Business Ethics and Human value

Dr R SoundararajanRef CSV Murthy , Business Ethics Himalaya Publications

MODULE-I:

Ethics in Business : Definition of business ethics - A model of

ethics; ethical performance in business, managerial values and

attitudes; ethical congruence, managerial philosophy; types of

ethics; code of ethics; importance of ethics in business

Class-1 Hour -1

Understanding EthicsWhat is ethics ?

What are the Theories of Ethics?Briefly describe the Ethical Concepts?

Compare Ethics with Moral?

What is ethics?Briefly describe the

theories?Discussion

What is Ethics?

• Ethics is a set of standards• Many people think

ethics has to do with set of social conventions or religious decree.• Value system

Derived from Latin word ethicus

Greek Word ‘ethikos’

Means character or manner

Concepts of rights and wrongs

Work out from human reason and experience by which free human actions are determined as ultimately right or wrong , good or evil.

• If an action agrees with these standards then ethical and if not it is unethical

Ethics refers to the assessment of Ethical values Philosophy, and principles of human being conduct and its purpose in daily life to establish acceptable human performance

Ethical Theories

1. Aristotle – proposed theory of virtues- an idea of Greek culture

2. Theory of Consequentialism – focus on ones action.

3. Deontology- Study of obligation.

What are the Ethical concepts?Discussion

Ethical concepts

Ethical Subjectivism Ethical

Relativism

EthicalRelativism

What is ethically right or wrong for the individual depends on the principle chosen by him

No absolute truth. Truth depends on the individual or culture believe

Consequences of one’s conduct are the basis for the morality of that conduct

EthicalConsequentiali

smEthics of virtues Associated with moral

and ethical principle

Class-2 Hour -2

What are the objectives of Ethics?

Discussion

What are the objectives of Ethics?1. Deal with human behavior2. Assess Whether a particular act or decision taken by

individual is moral or not3. Establish moral standards and norms and behavior4. Judge human behavior based on standard5. Access the human behavior and express the opinion 6. Set the standard code for moral behavior

Differentiate Ethics and Moral

Discussion

Ethics and MoralBasis of

differenceEthics Morals

Meaning What is good and what is bad. Moral Duties and Obligations

Principles of right and wrong

Root Ethos- Greek word meaning character is a personal attributes

Latin word ‘mos’ – meaning customs – Custom is an attribute of a group or society.

Nature Accepted because arise from personally accepted principles

Accepted due to the authority which may be religious or cultural

Scope Wider in scope. Examines moral standards of a group or society to determine whether these standards are reasonable

Smaller scope Address human needs for belonging

Expression Norms are abstract. Cannot be described as general rules

Mostly expressed as general rules. Example –Always Tell truth

Absorption Adopted by individual gradually by taking reasonable decision in appropriate situation

Absorbed since childhood from family, friends, school, religion, leaders and so on

What are the major difference between Ethics and Law?

Discussion

What is the basic difference between Ethics and Law?

Basis of difference

Ethics Laws

Meaning Cannot be legislated. Examines both individual and social good in all dimensions

Concerned with regulations necessary for public order 

Ethics and law are quiet independent of each other. What is lawful need not be ethical.

Class-3 Hour -3

Characteristics Moral Standards deal with matters that can seriously injure the society In every society theft , rape murder fraud and law breaking are considered immoral

Characteristics

1

Moral Standards are not changed by any the decisions of any particular authority like legislatureThe validity of these standards depends on the reasons that support and justify them

2

Characteristics Some time moral standards can come in conflict with self InterestIf a person has moral obligation to do something it has to be done even it causes harm to self

Characteristics

3

Moral Standards are based on impartial consideration.Not evaluated based on who will benefit or who will be harmed

4

Ethical DecisionsCharacteristics

1. Differ with individual perceptions

2. Affects wide range of situations and not limited to themselves

3. Trade off between cost and benefit – profit and responsibilities two ends of spectrum

4. Consequences are not clear in most cases

5. Every individual is responsible for ethical and unethical decision

6. It is voluntary human actions

Right

Morally Correct

Just

Justice not only done ; also seen to have been done

Proper

Appropriate and acceptable

Honest

Honest and due

Good

Good for all concerned

Equitable

Just and EqualCharacteristics

needed for ethical decision

What are the major branches of Ethics?

Discussion

Major Branches of Ethics

Meta – Ethics: Concerned with the grounds used to justify the moral judgments rather than on making moral judgments

Practical or applied Ethics:

Applies ethical principles to practical

discipline.

Rule based Ethics:It seeks evaluate

moral consideration based on rules

Virtue Ethics:Concerned with possessing moral traits and living a good life

Normative Ethics: Concerned with developing theories that determine which human actions are right or wrong

Political Ethics:Consists of examination of good society, the origins, and the forms of political power

Consequentialism or teleology-action judged based on consequences.

Deontology : Assumed that right or wrong is not based on consequences but on the intrinsic goodness of action itself.

Can you tell me the characteristics that high light

the Moral standards?

Discussion

Can you Sum up the meaning of ethics?

