Business Ethics:

Introduction

Prof S Patanjali
 A Definition of . . . Management

Management: “A series of ethical actions done by people, using technology

and resources, to achieve a state of joy and happiness in the minds of both
producers and consumers.”

- Dr Satish Modh, Ex-Professor at NMIMS, Mumbai

 What is business ethics?
Business ethics is the study of business situations, activities, and
decisions where issues of right and wrong are addressed

Ethical dilemmas and ethical choices are situations in which an

individual is required to define right and wrong conduct

Not easy to define “Good / Ethical Behavior”

 Business Ethics
Managers face a variety of ethical situations

Most of these involve:

- how the Organization treats its Employees;
- how the Employees treat the Organization; and
- how the Employees and Organizations treat other Stakeholders
 Quotes
“Ships don’t sink because of the water around them”

Hosmer (1987) defines an ethical code as “statements of the norms and

beliefs of an organization with the intention to encourage ways of thinking
and patterns of attitude that will lead towards the wanted behavior”

Luthans: Ethics involves moral issues and choices and deals with right and
wrong behavior
 Quotes
Cowardice asks, ‘Is it safe?’
Expediency asks, ‘Is it politic?’
Vanity asks, ‘Is it popular?’

But, conscience asks, ‘Is it right?’

Martin Luther King Jr

 Defining morality, ethics and ethical theory
 Morality is concerned with the norms, values and beliefs
embedded in social processes which define right and wrong for an
individual or a community

 Ethics is concerned with the study of morality and the application

of reason to elucidate specific rules and principles that determine
right and wrong for any given situation

 These rules and principles are called ethical theories

 The relationship between morality,
ethics and ethical theory

Ethics … to …that can

rationalizes produce be applied
morality … ethical to any
theory … situation. Potential
Morality Ethics Ethical solutions to
theory ethical
problems
Ethics and the law

Ethics

grey
area

Law
 Business Ethics
Organizational principles, values, and norms that originate from individuals, organizational
statements, or from the legal system

 Guide individual and group behavior in business

 Principles: Specific boundaries that should not be violated
 Values: Existing beliefs and ideals that are socially enforced
 Ethics - Behavior or decisions made within a group’s values

12
Reasons for Studying Business Ethics

Improves an individual’s personal ethics

Helps in addressing business-strategy decisions that are complex and

detailed

Ensures collective agreement of organizational ethics

Helps people with limited experience in making organizational

decisions

Helps one identify and resolve ethical issues in a quick manner

13
 Importance of Business Ethics

1. Power and influence of business in society

2. Potential to provide major contribution to society
3. Potential to inflict harm
4. Increasing demands from stakeholders
5. Lack of business ethics education or training
6. Continued occurrence of ethical infractions
7. Evaluating different ways of managing business ethics
8. Interesting and rewarding
Elements of an Ethical Culture

15
Voluntary Boundary, Core Practices, and Mandated
Boundaries of Ethical Decisions

16
 Characteristics of an Ethical Organization
 At ease when interacting with internal & external stakeholders – the company & these
stakeholders have the same good in mind;

 Obsessed with Fairness – other group/ persons interests is as important as ones own
interests;

 Individuals assume personal responsibility for the actions of the organization;

 There is high value given to the environment.

 Principles of Personal Ethics
 Concern & respect for the autonomy of others;

 Honestly and willingness to comply with the law;

 Fairness in actions and not taking undue advantage of others;

 Benevolence and preventing harm to all (humans and non-humans).

 Principles of Professional Ethics
 Impartiality, objectivity;

 Openness, full disclosure;

 Confidentiality, trust;

 Duty of care;

 Fidelity to professional responsibility;

 Avoiding conflicts of interest.

The Role of Organizational Ethics

20
Ethical Issues in Business

Misuse of
company
resources
Employee Abusive
theft behavior

Product Issues to Harassment

knockoffs
be
addressed

Bribery Accounting
fraud

Defective Conflicts of
products interest
 Ethical Issues in Business
 Misuse of company time and resources
 Time theft
 Using company software and Internet services for personal business

 Abusive or intimidating behavior

 Physical threats and false accusations, profanity, and insults
 Wage theft
 Bullying

22
 Ethical Issues in Business

 Lying
 Types - Joking without malice, lying by commission, and lying by omission
 A lie may be unethical based on the context of the statement and its intent to distort
the truth

 Conflicts of interest:
 Exists when an individual must choose between his or her own interests and those
of the organization or some other group

23
 Ethical Issues in Business
 Bribery
 Types - Active bribery and passive bribery
 Legalities of felicitation payments differ from country to country

 Corporate intelligence
 Collection and analysis of information regarding the external environment of a
business
 Types of intelligence models - Passive monitoring system for early warning, tactical
field support, and support dedicated to top-management strategy

24
 Ethical Issues in Business

 Discrimination:
 on the basis of race, colour, religion, sex, marital status, public assistance status,
disability, age, national origin, and veteran status
 Not acceptable and maybe Illegal

 Sexual harassment
 Unwanted sexual approaches
 Repeated remarks with the implied suggestion that the target’s employment status
or favorable treatment depend on a positive response and/or cooperation

25
 Ethical Issues in Business

 Fraud
 Types - Accounting fraud and marketing fraud
 Categories of false or misleading advertisements
• Puffery, implied falsity, and literally false
• Labeling issues and ambiguous statements
 Dual relationships cause direct or indirect conflicts of interest in professional
judgement

26
 Ethical Issues in Business (continued 5)
 Consumer fraud
 Examples of fraudulent activities
• Shoplifting, collusion or duplicity, and guile

 Financial misconduct
 Various Regulators and Laws exist to:
• Increase accountability and transparency in the financial industry
• Protect consumers from deceptive financial practices

27
Types of Consumer Fraud

Source: Rich Johnson, “How Do Customers Take Advantage of Retailers,” Site Jabber, September 24, 2010, http://www.sitejabber.com/blog/2010/09/24/how-
do-customers-take-advantage-of-retailers/ (accessed February 20, 2015).
 Ethical Issues in Business
 Insider trading
 Types - Illegal and legal

 Intellectual property rights

 Legal protection of intellectual property such as music, books, and movies
 Legal framework exists to protect IP

29
 Ethical Issues in Business (continued 7)
 Privacy issues
 Data protection
 Monitoring of employees’ use of available technology
 Consumer privacy
 Dimensions to consumer privacy
• Consumer awareness of information collection
• Lack of consumer control over the personal information collected

30
 Institutionalization of Business Ethics

 Institutionalization helps implant values, norms, and artifacts in

organizations, industries, and society

 Failure to understand core practices provides the opportunity for unethical

conduct

 Institutionalization of business ethics has advanced rapidly in recent years

as stakeholders recognized the need to improve business ethics

31
Any Questions / Reflections?