Xaviers Institute of Business Management Studies

Business Ethics

Max. Marks: 80

SECTION - A

1. Answer any ten of the following in about 3-4 lines each: (2x10-20)

a) Define Business Ethics.

ANS: Business ethics refers to implementing appropriate business policies and practices
regarding potentially controversial subjects, including corporate governance, insider
trading, bribery, discrimination, corporate social responsibility, fiduciary responsibilities,
and much more. The law often guides business ethics, but at other times business ethics
provide a basic guideline that businesses can follow to gain public approval.
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b) What is morality?
ANS: Morality is a set of rules that shapes our behavior in various social situations. It is
more sensitive doing the good instead of the bad, and therefore, it establishes a level of
standard for virtuous conduct.
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c) How religion and ethics are related?
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d) What is ethical dilemma?
ANS: An ethical dilemma is a paradox that comes up when there are two or more options,
but neither of them are the best ethical or moral option. False accounting, sexual
harassment, data privacy, nepotism, discrimination—these are just some of the ethical
dilemmas that happen in today’s workplace.
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e) Define Corporate Governance.
ANS: Corporate governance is the system of rules, practices, and processes by which a firm
is directed and controlled. Corporate governance essentially involves balancing the
interests of a company's many stakeholders, such as shareholders, senior management
executives, customers, suppliers, financiers, the government, and the community.
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f) What are attitudes?
ANS: Attitude is a way of looking at any situation and deciding either consciously or
unconsciously – how we relate it to ourselves and others.  It can be something to do with our
own personality and experience. The major positive attitudes include being confident,
respectful, sincere, honest, hard working, faithful, loving, flexible, humble, helping,
independent, sympathetic etc.,
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g) What is the psychological egoism?

ANS: The psychological egoism is a theory about the nature of human motives. This
suggests that all behaviors are motivated by self-interest. In other words, it suggests that
every action or behavior or decision of every person is motivated by self interest.
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h) State the two unethical practices in Software Company?
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i) What are tax ratios?
ANS: A tax-to-GDP ratio is a gauge of a nation's tax revenue relative to the size of its
economy as measured by gross domestic product (GDP). The ratio provides a useful look at
a country's tax revenue because it reveals potential taxation relative to the economy. It also
enables a view of the overall direction of a nation's tax policy, as well as international
comparisons between the tax revenues of different countries.
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j) List four features of utilitarianism?
ANS:

 Consequentialism: Consequentialism is the view that one morally ought to promote

just good outcomes.

 Welfarism: Welfarism is the view that only the welfare (also called well-being)

of individuals determines the value of an outcome.

 Impartiality: Impartiality is the view that the identity of individuals is

irrelevant to the value of an outcome. Furthermore, equal weight must be given
to the interests of all individuals.

 Aggregationism: Aggregationism is the view that the value of the world is the
sum 8 of the values of its parts, where these parts are local phenomena such as
experiences, lives, or societies.
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k) What is whistle blowing?
ANS: Whistle blowing means calling attention to wrongdoing that is occurring within
an organization . Whistle blowing has to do with ethics because it represents a person’s
understanding, at a deep level, that an action his or her organization is taking is
harmful—that it interferes with people’s rights or is unfair or detracts from the
common good. Whistle blowing also calls upon the virtues, especially courage, as
standing up for principles can be a punishing experience.
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l) What is software privacy?
ANS: The illegal copying of software (software piracy), illegal access and interception,
misuse of devices, computer-related forgery, fraud, offences related to child
pornography, offences related to infringements of copyright and related rights are all
considered ethical issues on cyberspace.

