BUSINESS ETHICS

Moral principles of duty and virtue that prescribe how we should behave; the foundation of our internal control.

Integrity Responsibility Respect Fairness Excellence

Objectives of Ethics
Study of human behaviour and makes evaluative assessment

about that as moral or immoral.

Establishes moral standards and norms of behaviour. Makes judgment upon human behavior based on these

standards and norms.

Prescribes moral behaviour and makes recommendations

about how to or how not to behave.

Ethics will be different at different levels

At the basic level, it is about discipline, i.e.. to maintain punctuality, coming to work on time, behaving properly with superiors,

colleagues and subordinates and not wasting time during working hours.
At the top level, it is about commitment and Protecting the interests of the organization.

Factors Influencing Ethics

Individual
o Values o Work Background o Family Status o Personality

Organizational
oTop Level Mgmt. Philosophy oThe Firms Reward System oJob Dimensions

Environmental
oCompetition oEconomic Conditions oSocial/Cultural Institutions

Sources of Ethics

1.
2.

Genetic Inheritance : the qualities of goodness is a product of genetic traits strengthened over time by the evolutionary process.
Religion : religious morality is clearly a primary focus in shaping our societal ethics.

3.
4. 5.

Cultural Experience : individual values are shaped in large measure by the norms of the society.
The legal system : laws represent a rough approximation of societys ethical standards. Codes of Conduct : three primary categories of codes, a) company codes, b) company operating policies, c) codes of ethics.

Code of Ethics American Marketing Association

Responsibilities of Marketer : a) not to do harm knowingly, b) to adhere all applicable laws and regulations, c) the accurate representation of their education, training and experience, Honesty and Fairness : a) being honest in serving consumers, clients, employees, suppliers, distributors and the public. b) no knowingly participating in conflict of interest without prior notice to all parties involved, c) establishing equitable fee schedules including the payment or receipt of usual, customary and/or legal compensation for marketing exchange.

Code of Ethics American Marketing Association

Rights and Duties of parties :

a) products and service offered are safe and fit for their intended use, b) communications about offered product and services are not deceptive, c) all parties intend to discharge their obligations, financial and otherwise, in good faith,

There is a big difference between what you have a right to do and what is right to do.

Its not about what we say, or intend, nor is it simply a written code or a framed credo.

FAIRNESS Process Impartiality Equity CARING The heart of ethics It is scarcely possible to be truly ethical and yet unconcerned with the welfare of others

CITIZENSHIP Duties that prescribe how we ought to behave as part of a community.

Foundations of Ethical Behavior

Treat others as you would be treated : Respect Honesty Trust

Taught in All Cultures

Judaism: What you hate, do not do to anyone. Islam: No one of you is a believer until he loves for his brother what he loves for himself. Hinduism: Do nothing to thy neighbor which thou wouldst not have him do to thee. Sikhism: Treat others as you would be treated yourself. Buddhism: Hurt not others with that which pains thyself. Confucius: What you do not want done to yourself, do not do to others. Aristotle: We should behave to our friends as we wish our friends to behave to us. Plato: May I do to others as I would that they should do unto me.

TREAT PEOPLE THE WAY YOU WANT THEM TO TREAT YOU

Ethical Issues Relating to Business

Honestycommunication and behavior consistent with facts

Disclosure of information Promises/commitments Laws and professional standards Representation of others like shareholders

Unfair competition
Refrain from bribes and excessive gifts Comply with anti-trust laws

Just compensation
Respect intellectual property Treat employees fairly

Respecting rights of others

Treat others with fairness and respect regardless of age, religion, ethnic group, sex, economic status, etc., especially children, women, and subordinates Respect others and future generations by treating the environment well

Values are important beliefs and desires that shape attitudes and motivate actions.

2000 Josephson Institute, Ethics in the Workplace

Values

Values are general terms referring to those things which people regard as good, bad, right, wrong, desirable, justifiable etc. Business is driven by values. Managerial values are e.g. importance of good in organizations (like productivity, profit maximisation, employee welfare, industry leadership, organisational stability, organisational efficiency, organisational growth, social welfare etc.), groups within organisations ( like employees, customers, co-workers, superiors, subordinates, stock-holders etc.) and the personal goals of individuals.

Core Values
Honesty Being straightforward, sincere, truthful, free of fraud,

deception or misrepresentation

Respect To give particular attention to, show consideration for, or

hold in high or special regard

Responsibility Moral Leaders take responsibility for their own

actions/failures . Involves a commitment to give a quality performance and not making promises that cannot be kept, such as committing to unrealistic delivery dates. Also calls for acknowledgment of implicit commitments, such as the protection of confidences
Fairness Involves a elimination (or at least a minimization) of one's

own feelings, prejudices and desires, so as to achieve a proper balance of conflicting interests.

