Business Ethics

Chapter One
Introduction to Business Ethics

Conscience

Human beings are born with Conscience.

Conscience differentiates us from animals.

We have been given the title of superior

most being of God which lays more
responsibility on us than any other specie.

We have been reminded by different

messengers in form of different religions to
follow the inner voice of conscience which is
built in.

Values

Following the conscience, humans have

made certain rules and laws which help the
society to live peacefully.

There are certain acts which may not be

considered as criminal activities but we still
avoid doing them because they make us
uncomfortable, we call them personal
values.

Values are the moral principles and beliefs

or accepted standards of a person or a
social group.

Ethics

The philosophical study of the moral value

of human conduct and of the rules and
principles that ought to govern it; moral
philosophy

Business Ethics

Business Ethics refers to clear standards

and norms that help employees to
distinguish right from wrong behavior at
work.

In the business context ethics has to do with

the extent to which a persons behavior
measures up to such standards as the law,
organizational policies, professional and
trade association codes, popular
expectations regarding fairness and rights,
plus an individuals internalized moral
standards.

Business Ethics, then, is not distinct from

ethics in general, but rather a subfield.

The subfield refers to the examination and

application of moral standards within the
context of finance; commerce; production,
distribution and sale of goods and services;
and other business activities.

Ethical Dilemmas
An ethical dilemma is a situation where a
potential course of action offers potential
gain but is unethical.

The key question for the business leader

when presented with an ethical dilemma is:
What to do?

Ethical leadership is exhibited when ethical dilemmas are

resolved in an appropriate manner.

Frequently rising ethical dilemmas are:

. Provide a product or service you know is

harmful or unsafe.
. Misleading someone through false
statements.
. Using insider information for personal
gains.
. Playing favorites.

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Manipulating and using people.

Benefiting personally from a position of trust.
Violating confidentiality.
Misusing company property or equipment.
Falsifying documents.
Padding expenses.
Taking bribes or kickbacks.
Participating in a cover up.
Theft or sabotage.
Committing an act of violence.
Substance abuse.
Negligence or inappropriate behavior in the work
place.

Poor ethical choices

While dealing with ethical dilemmas people

sometime make poor ethical choices.

Reasons for weaker decisions may be

because of:
flaw in character; intentional evil
sociopathy; lack of conscience
personal greed, envy, jealousy, resentment,
Fear to lose or will to win at any cost

Flaws in corporate culture

Sometimes good people also end up making

poor ethical judgments because of lack of
understanding.

There could be indifference,

Lack of knowledge and understanding of
standards on part of employees,
Poor or inappropriate incentive system,
Poor leadership.

Strong ethical culture

Business leaders need to take proactive

measures to establish and maintain a
corporate culture that emphasizes strong
moral leadership

Steps to create an ethical

culture

Adopt a code of ethics

Provide ethics training

Hire and promote ethical people

Correct unethical behavior

Be proactive

Conduct a social audit

Protect whistle blowers

Empower the guardians of integrity

Code of ethics;
Identify commonly held moral beliefs and
values of the members of the firm and codify
them into a written document all can
understand and support.
Post the code of ethics in prominent places
around the worksite.
Make certain that all the employees
subscribe to it by asking them to sign it.

Ethical Training

Frequent training sessions should be provided

to employees, either through ethics experts
or through managers of the company.
The employees have to be provided with real
world scenario in which ethical dilemma is
encountered.
Participants have to find solutions based on
the code of ethics provided to them.

Hiring and promoting ethical people

When making human resource decisions

always opt for people with good character
along with technical competence.
Investigate the character of the people
before you hire them.
Base promotional decisions on matters of
character in addition to technical
competence.

Correction of unethical behavior

A progressive discipline may be used;

Oral warning, written reprimand, suspension
without pay and termination are the
consecutive steps taken to enforce the
application of code of conduct.
In some sever cases direct termination is also
done to save organization from further
losses and to signal all the employees that
substandard moral behaviors will not be
tolerated.

Being Proactive

In order to build a reputation of ethicality and

good corporate social responsibility, the
organization should conduct community
services; education programs, hygiene,
housing programs etc.
Seeking and adopting best practices from
other businesses in the community is also a
proactive strategy.

Social Audit

From time to time the leaders of business

might invite responsible parties to examine
the organizations product design,
purchasing, production, marketing,
distribution, customer relations and human
resource functions.
The concept is correction in the areas of
policies as well as social responsibilities.

Protection of whistle blowers

When unethical actions are uncovered within

a firm by one of the employees, managers
should take corrective action.
Turning a blind eye towards the unethical
actions will convey the message to
employees that the ethicality is not the
characteristic of that organizations culture.

Empower the guardians of integrity

The leader of the organization has to lead by

setting an example of firms commitment to
ethics in its relationship with suppliers,
customers, employees and shareholders.

Conclusion

Every business leader faces ethical

dilemmas from time to time, some face
daily temptations

How the leader manifests moral integrity

when faced with ethical dilemmas sets the
tone of everyone else in the organization.

Ethical shortcuts may give short term

benefits but the end results are tragic in the
long run.

Case Study on Ethical

Dilemma

Ethical Principles and

decision making
Chapter 2

Decision through reasoning

An ethical decision rapidly involves
choosing between two options:
One we know to be right
Another we know to be wrong

Therefore we have to do ethical reasoning to

find out which decision is actually right to
take because our decisions built our
identity.

