Ethical Issues and Dilemmas

in
Business

G Narasimhan
Director,
Bumblebee Academy

Agenda
How Ethical? A Perception Quiz / Survey
What would you do
Ethical Dilemmas in Social Situations
Ethical Dilemmas at Workplace

Business Ethics Themes for Discussion

What is Ethics and Business Ethics

Major Theories or Moral Philosophies" that are applied to business ethics
Model of ethical decision-making in business and Video Based Caselets & Discussions
Factors that affect ethical decision-making in the business context

Ethical Issues and Challenges in International Business

Framework for Corporates to promote Ethical Behaviour
Caselet on Business Ethics Dilemmas

Perception Survey
India is one of the Least Corrupt Countries in
the World
Agree / Disagree

Perception Survey
India is one of the Highly Corrupt Countries in
the World
Agree / Disagree

Perception Survey
Arrange the following in the Order of More Corrupt to Less
Corrupt :
India

Nigeria
1

Japan
2

China
4

USA
5

Sweden

Perception Survey

Source : Transparency International

http://cpi.transparency.org/cpi2013/re
sults/

Arrange the following Less Corrupt to More

Corrupt :
India

Nigeria

Japan

China

USA

Sweden

Co
t
as
e
L

Co
t
s

pt
u
rr

pt
u
rr

Corruption Perception Index Transparency Intl 2013

Survey Results

Source : Transparency International

http://cpi.transparency.org/cpi2013/re

Perception Survey
Ethical Companies

Which of the following Indian companies do you think should

be part of the Worlds Most Ethical Companies

Sahara India Wipro Satyam (old)

Tata Power

Perception Survey
Ethical Companies

Introspection and Reflection

Self-assessment
1

Always Mostly

How ethical I am

Seldom
Always

Unethical

How ethical I want to be

Do I know what are my Core Values and Do I live by those values
Do I know what is ethical and what is not ethical
Is there a Knowing Doing Gap
How do I feel when I have done something unethical

10
Mostly
Ethical

Creating Virtuous and Vicious Circle

Choice is Yours!

Outcome
Deeds

Thoughts

Words
Beliefs and
Values

Personal
Experiences
Social and Legal
Climate

Therefore.... Being Ethical is a Good

Business
Being Ethical is a Good Business
Being Ethical Strengthens Our Position and Improves Our
Competitiveness

Business Stakeholders expect Companies to behave Ethically

Goodwill, customer
loyalty, reputation

Prevention and
reduction of
criminal penalties

Balance the needs

and wishes of the
stakeholders

Global Challenge

Employee Retention

Preventing civil
lawsuits

Market leadership

Setting the
example, ethical
leadership

But .. Being Ethical Poses Challenges

And, . We have reasons and excuses to rationalizeem
Because
No universal principles on what is right or wrong
What is right in one situation is wrong in another
who decides?
How do we know what is right or wrong? AndPressure
to meet unrealistic
goals
by unethical
Cut throat Competition; Often competition wins dealsAcute
Competition
means; Others getting promoted .
Economic
Greed
It is common in our business and it is not wrong Pressure
to earn
profit
To win business contracts, people expect bribesWorkplace stress and
competition
me to do
this
My boss asked
Rationalizations
???
Information of unethical practices
by media
Poor
leadership
Lack of guidelines and
Immoral
model code

I think
My Behavior Isnt Really that Illegal Or
My Action Is In the Interest of my company
No One Will Find Out What Ive Done
The Company or Boss Will Condone My Action And Protect
Me

What Would You Do?

How do you respond to real-life Ethical Dilemmas?

Source and Courtesy : http://abcnews.go.com/WhatWouldYouDo/page?id=10614513

Source and Courtesy : http://abcnews.go.com/WhatWouldYouDo/page?id=10614513

Ethical Dilemmas at Workplace

Ethical Dilemmas

arise in business
becausemultiple
stakeholdersmake
conflicting demands.
3-20

Ethical Dilemmas at Workplace

(1) You are the Marketing Head of a large firm. You have

employed an agency to prepare market and competitive

strategy. They have searched the trash of competitor and got
a very important strategy document and they share that with
you as part of the overall strategy. WWYD?

(2) You are the Head of Alliances and Strategic Partnerships of

a Global Corporation. You get an information that one of your
large partners in Indonesia is entertaining the Government
officials by paying their trips to exotic locations. WWYD?