Character of a Man

Decided by

Conduct of a Person

Leads to

Series of action

Taken Together

Considered as

Good or Bad , Right or wrong,

Moral or Immoral

Known as Moral Judgment

Moral StandardsRequires

By which we can Judge again

How do you understand the subject business

Ethics?

1. Emerging Business Ethical Issues – management concerns- Stakeholder relationship.

2. Ethics as a dimension of social responsibility

3. Understand Ethical decision making and corporate governance

4. Individual factors such as moral philosophies

5. Organizational factors such as corporate culture leadership dimensions

6. Organizational factors – relationship and conflicts

7. Develop ethical program, code of conduct and audit of ethical program, implementation

8. Business ethics in global economy

Can you Explain Business Ethics ?

Discussion

• What is Business Ethics?

• What are the features of Business Ethics?• Applied Ethics – what is good and what is bad

for business• Ethics is a study of morality as chemistry is the

property of chemical substances.• Ethics is a kind of investigation where as

morality is a is the subject matter of investigation.• Moral is a standard and ethics examines the

standard.• For Example Honesty is good and dishonesty is

bad.

Business Ethics

• It is Specialized study of moral rights or wrong

• Application of Ethical Principles to business

Class-4 Hour -4

Case Study-3• Babu Rao is an officer on special duty in the project analysis wing of the

Finance Department. His job is to look at the financial and economic viability of projects. Given the available budget, the project with higher returns are picked up for funding or seeking aid from external donors. Although the procedure is involved, its principles are Simple. • The analysts calculate for each year of the useful life, the expected

expenditures and revenues. As these flows occur in different years, they have to be made comparable.• For this purpose, the revenue and expenditure flows are discounted

using a particular interest rate. Discounting means that their magnitudes are reduced by using a factor on the interest rate

Case Study -3 Continued• Due to discounting, the actual numbers of future streams of expenditure

income become smaller. The same numbers of expenditure and income of say year 5 will smaller than those of year 3. The present values of future income and expenditure depend on two factors: interest rate and the future year in which they occur.• In this process, the present value of the numbers of later years in future

becomes less than that of earlier years in future. These (benefit) and expenditure (cost) streams, which are reduced to their present values, are added compared. In short, the projects which have higher benefit-cost ratios in terms of present values selected for funding.

Case Study -3 Continued• In this process, a pet project of a powerful minister is dropped. The

incensed minister calls Rao for discussion. Babu Rao tries to explain things. But the minister berates him for slashing solid Rs 100 crore revenue of seventh year to almost Rs 15 crore. After some discussion the minister realizes that if the interest rate used for discounting expenditure and revenue flows is reduced, project will become viable. He asks Babu Rao to cut that rate. Babu Rao refuses saying that the Rate is prescribed by the Department of Economic Affairs.

Answer the following questions:• What should Babu Rao do in the above circumstances? Follow minister's orders.• Babu Rao should give up his narrow accounting perspective and adopt

a wider social point of view• He should politely express his inability to follow the Minister’s

Instruction.• He should tell the minister that he would write to the Department of

Economic Affairs seeking a lowering of the rate of interest.

Class-5 Hour -4

What are the major difference between Business Ethics and

Social Ethics?

Discussion

Business Ethics and Social Ethics• Business Ethics is different from social ethics in the following 3 ways:• Provides frame work for evaluating business• Allows critical analysis of business and development of new and

different methods• Fuse personal and social responsibility• It is broader than Social ethics and is more systematic and

constructive

What are the issues investigated under business

ethics?

Discussion

Three Issues

• Are the systematic issues in which ethical questions are raised about economic, political legal and social system whit in which business operates?

• Are the Corporate issues are raised on policies and practices of a particular business enterprices?

• Are the Individual issues where in ethical questions are asked about decisions , actions, and characteristics of a particular individual within enterprise?

Business Ethics?Questions

Economic,Political Legal and Social system

Policies and Practices

Decisions , Actions, andCharacteristics of a particular individual

What is Business Ethics?

• Study of what constitutes right or wrong or good and bad human conduct in business context.• Deals with morality in business environment• Refers to application of everyday moral or

ethical norms to business. It requires awareness of how the products and services of an organization and actions of the employees can affect its stakeholders and society as a whole either positively or negatively.

• Ethics in business relates to corporate culture, values, leadership, programs and enforcement.• Set of principles which

governs the conduct of business – at the individual or collective level by the application of ethical reasoning to specific business situation and activities.

Who are all the stakeholders?• Owner• Employees• Customer• Government• Public• Others

What are the principle of Business Ethics

• Not to do any evil.• Cooperation with others• Equivalent Price• Human Dignity• Sacredness of means and ends- good

ends should not be attained with wrong means• Principle of proportionality- proper

judgment before doing anything so that others do not suffer from loss or risk of evil.

• Publicity: Anything done should be brought to the knowledge of everyone.• Business should be conducted

based on Universal value.• Non Cooperation in evils• Non Violence

What are the factors influence the Business Ethics?