Ethical principles that can used

in ethical reasoning

Utilitarianism

Universalism

Rights

Justice

Virtue

Utilitarianism

Jeremy Bentham and Stuart Mill are

acknowledged as founders of the concept of
Utilitarianism.

Utilitarian view holds that an action is judged as

right or good on the basis of its consequences.

Utilitarianism is also called the consequentialist

approach.

Stuart Mill is known for his greatest happiness

principle, which provides that we should
resolve ethical dilemmas by bringing the
greatest good to greatest number of people.

There will always be a few disgruntled souls in

every ethical dilemma solution, so we just do
the most good that we can.

Some of the issues to which we have applied

utilitarianism include providing health care
even as cost escalate.

Protecting the environment even as we

generate electricity, drive cars, and operate
factories and outsourcing manufacturing of
clothing to developing countries.

Utilitarianism is a theory of balancing that

requires us to look at the impact of our
proposed solutions to ethical dilemmas from
the viewpoint of all those who are affected.

Universalism

Immanuel Kant is considered one of the

leading founders of the principle of
universalism.

Universalism is also called Deonotological

(duty based) approach.

According to universalism, ends do not justify

the means of an actionthe right things must
always be done even if doing the wrong thing
would do the most good to most people.

It is also referred as nonconsequentialist ethic.

Kants principle of the categorical imperative,

unlike utilitarianism, places the moral
authority for taking action on an individuals
duty towards other individuals and
humanity.

Kants approach forces decision makers to

take into account their duty to act responsibly
and respectfully towards all individuals in the
situation.

An important part to Kants theory is that

you not only have to be fair; you have to
want to do it for the right reasons.

Self interest was not a big seller with Kant,

and he wants universal principles adopted
with all good will and pureness of heart.

Rights

The rights theory is also known as

entitlement theory and is one of the more
modern theories of ethics, as philosophers
go.

Robert Nozick is the key modern day

philosopher on this theory.

The two elements of right theory are:

Moral entitlement
Every one has a set of rights also called
moral rights.
Legal entitlement
Its up to the government to protect those
rights, also known as contractual rights.

Moral rights are linked to individuals or groups but

not to societies.

Moral rights are also connected with duties, i.e. my

moral rights imply that others have a duty towards
me to not violate those rights, and vice versa.

Moral rights also provide the freedom to pursue

ones interest, as long as they do not violate
others rights.

Moral rights also allow individuals to justify their

actions and seek protection from others in doing
so.

Contractual rights or contracts provide

individuals with mutually binding duties that are
based on a legal system with defined
transactions and boundaries.

1.

The contract should not commit the parties to

unethical or immoral conduct.
Both parties should freely and without force
enter the contract.
Neither individual should misrepresent or
misinterpret facts in the contract.
Both individuals should have complete
knowledge of the nature of the contract and
its terms before they are bound by it.

2.

3.

4.

Another dimension of ethical principles is

negative and positive rights.

Negative rights;
refers to the duties others have to not
interfere with actions related to a persons
right, e.g. you have a right to freedom of
speech so all, even your employer, have the
duty not to interfere with that right.

Positive right;
Imposes a duty on others to provide for
your needs to achieve your goals, not just
protect your rights to pursue them.

Some of these rights may be part of national,

state or local legislation. For example, you
may have the right to equal educational
opportunities for your child if you are a
parent. This implies that you have the right
to send your child to public school that has
the same standard as any other school in
the community.

So under this big umbrella of ethical theory

we have the protection of human rights that
includes issues such as sweatshops,
abortion, slavery, property ownership and
use, justice (as in court process) animal
rights, privacy and euthanasia

justice

Blame Locke and John Rawls for this theory,

sometimes called the theory of justice and
sometimes referred to as a social contract.

John Rawls offers two principles of fairness:

1.

2.

First principle states that all individuals should be

treated equally.
Second principle states that justice is served when
all persons have equal opportunities and
advantages; through their positions and office, to
societys opportunities and burdens.

Richard DeGeorge identifies four types of

justice:

1.

Compensatory justice.

2.

Retributive justice.

3.

Distributive justice.

4.

Procedural justice.

Compensatory justice
concerns compensating someone for a
past harm or injustice. E.g. affirmative
action programs to compensate decades of
injustice with minorities.
Retributive justice
means serving punishment to some one
who has inflicted harm on another. A
criterion for applying this justice is: Does
the punishment fit the crime?

Distributive justice
refers to the fair distribution of benefits
and burdens. Have someone been unfairly
profited by a policy?
Procedural justice
designates fair decision practices,
procedures, and agreements among parties.
This criterion asks, Have the rules and
processes that governs the distribution of
rewards, punishments, benefits and costs
been fair.

Virtue Ethics

Plato and Aristotle are recognized as

founders of virtue ethics, which also has
roots in ancient Chinese and Greek
philosophy.

Virtue ethics emphasizes moral character in

contrast to moral rules (deontology) or
consequences of action (consequentialism).

One of the purposes of teaching this course is to help

you develop a set of virtues that can serve as a
guide in making both personal and business
decisions.
You will learn those virtues by studying the history of
business through individual case studies.
You will learn what constitutes a good ethical choices
in business and what brought disastrous results for a
business.
From contrasting those results, you can develop your
list of virtues.

Robert solomons list of

Definition
virtues

Virtue standard
Ability
Acceptance

Articulateness

Coolheadedness

Trustworthiness

Being dependable and

competent.
making the best of a bad
situation.
Ability to make and defend
ones case.
Retaining control and
reasonableness in heated
situation.
Fulfilling ones
responsibilities.

Case Study on Ethical Decision

making