(3) As a Procurement and Purchase Manager, youve made a

verbal agreement with a supplier. A competitor offers you a
deal for 50% less. Do you take it the deal? WWYD?

Ethical Dilemmas at Work Place (2)

(4) Youre traveling in Elbonia on business when youre invited

to a feast by shepherds. Youre given the sheeps eyeball, the

greatest Elbonian delicacy. To refuse it is the greatest insult.
Everyones watching. Do you gulp it down? WWYD?
(5) A close friend will be interviewed for a job with your
employer. He asks you for a list of the questions in advance.
Do you supply it? WWYD?
(6) After closing a big deal, your manager surprises you with a
warm, lingering hug. Do you tell your manager youre not
comfortable with this? WWYD?
(7) You decide not to hire a deserving candidate because hes
wearing a nose ring. When he asks why he didnt make it, do
you give the real reason? WWYD?

Ethical Dilemmas at Work Place (3)

(8) You have a struggling young company. You have to choose

between two equal candidates for a job, a man and a woman.

The woman will work for 20% less than the man. Do you hire
her for that reason? WWYD?
(9) The customer wants a refund. You agree that a refund is
called for but company policy says No. If you go to Corporate,
the customers refund will be denied. If you act on your own
authority, the customer will be satisfied, but you may get in
trouble. What would you do? WWYD?
(10) Youre reviewing the results of an employee survey and
accidentally discover a way to see individual responses and
comments. Do you keep reading or report the problem? WWYD?

Key Ethical Issues in Business

Ethical Business
Practices

Consumer

Respect Consumer Rights

Avoid exploitation of consumers
Quality of products promote wellness
and product safely

Employees

Respect the employees

Fair treatment of employees
Non-discrimination

Shareholder

Transparency and governance

Disclosures and Information access

Corporate Citizen

Principle and value based business

Avoid payment of bribes
Behave as a responsible corporate citizen
Fair trade practices and Healthy
competition

Unethical Business
Practices

Non-compliance with
code of conduct
Abusive behaviour,
coercion, bullying,
harassment of coworkers

Divulging confidentiality

Bribery and corruption

Taking credit for coworkers ideas

Financial irregularities,
false accounts
Covering up incidents

Ethical Business
Practices

Lying to colleagues,
customers and authorities
Unfair Discrimination
Sexual harassment

Firing whistle blowers

Misappropriation of funds
Misuse of facilities for
personal gain

Insider trading
Stealing
Conflict of interest
Questionable Payments

Consumer

Respect Consumer Rights

Avoid exploitation of consumers
Quality of products promote wellness
and product safely

Employees

Respect the employees

Fair treatment of employees
Non-discrimination

Shareholder

Transparency and governance

Disclosures and Information access

Corporate Citizen

Principle and value based business

Avoid payment of bribes
Behave as a responsible corporate citizen
Fair trade practices and Healthy
competition

Ethics and Business Ethics

What is ethics
Is Ethics following your Feelings?
Relatives and strangers, Friends vs. foes, Prejudices and biases

Is Ethics following your Religion?

Animal rights (vegetarian & vegan), Euthanasia, Family

planning, Gay
What does the Religion say?

Is Ethics following the Law?

Apartheid laws of SA, No voting or property rights for women,

Death penalty, Drugs Laws vary from country to country

Is Ethics following whatever the Society accepts?
Entire society can become ethically corrupt Nazi Germany, no

social consensus on many issues (abortion, gay rights, drugs,

prostitution)

Ethics is a Moral Philosophy

Ethics - Discipline dealing with what is good
and bad and with moral duty and
obligation,
A set of moral principles or value
A theory or system of moral values
Ethics assists individuals in deciding when
an act is moral or immoral, right or wrong
Ethics can be grounded in natural law,
religious tenets, parental and family
influence, educational experiences, life
experiences, and cultural and societal
expectations.

Business Ethics - Application of the

discipline, principles, and theories of
ethics to the organizational context.

Business ethics - Principles and

standards that guide behavior in the
world of business

Praiseworthy or
Blameworthy
Responsible or
Irresponsible
Fair or Unfair
Good or Bad
Right or Wrong
Legal or Illegal

Corporate Governance, Compliance, Ethics and Social

Responsibility

Business Ethics - Themes for

Discussion
The major theories or "moral philosophies" that
are applied to business ethics;

A well-established model of ethical decisionmaking in business;

The factors that affect individual ethical
decision-making in the business context.