Relevance of Values in Managers

1. Knowledge of business ethics will help managers in resolving ethical issues/dilemmas as they arise.

2. Knowledge of values will help managers in setting highly responsible tone for the organization - in individual judgments and decisions whether ethical or not.
3. It helps manager to realize their social responsibility. Many organizations find it wise to go beyond their primary mission and take into the needs of the community. Business ethics make managers more accountable for social responsibility. 4. Knowledge and awareness of the concept and practices of business ethics is equally helpful to practicing managers in managerial conduct and decision-making.

Types of Values
VALUES
TERMINAL INSTRUMENTAL

refers to desirable end-states of existence, the goals that a person would like to achieve during his/her lifetime.

refers to preferable modes of behavior, or means of achieving the terminal values.

Importance of Values
1. Values lay the foundation for the understanding of attitudes and motivation because they influence our perceptions. 2. Individuals enter organizations with notions of what is right and wrong with which they interpret behaviors or outcomes 3. Values generally influence attitudes and behavior. Does your values match with your Job/Organization? How you will react?

Professional Values
Working within the laws of India Serving with competence excellence efficiency objectivity impartiality Continual improvement of quality of service, Respecting all stakeholders

Ensuring proper, effective use of company money

Ensuring the means are as important as the ends

Upholding transparency in functioning while respecting confidentiality

Ethical Values
Conserving, public trust in the integrity, objectivity and impartiality of government Resolving official duties vs private interest conflicts in favour of the public interest

Acting at all times in such a way as to uphold the public trust

Taking all decisions in the public interest

People Values
Exercising authority and responsibility with respect for human dignity Demonstrating respect, fairness courtesy in all dealings with citizens and fellow public servants Leading by participation, openness and communication, with respect for diversity

Treating people with fairness and civility at all times

Basing appointment decisions on merit

Fundamental in recruitment evaluation promotion

Drivers of Values & Ethics Performance

RESULTS Leadership People

Achieving High Levels of Values and Ethics Performance

Drivers

Organizational Culture Risk Assessment,Controls Standards Preventing and Managing Values and Ethics Problems

The Three Pillars of High Performance

Achieving high levels of positive values and ethics performance for an organization involves three foundation pillars:
Leadership

Organizational Culture
People Management

Achieving high levels of ethics and values performance can lead to higher levels of public trust and confidence.

Shared Values

Integrity

Doing the right thing when no one is looking

Fairness (Safety & Trust)

Individual & Collective Accountability

To ourselves & our profession To each other To management To the Laboratory

Respect and Appreciation for the individual

Ones expertise Ones opinion A persons uniqueness Reciprocal generosity -We encourage responsible & informed risk taking (judgment)

Why Ethical Behavior Adds Value

Better information
Trust from investors Better allocation of resources Customers will be more loyal

Fair competition
Lowers cost of business in economy Leads to better decision-making (do whats best for

firm, not one individual) Improves competitive nature of a countrys economy

Why Ethical Behavior Adds Value

Just compensation
Attracts and retains better employees

Rights of others
Draws upon talents of wider set of individuals Develops long-term respect from the community Maintains the environment for long-term value to all

Its the right thing to do!

Can Ethical Values be Taught? Level 1: The Foundation

Personal Ethical Understanding

Right/wrong, Fairness, Honesty, Personal Integrity, Respect for Others

Personal Ethical Understanding

Concepts of right and wrong, fair play, respect for

rights of others, honesty, personal integrity

Best learned in the home at an early ageand

follow-up is needed throughout life

Institutions (churches, schools, etc.) can help

Level 2: Application to Business

Application of Ethics to Business Situations

Fraudulent Practices, Misleading Advertising, Unfairness

Personal Ethical Understanding

Right/wrong, Fairness, Honesty, Personal Integrity, Respect for Others

Application of Ethics to Business Situations

Fraudulent practices, misleading advertising, unfairness Can be taught in management education and

organizationsprovided students have a personal understanding of ethics Can be reinforced by policies, codes of ethics, training

Application of Ethics to Business Situations

Companies also have to further strengthen ethics management and social responsibility activities to improve their public image

Level 3: Ethical Courage

Ethical Courage
Willingness to Pay the Price for Ethics

Application of Ethics to Business Situations

Fraudulent Practices, Misleading Advertising, Unfairness

Personal Ethical Understanding

Right/wrong, Fairness, Honesty, Personal Integrity, Respect for Others

Ethical Courage
It is not sufficient to simply understand ethical principles One must have the courage to pay a price for being ethical

