internal and cannot be imposed on oneself
An action is morally correct if it minimizes the aggregate violation of the rights of all stakeholders. The Kantian model is useful to managerial decision making and readily leads itself to internal audit review. He used the term good as good will.

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The Kantian Model

People 'act out of respect for the moral law' when they act in some way because they have a duty to do so. Thus, according to Kant, goodness depends on rightness. Eg Individual: I may make a false promise in order to reap financial gain. Generalized: Anyone may make a false promise to get something s/he wants. This is self-contradictory because: If anyone may make a "false promise," nobody would take a promise seriously; promising becomes meaningless. Result: I may not act on that maxim.

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Ethics, Economics, and Law

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Ethics and decision Making

Facts Decision making in business ethics usually requires companies to identify specific ethical standards, which often means different things to different people. As organizations continue to grow and expand, new individuals are hired who may not have the same ethical standards as individuals already working in the company. Companies often use the organizations mission statement to build a framework for helping individuals make ethical business decisions. Expert Insight Companies may use professional consultants, seminars, or other training methods to educate employees on decision making in business ethics. These outside sources may also be able to provide companies with an objective review of their current operations and offer advice on how to implement a strong ethical code in their business operations. While these professional resources may be expensive, it often helps companies develop an ethical business environment.

Ethics and decision Making

Types There are five types of ethical standards: utilitarian, rights, fairness or justice, common good, and virtue. Utilitarian ethics is a standard that attempts to do the most good and limit the amount of harm for each individual. A rights approach protects and respects the moral rights of individuals impacted by decisions. The fair or just style seeks to create equality among all individuals The common good method focuses on bettering society as a whole. The virtue tactic centers on the ideal virtues necessary for promoting individuals for the company.

Ethics and decision Making

Functions Business ethics is a tool companies use to ensure managers, directors, or executive officers act responsibly in various business situations. Ethical decision making attempts to promote the company as a whole, rather than letting one individual profit from business decisions. Individuals who consistently make decisions based on their personal benefit may create legal liabilities for a company that can lead to bankruptcy. Considerations Creating an ethical business environment does not happen overnight. Companies may need to spend time and money training and promoting business ethics among managers and employees. Companies may also find implementing an ethical decisionmaking process may lead to negative feedback from managers or employees. Combating this negative feedback may be a difficult part of implementing business ethics.

Ethics and Indian management

1. Build ethical culture into business processes and strategy One of the business attitudes in India is that business cannot be done without paying bribes, hence receiving kickbacks is justified. The mindset is that an ethics program is not practical as business will suffer. For business growth some compromises need to be done. This thinking makes a code of conduct a document without much strength. Ethical behavior is considered insignificant in evaluating managers performance. Hence, the need of the hour is to build ethical culture as part of business strategy. Processes for monitoring ethical behavior need to be implemented. For example, performance appraisals of employees should incorporate bonus points for the ethical means adopted to meet targets.

Ethics and Indian management

2. Change Mindset of Employees In India, even a youngster will tell you that it is practical to be corrupt. If a person speaks of ethical behavior, the person is most likely to be viewed as an idealist with their head in the clouds. This cynicism makes it difficult to implement an ethical work culture. 3. Make Code of Conduct Relevant Most of the organizations have a code of conduct that employees sign at the time of joining the organization. New recruits receive a brief overview of expected business conduct in the induction sessions. However, rarely organizations code of conduct is a living document. It is not unheard of that the code of conduct is too old and policies mentioned in it are not complying with the prevailing business and legal laws. The situation is that nobody bothered to update it regularly. Hence, these documents are not taken seriously.

Ethics and Indian management

There are many companies in the world, but not all do business ethically. Ethisphere Institute, an American think-tank, has come out with a list that shows that 145 companies in countries like the US, Great Britain, Japan, Portugal and India stood out for setting high standards of employee behaviour and conduct. Only two from India, that have been rated most ethical by the institute. Tata Steel Tata Steel Limited is a multinational steel company headquartered in Mumbai, and subsidiary of Tata Group. It is the 10th-largest steel producing company in the world, with an annual crude steel capacity of 23.5 million tonnes, and the largest private-sector steel company in India measured by domestic production

Ethics and Indian management

Wipro Wipro Limited is an Indian global IT services and consulting company headquartered in Bangalore, India. As of 2012, it is the second-largest IT services company by turnover in India, employing about 120,000 people worldwide as of December 2011. To make Indian organizations globally competitive at par with the multinationals building an ethical culture is a necessity. The war of talent is won by organizations that provide a comfortable and secure work culture to employees. Multinationals invest in organizations where they are sure of the ethics of the management teams. Customers prefer organizations fulfilling their corporate social responsibility. Look from any lens, adopting ethics pays in the long-run. This is the right time to do some internal selling and get management commitment for building an ethical work culture.