Major theories or Moral Philosophies

Applied to Business Ethics

Teleology Consequentialism Action Ethics

Thinking about doing

Teleological theories

Focus on the consequences caused by an action

Often referred to as "consequentalist" theories
By far the most common teleological theories are egoism and utilitarianism

Egoism

Driven by Self interests

Core of free market economy - profit centric business model Need checks
and balances

Utilitarianism

Overall good; e.g., companies decide to move their production facilities from one
country to another. How much good and how much harm from the move? If the good
appears to outweigh the harm, the decision to move may be deemed an ethical one,
by the utilitarian yardstick

Benefit cost analysis; Social benefit-cost analysis

Issues of measurement and minority interest getting overlooked

Acks that many actions benefit some and harm some; Dominant Business Philosophy

Deontology Agent Ethics

Thinking about being

Deontology

Focus on the fairness of means irrespective ends / consequences

Fairness of action; Treat all fairly;

Interpersonal Fairness and Information Fairness

No universal principles ; right and wrong is determined by individual or groups

The relativist believes that standards of right and wrong change over time and are
different across culturesand does not accept that some ethical standards or
values are superior to others. The concept of relativism can probably be
summarized as "What's right for one may not be right for another," or "When in
Rome, do as the Romans do."

No action to harm some for the benefit of others

Each treated with same respect and no one should be treated as means to an end
Principles are permanent and unchanging

Justice
Distributive fairness is based on the outcomes received by individuals and their
perceptions of these outcomes. Procedural fairness is based on the processes
(policies, procedures, rules) employed to reach decisions. Individuals evaluate the
fairness of these processes in addition to (or instead of) the outcomes received.

Relativism

Ethical Dilemmas and Ethical Decisions

Theory, Practice and Outcome - Caselets

As you watch the following video, note down your views, considerations and decision.

Ethical Dilemma.mp4
Business Ethics Resolving an Unethical Situation.mp4
Discussions Topics

1. What was your initial decision?

2. Dis that decision consider the various factors that were brought out in the later part
3. Do you think a structured approach to decision with guidelines based on the theories
(discussed in previous section) would have helped you to take better decisions?

Factors Affecting Ethical Decision Making

Individual Difference Factors
Cognitive Moral development of
the individuals Three stages
Pre-conventional avoid
punishment or seek personal
reward; associated with small
children
Conventional Fairness to
others and a desire to conform
to social norms- adult
behaviour
Principled level At principle
level inner conviction not
affected much by situations
and environment

Situational (organizational)
factors
Organizational culture, Value
system, Leadership
Supervisor
Policies and procedures e.g.,
Policy for accepting gifts
Org code of conduct Work group behaviour

Pressure to meet unrealistic

goals
Acute
Competition
Economic
Greed
Pressure to earn
profit
Workplace stress and
competition
Information of unethical practices
by media
Poor
leadership
Lack of guidelines and
model code

Issue-related factors
Moral intensity of issue
decides the importance
Issue intensity Consequences
or impact, perceptions of the
society / societal consensus

Factors Affecting Ethical Decision Making

Individual Difference Factors
Cognitive Moral development of
the individuals Three stages
Pre-conventional avoid
punishment or seek personal
reward; associated with small
children
Conventional Fairness to
others and a desire to conform
to social norms- adult
behaviour
Principled level At principle
level inner conviction not
affected much by situations
and environment

Situational (organizational)
factors
Organizational culture, Value
system, Leadership
Supervisor
Policies and procedures e.g.,
Policy for accepting gifts
Org code of conduct
Work group behaviour

Pressure to meet unrealistic

goals
Acute
Competition
Economic
Greed
Pressure to earn
profit
Workplace stress and
competition
Information of unethical practices
by media
Poor
leadership
Lack of guidelines and
model code

Issue-related factors
Moral intensity of issue
decides the importance
Issue intensity Consequences
or impact, perceptions of the
society / societal consensus

Ethical Issues and Challenges in

International Business

Scandals:
High Flying Cos
Crumbled like Pack
of AIG
Cards

Lehman Brothers
WorldCom
Satyam
Enron
Arthur Anderson

Corporate World, Capitalism and Free Markets Importance of

Ethics, Governance and Social Responsibility

Ethical Issues and Importance - Timeline

1960 s
s
Ethical Climate

Social unrest. Anti-war

sentiment. Employees have
an adversarial relationship
with management. Values
shift away from loyalty to an
employer to loyalty to ideals.
Old values are cast aside.