Examples can be helpfulcase studies showing people willing to stand up for ethical principles

Level 4: Ethical Leadership

Ethical Leadership
Helping Others to be Ethical

Ethical Courage
Willingness to Pay the Price for Ethics

Application of Ethics to Business Situations

Fraudulent Practices, Misleading Advertising, Unfairness

Personal Ethical Understanding

Right/wrong, Fairness, Honesty, Personal Integrity, Respect for Others

Ethical Leadership
The ability and willingness to encourage others to behave ethically

Includes
Developing an organizational climate that fosters

ethical behavior Structuring policies that encourages ethics Behaving ethically while facing the pressures of leadership

The Importance of Ethical Leadership

Honest Employees

Will be Honest Always

Swing Group
Could Go Either Way

Dishonest Employees

Policies Wont Help Much

Ethical Leadership will significantly impact an organization since the vast majority, in this view, can be influenced to behave ethically.

Importance of Ethical Leadership

Honest Employees

Dishonest Employees

Will be Honest Always

Swing Group
Could Go Either Way

Policies Wont Help Much

Strong Ethical Leadershipinduces the group to behave as if they were the honest employees.

Importance of Ethical Leadership

Honest Employees

Will be Honest Always

Swing Group Wont Help Much Policies

Could Go Either Way

Dishonest Employees

Weak Ethical Leadershippermits group to behave as if they were the dishonest employees.

The work ethos is the prevalent outlook towards work or the value system with regard to the working environment and communitys value system, whether it is of an individual or a work group.

NEED AND IMPORTANCE OF BUSINESS ETHICS

I. Protection of Consumer rights: Consumer is the centre of all business activities. In fact, business is essentially meant for satisfaction of consumer wants. Unfortunately, consumers are the most neglected and exploited group. The application of business ethics will help to confer and implement consumer rights. Business ethics can be used to check malpractices like adulteration, unfair trade practices and to make the working of business consumer oriented. II. Social Responsibility: Business ethics is a means of making business socially responsible for its actions. Exploitation of consumers, employees, discriminate use of natural resources, etc; is quite common in all types of business. Compliance to ethical standards will ensure (a) protection of consumer rights, (b) public accountability, (c) protection of workers interests, and (d) proper utilization of natural resources. III. Concept of Socialism: The concept of socialism in business states that gains of a business must be shared by all and just by the owner of business. Profit is a sing of business skill and talent. Profit is also a result of group efforts. Employees, shareholders, consumers, Suppliers and others contribute to the success of the business. Therefore, success should be shared by all concerned.

Contd
IV..Consumer Movement:
The growth in consumer movement is also another important factor that has necessitated the need for business ethics. The spread of education and awareness among consumers about their rights has made the business community to conduct business on ethical principles. V. Better Relations With the Society: Business ethics is needed to develop good relations between business and society. The relationship of business with society has various dimensions such as its relations with shareholder, employees, consumers, distributors, competitors and government. Business ethics will help to promote and protect the interest to various groups.

CONCEPT OF BUSINESS ETHICS

1. Business Ethics towards Employees: Payment of right wages and salaries. Provision of proper facilities. Proper personnel policies relating to promotion, performance appraisal, transfers etc;
2. Business Ethics Towards Customers: Right pricing. Ethical promotion including advertising. Provision of proper information about products etc. 3. Business Ethics Towards Competitors: Fair competitive practices. Restraining from instigating employees, suppliers or dealers or competitors etc.

Contd.
4. Business Ethics Towards Government: Timely filing returns and other records. Payment of proper dues including taxes. Supporting Government in social development activities, etc;
5. .Business Ethics Towards Suppliers: Proper supply contact. Timely payment of dues. 6. Business Ethics Towards Dealers: Timely delivery of products. Proper dealer contact.

Contd..
7. Business Ethics Towards Shareholders or Stakeholders: Provision of proper information. Timely payment of dividend. Restraining form insider trading on the stock markets, etc; 8. Business Ethics Towards Financial Institutions: Proper information about firms financial position. Timely repayment of advances and interest, etc.

Ethics @ Workplace

Ethics in the workplace in its simplest terms means doing the right things that guide your behavior at work.

On-the-Job Ethical Dilemmas

Situation in which a business decision may be influenced for personal gain. Telling the truth and adhering to deeply felt ethical principles in business decisions.