Nature of

Ethics

Leadership

Strategy and performance

Environment

Corporate Culture

Individual Characteristic

The quality and worth of leadership can only be measured in terms of what a leader intends , values believes in or stands for.In other words character

The leader has to foster learning , offering choice and building consensusIf we pollute even

a small amount world would be very dirty place in which we would not like to live.

In order to act with integrity the firm should articulate its value- Mission, Conduct and code of ethics

What is meant by Golden Rule• Ethics of reciprocity- ‘Do unto others as you would have them to unto

you.’• In other words – ‘treat others as you would like to be treated’• Golden rule is an example of normative theory which establishes a

single principle against which we can judge all actions – whether any possible action is right or wrong.

Briefly describe the history of business ethics

• Business Ethics has existed in academics since 1970• Linked with social responsibilities• The responsibilities has been described as• Philanthropic• Ethical• Legal• Economic

Can you give the scope of Business Ethics on four

important heads ? Discussion

Scope of Business Ethics

Stake Holder Level

Internal Policy Level

Societal Level

Personal Policy Level

Stakeholder Level•Employee•Customers•Shareholders•Banks and other lending institutions•Government

•Security of Jobs•Better Working

Conditions•Participative

Management•Welfare Facilities

•Better Quality of goods•Goods and services at

reasonable price•No discriminatory price•No false claims about

products in advertisement

• Capital appreciation• Regular dividends•Disclose all relevant factors• Protect minority shareholder

interest•No window dressing• Protect interest in times of

mergers amalgamation, and take over

•Guarantee safety of borrowed funds •Prompt repayment of

loans

•Comply with rules and regulations•Honesty in paying taxes

and other dues•Acting partner in the

progress of the country

Others•Personal Policy level•Social Level• Internal Policy

• Not to use office car stationary, and other• Not to misuse others for

personal gain• Not to indulge in politics

to gain power• Promise keeping• Mutual help

• Concern for poor• No discrimination against

any particular section or group• Concern for clean

environment• Preservation of scarce

resources for posterity• Contributing for better

quality life

• Fair practices relating to requirements, Compensations, layoff, perks promotions etc. • Transformational leadership to

motivate employees, to aim at better and higher things in life • Better communication at all

levels

Explain the three different types of ethics are explained below-

Transactional Ethicsparticipatory Ethics

Re-cognitional Ethics

Each party have to

accept the principle of honesty and principle of reciprocity

Transactional Ethics

Principal of recognition

Recognitional Ethics

Cooperate for common good

Participatory Ethics

None of the parties

participate for survival

Participation not enforcedAll parties

Participate

What are the ethical influence on business?

Areas of business Ethical PracticePlant Location No adverse impact on communityProduction Control on pollutionPurchase No hording of Raw materialsStorage No hording of Finished GoodsMarketing Fair treatment to customersAdvertising Truthful and realistic claimsAdministration Concern for social valuesFinance Protection and appreciation of capitalPersonnel Just and equitable treatment to

employees

Code of ethics of a marketing association

Presentation by class

What is Ethical Dilemma?Discussion

Prisoner's DilemmaPr

isone

r A w

ith P

rison

er B

Prisoner B with Prisoner A

A gets one year B gets one year

Cooperates Not Cooperates

Coop

erat

esNo

t Coo

pera

tes

A gets 3 year B gets NIL

A gets NILB gets 3 year

A gets 2 year B gets 2 year

Ethical Dilemma• Ethical dilemma is a situation where the decision maker has

to choose not between right and wrong but between right and right.• In business many issues may seem straight forward and easy

to solve but in most cases conflict arise and no one option is clear choice.

Problem definition: Clearly identify the problem How would you define the

problem if you stood on the other side of the fence?

How did the situation arise?

Decision Making What is the intension of decision

making? How does this intension compare

with probable results? Will your decision change or be

valid over a long period of time as it seems now?

View Points To whom are you loyal as a person and as a

member of the organization? Whom could your decision or action injure? Can you discuss the problem with the affected

parties before you make your decision? Could you disclose without any doubt your

decision or action to your boss, CEO, Board of Directors, your family, Society as whole?

Under what condition you allow exception to your stand?

Effect What is the potential of your action if

understood or misunderstood?

State the guidelines used in case of ethical dilemma.

What is need for business Ethics?

Discussion

Need for business Ethics

Business men requires ethical behavior and should have moral consciousness. – no adulteration,- no overcharging, - no spurious goods,- no black marketing ,- no false advertising.

In a long run ethical business conduct is the self interestIf good quality and fair price to customerIf fair dividend to share holdersPay taxes in timeThen sales and profits increase

Moral consciousness

Self interest

Social PressureConsumer forums, Shareholders association , other social groups exert pressure on business firm for avoiding unethical practices Legal imperative

Follow law of land

What are the Benefits of business Ethics?

Discussion

Benefits

Benefits

Improvement of Society

Team Work and Productivity

Facilitate Change

Cordial Employer- Employee RelationsAdherence to

Law

Public Image

Strategic Advantage

Corporate Social Responsibility