1970 s

1980 s

Ethical Culture

Ethical Culture

Ethical Climate

Defense contractors and other

major industries riddled by
scandal. The economy suffers
through recession. Unemployment
escalates. There are heightened
environmental concerns. The
public pushes to make businesses
accountable for ethical
shortcomings.

The social contract between

employers and employees is
redefined. Defense contractors are
required to conform to stringent
rules. Corporations downsize and
employees' attitudes about loyalty to
the employer are eroded. Health care
ethics emphasized.

Global expansion brings new ethical

challenges. There are major
concerns about child labor,
facilitation payments (bribes), and
environmental issues. The
emergence of the Internet
challenges cultural borders. What
was forbidden becomes common.

Major Ethical Dilemmas

Major Ethical Dilemmas

Employee militancy (employee

versus management mentality)

Environmental issues
Increased employee
-employer tension
Civil rights issues dominate
Honesty
The work ethic changes
Drug use escalates

Business Ethics
Developments

Companies begin
establishing codes of conduct
and values statements

Birth of social responsibility

movement

Corporations address ethics

issues through legal or
personnel departments

1990

Human rights issues surface

(forced labor, sub-standard wages,
unsafe practices)
Some firms choose to cover rather
than correct dilemmas
Business Ethics Developments
Compliance with laws high-lighted
Foreign Corrupt Practices Act of
1977
Values movement begins to move
ethics from compliance orientation
to being "values centered"

Source : ERC

Major Ethical Dilemmas

Bribes and illegal contracting
practices
Influence peddling
Deceptive advertising
Financial fraud (savings and loan
scandal)
Transparency issues arise
Business Ethics Developments

Major Ethical Dilemmas

Unsafe work practices in third world
countries
Increased corporate liability for
personal damage (cigarette
companies, Dow Chemical, etc.)
Financial mismanagement and fraud.
Business Ethics Developments
Federal Sentencing Guidelines for
Organizations (1991)
Class action lawsuits

ERC develops the U.S. Code of Ethics

for Government Service (1980)

Global Sullivan Principles (1999)

ERC forms first business ethics office

at General Dynamics (1985)

In re Caremark (Delaware Chancery

Court ruling re Board responsibility
for ethics)

Defense Industry Initiative

established (1986)

IGs requiring voluntary disclosure

Some companies create ombudsman

positions in addition to ethics officer
roles
False Claims Act (government
contracting)

http://www.ethics.org/resource/business-ethics-timeline

ERC establishes international

business ethics centers
Royal Dutch Shell International
begins issuing annual reports on
their ethical performance

Ethical Climate 2000s

Ethical Culture

Unprecedented economic growth is followed by financial failures.

Acts of terror and aggression occur internationally.

Ethics issues destroy some high profile firms.

Personal data is collected and sold openly. Hackers and data thieves plague businesses and
government agencies.

Major Ethical Dilemmas

Cyber crime
Privacy issues (data mining)
International corruption.
IP theft

Financial mismanagement

Role of business in promoting sustainable development

Business Ethics Developments

Business regulations mandate stronger ethical safeguards (Federal Sentencing Guidelines for
Organizations; Sarbanes-Oxley Act of 2002)

Anticorruption efforts grow.

Revised Federal Sentencing Guidelines for Organizations (2004)

Stronger emphasis on Corporate Social Responsibility and Integrity Management

OECD Convention on Bribery (1997-2000)
UN Convention Against Corruption (2003); UN Global Compact adopts 10th principle against
corruption (2004)
Increased emphasis on evaluating ethics program effectiveness

Global Business
Ethical Issues and Challenges

Challenges to Global Business in

Implementing
Ethical
complexStandards
than in home country due
Ethical Issues are more
to considerable variation across countries in laws, culture,
business practices, political, economic and social
development (human rights, education, poverty, equality,
etc.)
Institutional and regulatory frameworks to implement
ethical practices vary
Facts of situations encountered internationally difficult to
uncover