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SECTION - B
Answer any three of the following. Each question carries 5 marks. (3x5=15)

2. Explain the significance of ethics in business planning and decision making.

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3. What are corporate crimes? What are their effects on society?
ANS: Corporate crime is referred to as the conduct of a corporation or employees acting on
behalf of a corporation that is prescribed or punishable in law. Thus corporate crimes are
committed for corporate gain or to bring harm to any other person or body corporate. Such
crimes are committed in a quiet environment. However, criminal behavior in corporate
crimes does differ from the traditional crimes committed by individuals.
Corporate crimes are socially injurious or blameworthy acts which cause financial,
physical or environmental harm or harm caused to the workers and the general public. It is
believed that corporate criminal behavior is also a result of learning process from with the
working of the corporations. This behavior is also attributed to major social and moral
change. In a pursuit to meet targets or goals there could be adoption of unlawful means.
Corporate crimes are the most happening evils in the society. Loop holes in the
corporate crime towards the judicial approach have to have more effective impact on the
Society. Corporate crime refers to the crimes committed by the Corporation or the
individual acting on behalf of the corporation should be held liable and punishable in law.
Corporate crimes to be sentenced in the legal provision are still more effective and there is a
need for the amendment. It adversely affects the capital markets. In present scenario it has
become a threat to the society. Even for the act of the employee on the behalf of the
corporation, the concept of vicarious liability in consistent, the crime should be punished as
a serious offence by both the employee and also the corporation. Or in such circumstances,
the employee may take advantages.

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4. What are the implications of unethical practices on human resource
management?
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5. What do you mean by classical utilitarianism? Explain its principles.
ANS: Utilitarianism is a theory of morality that advocates actions that foster happiness or
pleasure and oppose actions that cause unhappiness or harm. When directed toward
making social, economic, or political decisions, a utilitarian philosophy would aim for the
betterment of society as a whole.
Utilitarianism would say that an action is right if it results in the happiness of the
greatest number of people in a society or a group.

There are three principles that serve as the basic axioms of utilitarianism.

1. Pleasure or Happiness Is the Only Thing That Truly Has Intrinsic Value.
Utilitarianism gets its name from the term "utility," which in this context does not
mean "useful" but, rather, means pleasure or happiness. To say that something has intrinsic
value means that it is simply good in itself. A world in which this thing exists, or is
possessed, or is experienced, is better than a world without it (all other things being equal).
Intrinsic value contrasts with instrumental value. Something has instrumental value when
it is a means to some end.

2. Actions Are Right Insofar as They Promote Happiness, Wrong Insofar as They
Produce Unhappiness.
 This principle is controversial. It makes utilitarianism a form of consequentialism
since it says that the morality of an action is decided by its consequences. The more
happiness is produced among those affected by the action, the better the action is. So, all
things being equal, giving presents to a whole gang of children is better than giving a
present to just one. Similarly, saving two lives is better than saving one life.
That can seem quite sensible. But the principle is controversial because many people would
say that what decides the morality of an action is the motive behind it.

3. Everyone's Happiness Counts Equally.

This may strike you as a rather obvious moral principle. But when it was put forward by
Bentham (in the form, "everyone to count for one; no-one for more than one") it was quite
radical. Two hundred years ago, it was a commonly held view that some lives, and the
happiness they contained, were simply more important and valuable than others.
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6. Explain the benefits of good corporate governance.
ANS:
1. Encouraging positive behavior. “Having clearly delineated policies and processes
and a board of directors and executive managers who maintain the compliance culture
directly supports improved results,” writes chartered secretary Monique Legair. It is
imperative that all board members themselves participate in that culture, ensure clear lines
of communication with management and the rest of the organization, and are immediately
responsive to any evidence that part of the organization is not participating.
2. Reducing the cost of capital. In today’s volatile environment, the implementation of
good governance practices can lead to a reduction in a company’s cost of capital. An
organization that is seen to be stable, reliable and able to mitigate potential risks will be able
to borrow funds at a lower rate than those with weak corporate governance. Companies
with debt or equity investors may find that their investors pay a premium to work with a
company that has a sound governance framework.
3. Improving top-level decision-making. There is a strong and demonstrable link
between an organization’s governance and rapid decision-making associated with improved
performance, explains the Corporate Governance Institute in a recent report. Moreover, a
number of performance failures have been directly linked to poor governance. There is no
doubt that good governance assures rapid access to information and the good
communication among stakeholders that leads to better results. Good governance also
enables rapid and accurate prioritizing of actions. This can prove invaluable in enabling the
organization to weather tough economic storms and supports the organization’s
sustainability.
4. Assuring internal controls. By implementing corporate governance correctly across
the organization, the board may be certain that an adequate and effective control
environment is in effect, with the level of assurance associated with each important
component of governance. What’s more, the board or the board committee is better
positioned to take action when the controls signal non-compliance.
5. Enabling better strategic planning. With more rapid access to information and good
communication with management, boards are able to formulate more successful strategies.
This includes more efficient allocation of resources and capital. The strong governance
framework will further assist the board in some of the following ways – understanding the
regulatory environment governing the business; leveraging technology from a production,
distribution and communications point of view; and identifying and managing the
reasonable interests of all stakeholders in the business. All these components are essential
elements of a robust strategic plan.
6. Attracting talented directors. Bringing in talented non-executive directors with
complementary skillsets helps to make an overall and comprehensive assessment of the
overall sustainability of the organization, including its level of compliance with relevant
legislation. This kind of new talent is vital to the sustainability of the organization which has
to adapt to the ever-evolving conditions of the market. For the candidate to the non-
executive post, providing this kind of environment is equally important.
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SECTION - C

