Business Business EthicsEthicsChapter # 1

Business Ethics the changing environment and stakeholder management

Business ethics & Business ethics & changing environment.changing environment.

Business Ethics

The study and examination of moral and social responsibility in relation to business practices and decision making in business.

Businesses & Govts operate in changing technological,ligal,economic,social & political environments with competing stakeholders & power claim.

•StakeholdersStakeholders are individuals,companies,groups & even nations that cause and respond to external issues,opportunities & threats.

Environmental Forces & Stakeholders

Economic Force

•Large and small companies are expanding businesses and products overseas.

•Businesses are going into the global market now a days.

Technological ForceThe advent of electronic communication and

the internet is changing economics,industries,companies and jobs.

Political ForcePolitical situation of particular area also affect

industries and jobs.Legal ForceLegal questions and issues affect all of these

environmental dimensions and every stakeholder.

Demographic ForceThe workforce has become more diverse.Employers & employees are faced with sexual

harassment & discrimination issues and effects the downsizing,career changes and security.

Stakeholder Management Stakeholder Management ApproachApproachStakeholder Management Approach: It is a way

of understanding the effects of environmental forces and groups on specific issues which affect stakeholders and their welfare.

Example: How do companies, communication media, political groups, consumers, employees, competitors, and other groups respond when they are affected by an issue, threat, or opportunity.

Beginning of Stakeholder Approach: The stakeholder approach begins with cooperation among individuals and groups. This cooperation is based on win-win strategies.

Base for Collaboration & win-Base for Collaboration & win-win Strategieswin StrategiesCollaboration & win-win strategies are

based on the following points:1. Identifying and prioritizing issues,

threats, or opportunities2. Mapping who the stakeholders are3. Identifying their stakes, interests,

and power sources4. Showing who the members of

coalitions are, or may be5. Showing what each stakeholder’s

ethics are (and should be)6. Developing collaborative strategies

and dialogues

What are unethical business What are unethical business practices?practices?

The most unethical behavior, one survey showed, happens in the following areas :

GovernmentSalesLawFinanceMedicineBankingManufacturing

Levels of business ethicsLevels of business ethics

Because ethical problems are not only an individual or personal matter, it is helpful to see the different "levels" at which issues originate and how they often move to other levels.

InternationalLevel

Societal Level

Association Level

Organizational level

Individual level

Individual levelAt the individual level, ethical issues

arise when, for example, a sales man is asked to sale the product by telling a lie to the customers.

Organizational levelAt the organizational level, ethical

issues arise, for example, when employee is asked to perform an unethical or illegal act to earn division or work unit profit.

Members should examine the firm's policies and procedures and code of ethics, if one exists, before making a decision or taking action.

Association levelAt the association level,

accountant, information technology (IT) professionals, lawyers, physicians, and management consultants must follow the ethics to facilitate the people.

Societal level At the societal level, laws, norms,

customs, and traditions govern the legal and moral acceptability of behaviors. For example activities in china may be not acceptable in uk.

Five Myths about Business Five Myths about Business EthicsEthicsMythA belief given uncritical acceptance

by members of a group, especially in support of traditional practices and institutions.

Five Myths 1.“ethics is a personal individual affair, not a public or debatable matter”

This myth holds that individual ethics is based on personal or religious beliefs and that one decides what is right and wrong in the privacy of one’s own conscience.

2.2. ““Business and ethics Business and ethics do not mix”do not mix”

This popular myth holds that; businesses operate in a free market.

This myth also asserts that management is based on scientific, rather than religious or ethical, principle.

3.3. ““ethics in business is ethics in business is relative”relative”

This is one of the popular myths, and it holds that no right or wrong way of believing or acting exists. Right and wrong are in the eyes of the beholder.

The claim that ethics is not based solely on absolutes has some truth in it. How ever, to argue that all ethics is relevant contradicts everyday experience.

4.4. ““good business means good business means good ethics”good ethics”

The reasoning here is that executives and firms that maintain a good corporate image, practices fair and equitable dealings with customers and employees, and earn profits by legal means have good ethics.

Such firms, therefore, would not have to be concerned explicitly with ethics in the workplace.

5.5. "information and "information and computing are amoral"computing are amoral"

This myth holds that information and computing are neither moral nor immoral, but are amoral, i.e., they are in "gray zone," a questionable area regarding ethics.

Information about individuals can be used as “a form of control, power, and manipulation. The point here is to beware of the dark side: the misuse and abuse of information and computing.

Why use ethical Why use ethical reasoning in business?reasoning in business?

Ethical reasoning is required in business for at least three reasons.

First: many times laws are insufficient and do not cover all aspects or “gray areas” of a problem.

How could tobacco companies have been protected by the law for decades until the settlement in 1997, when the industry agreed to pay $368.5 billion for the first 25 years and then $15 billion a year indefinitely to compensate states for the costs of health care for tobacco related illness?

Second: free market and regulated mechanisms do not effectively inform owners and managers about how to respond to complex issues and crises that have far-reaching ethical consequences. For example: did Microsoft act unethically while becoming the dominant player in its industry in free-market environment?

A third argument holds; that ethical reasoning is necessary because complex moral problems require” and intuitive or learned understanding and concern for fairness, justice, due process to people, groups, and communities”

Can business ethics be Can business ethics be taught and trained?taught and trained?

Since laws are often not always sufficient to solve complex human problems relating to business situations, the questions arise: can ethics help? If so how?

A useful framework for evaluating ethics training is Lawrence kohl berg’s study of the stages of moral development.

Stages of moral Stages of moral developmentdevelopmentKohl berg’s three levels of moral

development (which encompass six stages) offer argued for observing a person’s level of moral maturity.

Level 1: Self orientationStage 1: Punishment avoidance:

avoiding punishment by not breaking rules. The person has little awareness of others’ needs.

Stage 2: Reward seeking: acting to receive rewards for self. The person has awareness of others’ needs but not of right and wrong as abstract concepts.

Level 2: Other orientationStage 3: good person: Acting “right” to be

“good person” and to be accepted by family and friends, not to fulfill any moral ideal.

Stage 4: law and order: Acting “right” and follows the laws and made law & order situation good.

Level 3: Universal, Humankind Orientation

Stage 5: social contract: Acting “right” to reach consensus by due process and agreement. The person is aware of relativity of value and tolerates differing views.

Stage 6: Universal ethical principles: Acting right according to universal principles of justice & rights.