Roles and responsibility of managers

1. Protecting Companys Assets These include tangible as well as intangible. 2. Behaviour towards Government Agencies - Mgrs should not offer monetary or other gifts to any Government Agencies to obtain any favor. 4. Control Proper checks and Balances It ensures prevention of misuse of power, facilitates timely management response to change and be premptively and effectively managed. 5. Consensus Oriented Keeping the best interest of the whole community, taking into consideration historical, cultural and social aspects. 6. Gifts and Donations Mgrs should not give or receive any gifts, to obtain business or uncompetitive favors. 7. More Transparency and Accountability.

Roles and responsibility of Entrepreneurs

Developing the traits and qualities of a good leader, qualities that inspire confidence and trust from not only employees, but customers as well, and the confidence they have that you know what your doing and trust that you will do what you say you will do, in addition to other attributes any good leader must develop and use before anyone willingly follows them. To be a successful leader the entrepreneur must develop a clear and concise vision needed to inspire people by giving them purpose and direction. Developing a well thought out plan is critical to accomplish you vision, and the plan doesnt have to be expansive and elaborate, but you need to clearly define the path which you are going to lead the team on from point A to point B Entrepreneur needs to make sure that everyone son board with the plan and clearly understands not only their individual roles, but the, ole of the team as well, to insure the teams and your success. Make an educated decision and always be ready to make new decisions based on additional information, and remember that informed decisive decisions is a quality of a leader that others are willing to follow.

 A successful entrepreneur is able to adapt and make adjustments in the ever changing world of the marketplace, adaptation to new trends, technology, products, and marketing strategies, always working with the plan in mind, and brainstorm with the team ways you can best adapt to changes, implement the necessary changes with the thought always in mind that the plan is a virtual living tool, not static doctrines that would actually be worthless if one could not adapt them to the ever changing marketplace.

Roles and responsibility of Entrepreneurs

Your role as an entrepreneur and leader is only as good as your word, and when it comes to your word, keep it
Genuine praise should be given whenever it is warranted, as it is important to keep high morale for continued high performance Employees will always notice entrepreneurial leaders that are honest and fair-minded They are even quicker to notice dishonest and biased behavior, even the most subtle displays, and great leaders avoid playing favorites and destroying the high morale of the team, always working to build and maintain the successful team.

Chapter 4 Ethics and work life in India, Indian values for work life, Gandhi an philosophy-trusteeship

INDIAN PERSPECTIVE OF ETHICS

These are based on Vedas, Upanishads and the Bhagwad Gita. These do not depict any religion. These have universal appeal, because they deal with universal truths of Life. These believe in UNITY IN DIVERSITY because of belief in Vasudev Kutambak. These believe in Patience, Tolerance, Respect for others, Forbearance, Honesty, Integrity, Team Work, Sacrifice and Selfless Service.

INDIAN PERSPECTIVE OF ETHICS

Indian Ethos lays much stress on Self-Management and Self-Development. The self development is not mere development of skill, but is oriented to development of Innerbeing. It is related to the development of soul through development of Satvik qualities. Indian Ethos emphasizes on development of value based personality wherein there is a proper mix of spiritualism and materialism, knowledge and wisdom, value and skills. Work is Worship, Dignity of Work

Indian ethos
1. DHARMA It is the righteous conduct which one should practice. It is the basic value system which must be followed by each generation. ARTHA It is acquisition of wealth. It incorporates means to achieve wealth according to DHARMA. Artha or acquisition of material wealth, power, money and knowledge are very important factors to motivate and to excel 3. KAAM Desires and Expectations. It includes enjoyment of sensual pleasure. It also implies zeal and passion in ones activity, the fun and joy one finds in ones work, and the delight in any creative endeavours. MOKSHA It is a state of supreme bliss where the individual soul is free from all bondages of spiritual life.