Answer any three of the following. Each question carries fifteen marks. (3x15=45)

7. Explain the ethical issues involved in managing finance with an objective

of maximizing shareholders wealth rather than shareholders interests.
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8. Describe congnitivism and non-congnitivism ethical theories.
ANS: Cognitivism is perhaps best defined as the denial of non-cognitivism. Cognitivists
think that moral sentences are apt for truth or falsity, and that the state of mind of accepting
a moral judgment is typically one of belief. They think that typical utterances of indicative
sentences containing moral predicates express beliefs in the same way that other sentences
with ordinary descriptive predicates typically do.

Different species of cognitivist disagree about the contents of moral sentences and
beliefs, about their truth conditions, and about their truth. To discuss all the varieties would
require a complete taxonomy of possible metaethical positions. What they have in common,
however, is that they all deny that an adequate account of moral judgments can be given
consistent with the two negative non-cognitivist theses.

It has seemed obvious to many that non-cognitivism has much in common with
various relativist metaethical views. Though non-cognitivists may deny that the truth values
of moral judgments are relative to speakers or agents because such judgments have no truth
values, non-cognitivists have often accepted something similar to relativism.
For non-cognitivists hold that it is semantically appropriate for a person to utter a
moral judgment whenever she wishes to express the relevant non-cognitive attitude. And
many noncognitivists also believe that there are few rational constraints on holding the
relevant attitudes. But then it is hard to see how consistent moral judgments can be mistaken
.If relativism is problematic, it isn’t obvious that non-cognitivism avoids the problems.
Still many non-cognitivists have argued that the view does not entail or justify
relativism. They claim that whether or not a moral judgment is mistaken is itself a matter for
moral theorizing. A speaker should only call a moral judgment true if he or she accepts that
judgment. A speaker who expresses his or her acceptance of relativism in the normal way
might say something such as “They’re both saying something true”. This might seem to be
expressing commitment to a very deferential moral theory – one according to which each
agent should just do what she believes is right.
The non-cognitivists who adopt this response argue that this natural interpretation of
such claims is correct. What may seem to be a higher level metaethical claim – that no
consistent set of moral judgments is mistaken – , is really just another moral judgment and
hence one which would be rejected by any moral judge with substantive moral
commitments. If this line of argument works it will allow non-cognitivism to gain the
allegiance of those who wish to deny relativism while giving the motivations that lead to
both it and non-cognitivism their due.
 Non-cognitivism first came on the scene as a rather starkly drawn alternative to
prevailing cognitivist and realist construals of moral discourse. As it developed to enable it
to explain features of moral discourse relied on by its critics, the view became more subtle
and presented a less stark contrast with realist positions. The main negative claims were
often somewhat moderated. For example, the claim that moral judgments had no descriptive
meaning evolved into a claim that any such meanings were secondary. The claim that moral
judgments could not be true or false became the claim that they could be true or false only in
a minimal or deflationary sense. Not all of the shifts have been embraced by all non-
cognitivists, but it is fair to say that current versions are more complex and subtle than the
theories from which they descend. As a result the arguments for and against the views have
gotten rather intricate and even technical. That trend is likely to continue for at least a while
longer as ideas from other areas of philosophy are employed to further hone the objections
and fill out the responses to them.
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9. Explain the impact of corporate governance of Narayana Murthy Committee.