Employees disclosure of illegal, immoral, or unethical practices in the organization.

Businesspeople expect employees to be loyal and truthful, but ethical conflicts may arise.

Golden Rules of Ethics @ Workplace

Avoid Creating Disturbance Trust & Respect for Others Work Dont Interfere In Others Work Respect the Privacy of your Co-workers Avoid Gender Biasness No/Least Personal Work During Work Hours

Five Ps of Ethical Decision-making

Purpose
Persistence Pride Perspective

Patience

Five Ps of Ethical Power

PURPOSE:
I see myself as being an ethically sound person.

I let my conscience be my guide.

N o matter what happens, I am always able to face the mirror, look straight in the eye, and feel good about myself.

Five Ps of Ethical Power

PRIDE:
I feel good about myself. I dont need the acceptance of other people to feel important. A balanced self-esteem keeps my ego and my desire to be accepted from influencing my decisions.

Five Ps of Ethical Power

PATIENCE:
I believe that things will eventually work out well. I dont need everything to happen right now. I am at peace with what comes my way!

Five Ps of Ethical Power

PERSISTENCE:
I stick to my purpose, especially when it seems inconvenient to do so. My behaviour is consistent with my intentions. As Winston Churchill said, Never! Never! Never! Never! Give up!

Five Ps of Ethical Power

PERSPECTIVE:
I take time to enter each day quietly in a mood of self-reflection. This helps me to get myself focused and allows me to listen to my inner self and to see things more clearly.

Decision-Making
Ethical decision-making involves the ability to separate

right from wrong along with the commitment to do what is right

Decision-Makers Personal Moral Philosophy (Moral philosophy

involves systematizing, defending, and recommending concepts of right and wrong behavior)

Ethical Decision Making Process

1
2 3 4 5 6

Recognizing a Problem & Define the problem Identify the underlying principles, legislation and policies Identify and consider the options Choosing a Solution Implementation Evaluating the Solution

Define the problem

Gather as much information as you can that will illuminate the situation. In doing so, it is important to be as specific and objective as possible. Writing ideas on paper may help you gain clarity. Outline the facts, separating out assumptions, hypotheses, or suspicions. There are several questions you can ask yourself: What is difficult about the situation? What other factors are involved (e.g. whole of government policy)? Who else is involved and what are their points of view on the matter? Is there a need to work cooperatively? What effect does your behaviour have on them

Identify the underlying principles

After you have clarified the problem, refer to the Code of Ethics to see if the issue is addressed there. If there is an applicable standard or several standards and they are specific and clear, following the course of action indicated should lead to a resolution of the problem. To be able to apply the ethical standards, it is essential that you have read them carefully and that you understand their implications. If the problem is more complex and a resolution does not seem apparent, then you probably have a true ethical dilemma and need to proceed with further steps in the ethical decision making process. The following area can help to understand the Underlying Principles
Do your personal interests conflict, or reasonably appear to conflict, with

the public interest? What are your duties as a public sector employee? Does the Code of Conduct require you to behave in a certain way? Is there a relevant guideline, determination or policy? Are there any legal implications? Where necessary, seek legal advice.

Identify and consider the options

List all alternative options. For each option apply risk management principles to identify the impact on different stakeholders, the legal implications and the relevant principles of the Code of Conduct. For decisions that could have a large impact, or if you are still unsure as to the preferred action, get a second opinion from an independent, trusted person. Where necessary, seek advice from manager, organisations human resources unit or ethics advisor, or other agencies.

Choosing a Solution
Considering the information you have gathered and the priorities you have set, evaluate each option and assess the potential consequences for all the parties involved. Ponder the implications of each course of action for the client, for others who will be effected, and for yourself as a counsellor. Eliminate the options that clearly do not give the desired results or cause even more problematic consequences. Review the remaining options to determine which option or combination of options best fits the situation and addresses the priorities you have identified. What would your family or chief executive say if your actions were reported on the front page of a newspaper? How will this decision be viewed by future generations? Would you be happy if this action was performed on you?

Implementation
Create a detailed, step-by-step plan for implementing the

solutions you choose

Who will do what, when, how?

This should include a means of evaluating the solutions effectiveness by following ways Your choice of action must be within the legislation, policies and guidelines both for your organisation and the whole of government. Your behaviour must reflect the Code of Conduct. You must be able to justify your course of action.

Evaluating the Solution

This is done after the solution has been implemented and involves comparing the results of what happened to what you expected to happen. In addition, you would want to consider what you might do differently if the situation were to occur again.