The complex task of formulating ethical policies guided by a

combination of Laws, Ethical Principles, and Culture

Key Ethical Issues in Global Business

Different Laws, International Host and Home country laws, Intl law,
Minimum age, Minimum wage, work hours, Child labor,
Laws and Institutions
Sweatshops

Cultural Relativism (relying

solely on host country laws
and practices)
Corruption
Product safety and quality
Environment
Discrimination

Culture, history, resources, institutions differ considerably

across countries
Universal Principles (Universal Relativism)
Gifts and favors acceptable limits? Bribery and illicit
payments
FCPA
Product safety standards, Product quality
Consumer ignorance, lack of education; AIDS drugs

Global warming, Pollution

No discrimination based on race or sex

Erstwhile apartheid laws of SA

Ethical Issues in International

Business
International Law and Institutions

Home Country law, Host Country Law and International Law from Intl. Institutions
(ICC,WTO, UN, WIPO, etc)

Enforceability of international law weak and also not uniform

Home and Host country laws may be in conflict (questionable payments FCPA of USA)

Significant cultural variation across countries (e.g., Fundamental religious states

womens rights, Human rights in countries that are not democratic North Korea, China,
Cuba)

To aim for Universal Principles and Standards while respecting Local traditions

Home Country laws may not be enforceable in Host Country (e.g, US Sanctions against
North Korea or Cuba, Product safety standards of EU CE Mark)

Cultural Relativism

Key Questions to answer when there is a Conflict of Cultural Tradition

Is it possible to conduct business in host country without undertaking the practice?

And is the practice violation of a core human value? (Human dignity, respect for basic rights)

Ethical Issues in International

Business
Operating in Developing Countries

Reasons like poverty, lack of education, and inadequate healthcare

create situations in which individuals cannot be expected to take the
same decisions that would be made in a developed country;

Consume ignorance, inadequate regulatory framework in many

developing countries

Liability system in developed countries incentivize product safety

and quality (e.g., prohibited drugs)

AIDS and Sub-Saharan African Countries, Other Developing

Countries

Patented and expensive AIDS drugs

Compulsory licensing (Brazil), Indian Patent laws (no product patent
until recently)

Ethical Issues in International

Business
Responsibilities for Working Conditions in Suppliers Factories
Sweatshops

Sourcing from low cost countries to derive cost advantage

Exchange of gifts and favors is customary in number of countries may go

beyond ethical standards

US Response Foreign Corrupt Practices Act (FCPA)

Issues of Working conditions, Workhours, Minimum age (Child Labor), Wages

Popular case of Nike in Southeast Asia (Vietnam)

Questionable Foreign Payments and Corruption

Covers the use of agents, intermediaries and third parties also

Ethical Organizations

Framework for Ethically Acceptable

Behaviour

Ethical Organizations
Organizations should display Ethical Behaviour
Framework to Judge Ethical Nature of Business

Theory of Corporate Excellence

Ethics and Shareholder Value
Ethics and Corporate Governance

Leadership Ethical Role Model Behaviour

Organizational DNA and Culture

Code of Conduct

Policies, Guidelines, and Rules to guide

behaviour and decisions

A code is an open disclosure of the way an

organization operates

identity Code of conduct offer an invaluable

opportunity for responsible organizations to
create a positive public for themselves

Tool to encourage discussions of ethics and to

improve how employees deal with the ethical
dilemmas, prejudices and grey areas

Jack Welch on GE Values

Ethics Framework for Structure, Processes and

Performance

Our Vision, Mission and Values

To Inspire and influence with Integrity and Innovation, Our Customers (Professionals and Students) to
Explore Infinite Possibilities, Enhance their Capabilities and Accomplish More in their Personal and
Professional Life.
To make a difference to our Customers and Community by spreading traditional Values through
Modern Methods and Technology
To build a community of lifelong learners with a shared purpose of Accomplishing More, Celebrating
Life, by supporting one another and the community
Bumblebee Philosophy
Bumblebees defy the Principles of Aerodynamics and Fly, as they are unaware of their Limitations.
Believe in Yourself and You can explore Infinite Possibilities too.

G Narasimhan
Director,
Bumblebee Academy
Ph +91 9845025586
gnsimha@gmail.com

Thank You.