ANS: The Committee on Corporate Governance, headed by Shri Narayanmurthy was
constituted by SEBI, to evaluate the existing corporate governance practices and to improve
these practices as the standards themselves were evolving with market dynamics. The
committee’s recommendations are based on the relative importance, fairness, accountability,
transparency, ease of implementation, verifiability and enforceability related to audit
committees, audit reports, independent directors, related parties, risk management,
directorships and director compensation, codes of conduct and financial disclosures.
The key mandatory recommendations focus on
Strengthening the responsibilities of audit committees
At least one member should be ‘financially knowledgeable’ and at least one member should
have accounting or related financial management proficiency.
Quality of financial disclosures
Improving the quality of financial disclosures, including those related to related party
transactions.
Proceeds from initial public offerings
Companies raising money through an IPO should disclose to the Audit Committee, the
uses / applications of funds by major category like capital expenditure, sales and marketing,
working capital, etc.
Other recommendations
 Requiring corporate executive boards to assess and disclose business risks in the
annual reports of companies.
 Should be obligatory for the Board of a company to lay down the code of conduct for
all Board members and senior management of a company.
 The position of nominee directors: Nominee of the Government on public sector
companies shall be similarly elected and shall be subject to the same responsibilities and
liabilities as other directors
 Improved disclosures relating to compensation paid to non-executive directors.
Non-mandatory recommendations include moving to a regime where corporate financial
statements are not qualified; instituting a system of training of board members; and the
evaluation of performance of board members.
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10. Explain the factors influencing ethical environment a service organization.
ANS: Business leaders today are well aware of the ethical issues and hence they want
to improve the ethical standards of the business. Self-regulation is, of course, better and
produce impressive results. Besides, there are also a number of factors, which significantly
influence the managers to take ethical decisions.
Some of the factors that are influencing ethical environment are
1. Personal Code of Ethics
A man’s personal code of ethics that is what one considers moral is the foremost responsible
factor influencing his behavior.

2. Legislation
It is already stated that the Government will intervene and enact laws only when the
businessmen become too unethical and selfish and totally ignore their responsibility to the
society. No society can tolerate such misbehavior continuously. It will certainly exert
pressure on the Government and the Government consequently has no other alternative to
prohibit such unhealthy behavior of the businessmen.

3. Government Rules and Regulations

Laws support Government regulations regarding the working conditions, product safety,
statutory warning etc. These provide some guidelines to the business managers in
determining what are acceptable or recognized standards and practices.

4. Ethical Code of the Company

When a company grows larger, its standard of ethical conduct tends to rise. Any unethical
behavior or conduct on the part of the company shall endanger its established reputation,
public image and goodwill. Hence, most companies are very cautious in this respect. They
issue specific guidelines to their subordinates regarding the dealings of the company.

5. Social Pressures
Social forces and pressures have considerable influence on ethics in business. If a company
supplies sub-standard products and get involved in unethical conducts, the consumers will
become indifferent towards the company. Such refusals shall exert a pressure on the
company to act honestly and adhere strictly to the business ethics. Sometimes, the society
itself may turn against a company.

6. Ethical Climate of the Industry

Modern industry today is working in a more and more competitive atmosphere. Hence only
those firms, which strictly adhere to the ethical code, can retain its position unaffected in its
line of business. When other firms, in the same industry are strictly adhering to the ethical
standards, the firm in question should also perform up to the level of others. If the
company’s performance is below than other companies, in the same industry, it cannot
survive in the field in the long run.

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11. Explain the corporate social responsibility towards the educational institutions.

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