Benefits of Ethics
The list of potential benefits:
Fostering a more satisfying and productive working

environment Building and sustaining Organisation reputation Maintaining the trust of staff to ensure continued selfregulation Providing ethical guidance for employees prior to making difficult decisions Increased employee loyalty, higher commitment and morale as well as lower staff turnover Reputation benefits (customers and suppliers) More open and innovative culture Generation of good-will in the communities in which the business operates

HOW ORGANIZATIONS SHAPE ETHICAL CONDUCT

Ethical Awareness

Code of Conduct Formal statement that defines how the organization expects and requires employees to resolve ethical questions.

Ethical Reasoning

Codes of conduct cannot detail a solution for every ethical situation, so corporations provide training in ethical reasoning.

Ethical Action

Helping employees recognize and reason through ethical problems and turning them into ethical actions.

Ethical Leadership

Executives must demonstrate ethical behavior in their actions.

Personal Traits
Three personal traits act as moderators of an individuals personal values in decision making activities. They are Ego strength Field dependence and Locus of control

Ego Strength
Ego strength is actually another term for selfconfidences. Ego strength is associated with personal beliefs. A person with high ego strength would be expected to rely more on his own personal values and beliefs of what is right and what is wrong and be less influenced by others.

Field dependence
The tendency to rely on oneself or the field as the primary referent for behavior is field dependence. People who have a tendency to rely on self as a primary referent for their behavior are fieldindependent people. They are relatively cold and distant in relations with others, and more able to separate themselves from others and the environment. However, they have greater accuracy in personal perception, have a more articulated body concept, and have higher restructuring ability.

Locus of Control
The degree to which people believe they are masters of their own fate.

Internals (Internal locus of control) Individuals who believe that they control what happens to them.
Externals (External locus of control) Individuals who believe that what happens to them is controlled by outside forces such as luck or chance.

Morality
Morality can be explained in all these ways:
Morality can be defined as the standards that an

individual or a group has about what is right and wrong, or good and evil. Moral quality or character; rightness or wrongness, as of an action; the character of being in accord with the principles or standards of right conduct. Morality is an informal public system applying to all rational persons, governing behavior that affects others, and has the lessening of evil or harm as its goal.

Stages of Moral Development

There are six stages of moral development and an individual develops sequentially through the stages. Stage one: actions that avoid punishment. Stage two: actions that serve ones needs Stage three: actions that gain approval from others; Stage four: actions that abide laws and authority; Stage Five: actions taken to abide by social contracts and Stage six actions supported by universal principles. All six stages provide a rational moral Action

Moral Judgments
The Moral judgments should be (i) logical, ( Moral judgments should be able to support our
Moral judgments with reason and evidence. )

(ii) based on facts. ( Moral judgments should be based on

facts. Adequate moral judgments cannot be made in a vacuum. We must collect as much relevant information as possible for making them.)

(iii) based on acceptable moral principles.

Global Ethical Issues

Wages and hours
Child labour

Discrimination
Legal and ethical business practices

Product safety and quality

Environment

What causes unethical behaviour

Stress
Confusion Pressure to perform at expected levels

Competition within the industry

No knowledge

Some of the Unethical Business practices are :

Cutting corners on quality
Covering up incidents Abusing or lying Lying customers Stealing from the company Taking credits from co-workers ideas/work Taking or giving bribe

Unethical business practices (contd)

Government corruption Financial scandals Product safety Discrimination

Whats in it for me to be ethical?

-

A more accurate perception of the world around you, follow your conscience.

-Have the courage to do what is right and do try new things even

when it is hard or costly.

-Dont loose heart if you fail or dont get what you want

-A stronger personality, and greater likelihood of being happy in life

CONSIDER CONSEQUENCES
IS IT ETHICAL ? IS IT LEGAL ?

Is it fair ? Does it hurt anyone ? Have I been honest with those affected?

IS IT OK ?
IS IT RIGHT ?

Can my conscience live with this decision ?

5 Part Structure of Business Ethics

Specifications of moral judgment Moral judgments and moral standards Justification of moral judgement Logical reasoning and moral judgement Moral judgement and moral responsibility

ETHICAL RELATIVISM

The theory that suggest what is right is determined by what a culture or society says what is right.

CONCLUSION
In the last few years we have seen a drastic change in society as well as in all facets of the business world. The consumer, today, is more aware of his rights and his requirements. He demands the best quality at the regular prices. Companies today need to incorporate a strong or responsible culture to face the instance reaction of the consumer.
Todays market calls for stringent business ethics to be imposed in the corporate world.

Which Way Will Your Organization Swing?

Good Ethics Means Good Business