1.

4.

Ethics and work life in India

Indian values for the work place Respect for elders Respect for hierarchy and status - Rights and duties Quality of work life in Indian philosophy
Value oriented Holistic management

Ethics and work life in India

Importance of character Values Wholeness Goodness Courage Self discipline Living by inner truth Dharma of organization/management Value driven management Indian culture and wisdom Ethical/spiritual values Management effectiveness based on values

Indian values for work life

Specific to India workers in India have high career aspirations and also value having a good fit between work and their personal lives. However, more Indian women than men feel that lack of workplace flexibility is a career obstacle. But work-life challenges cause women to downsize their professional aspirations. The right work-life solutions improve a companys ability to recruit, develop, and retain promising employees, enhancing workplace performance and strengthening the bottom line and competitive advantage. In India, over 25 percent of both men and women reported a dual focus of work

Indian values for work life

Indian respondents had the highest short- and long-term career aspirations: 98 percent said they were hoping to advance to a higher-level position in the next five years and 78 percent said their long-term goal was to reach CEO or senior leadership positions. Both men and women in India value work-life fit 97 percent men and 95 percent women rate it as very important. However, women reported higher levels of difficulty in managing work-life demands while men were more likely to say that managing work and life was easy for them. The analysis showed that for more than 80 percent of both women and men in India, the existing flexibility policies provided by their organizations did not meet their work-life needs.

Indian values for work life

Comparing India with China and Singapore, highlights include: Women and men in India had the highest shortand long-term aspirations to advance further in their careers and to senior leadership roles: 78 percent of Indian respondents said their longterm goal was to reach CEO or senior leadership positions, vs. 52 percent in China and 51 percent in Singapore.

TRUSTEESHIP MANAGEMENT Gandhian Philosophy of Wealth Management

Trusteeship, as applicable to the corporate world, refers to the act of holding and managing resources on behalf of the stakeholders of the firm.

TRUSTEESHIP MANAGEMENT Gandhian Philosophy of Wealth Management

Trusteeship is a socio-economic philosophy that was propounded by Mahatma Gandhi . It provides a means by which the wealthy people would be the trustees of trusts that looked after the welfare of the people in general. This concept was condemned by socialists as being in favor of the landlords, feudal princes and the capitalists. Gandhi believed that the rich people could be persuaded to part with their wealth to help the poor.

TRUSTEESHIPMANAGEMENT Gandhian Philosophy of Wealth Management Gandhian Philosophy of wealth management is based on the Sarvodaya principles of Truth, Non-Violence and Trusteeship; wherein class harmony between labour and management reigns supreme.
According to Gandhiji, managers and proprietors of business firms are only the trustees of wealth of society.

The idea of trusteeship advocated by Gandhiji, is based on and has its origin in the Bhagaved Gita-in the principles of aparigraha (non-possession) and Sambhawa (equalism) Unlike the Utilitarian motto of greatest good of the greatest number, Gandhijis motto was greatest good of all.

Gandhijis principle of Trusteeship

Trusteeship principle is foundation of philosophy of wealth management
Principles of Trusteeship
No recognition to right to individual property Resources must be held and utilised for the benefit of society. Management is the trustee of the stakeholders and must work towards optimising stakeholder value, not merely maximising shareholder value

Gandhijis principle of Trusteeship

In case of industrialist what they produce should be determine by social necessity with optimal utilization of scarce resources and not by personal whims If workers are to work with harmony and collaboration with management then that make workers also co-trustee with the management Though wealth legally belongs of owners of business, morally belongs to society and community

Seven greatest Sins

Politics without principles Education without character Commerce without morality Pleasure without conscience Wealth without work Science without humanity Worship without sacrifice

Indian Corporate Leaders and Trusteeship

Infosys- the involvement of employees in the companys fortunes (through ESOPs) and his contentment with a mere 7% of company stock (he prefers it that way) reflect a deep-rooted commitment towards trusteeship. House of the Tatas with their corporatized initiatives for sociocorporate benefits WIPRO Cares Foundation, with a targeted corpus of Rs 100 crore for primary education; Birla foundation with its focus on socio-economic improvement in the lives of the people touched by the corporation.