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About the Author
Prof Dr.C.Karthikeyan, is a professor, and an alumnus of IIM-A, and currently Director for
leading B-Schools with 24 years of HR experience. He received his doctorate in HR area, and
leads as a Director for the leading B-School in Kerala. He is also a leading specialist in
Insititutional development and strategist for quality accreditations.
He is a research guide for 5 different universities in India, and had been a consultant to many
Industiies in the area of stratiegic alliances and Strategic HR. 5 Ph.Ds are in progress under his
able guidance and one person Is already awarded with Ph.D under his guidance.
He has received honours and awards for his contribution to the growth of institutions under his
leadership and had been leading as an example in terms of strengthening the institutional quality.
He has been awarded as Best Performer for his academic contribtutions as well as star performer
certificates which show cased his efficiency levels.
He has various publications in International journals and is also a reviewer, editor and board
member for various journals of repute.
1
PREFACE
This book prepares students of management who specializes Business Management and all
courses related to Management, and in HRM, or HR related subjects, HR practitioners,
Researchers in HR, and includes the dynamic concepts of newer HR paradigms happening across
the world, and also caters to the syllabus for BBA and MBA of all the leading Indian
Universitities specifically to Anna University, Bharathiar University, Kerala University, Calicut
University, and other Indian Universities. These concepts in this book will prepare all HR
professionals who are evolving into higher level professionals who can use this book for their
challenging and rewarding career. The readers can apply these concepts in their day to day HR
functions to have effective practical advancements in their career.
Who will benefit from this Book
All students and practitioners of HR management and practioners of HR at various levels in any
kind of organization will benefit from learning to manage Human Resources. This includes all
the students, faculties in colleges and universities, and those who already have HRM and want
to become more effective and other professionals who want an improved understanding of
managing human resource. This book also fits to the non-business organization like the non-
government organizations (NGOs), Government Organizations, Health Care Administrative HR
Professionals, and non-profit enterprises. The HR functions though occasionally are dynamic as
well intriguing, the basics remain the same related the Human nature. The dynamics of HR are
now more glocalised in nature as the culture and work practices are almost multicultural and
multinational in nature, and hence updating of newer and practically evolving HR practices are
required for the HR managers, and this Advances in HRM will definitely fit in. The dynamism
in the newer paradigms will soon become the secondary skill for the practicing as well as
budding HR practioners.
Organization of the Book
The concepts about HR management are classified according to the functions and applications
that are now applied in contemporary HR organizations across the world. There are some of the
new topics in this book like; Bradford Factor, Disability rights legislation, Competency-based
management, Connecting CBM to Organizational Execution-HRM. There are new and expanded
features in this book like;
Learning Assistance
The dynamics and newer paradigms, that has led to the advances in HRM and its associated
model on the inside of the book cover gives an overview of the book content. Each chapter
begins with learning objectives and concludes with a summary, key ideas, and concepts for
2
review, and discussion questions. The purpose of the new section “Exercises/Action Steps” is to
elicit readers’ involvement.
Acknowledgements
After completing almost two and half decades with interaction with different kind of human
beings, by virtue of travelling across the country and working in various kinds of organizations
with various work cultures, I first of all thank the almighty for having blessed me in giving those
coveted learning trails in life, as life itself is a journey of experiences and so is this book coined
and not simply meant for reading for examination.
I am indebted to so many persons that a complete acknowledgement would become

encyclopedic.
Many scholars, writers, and managers are acknowledged through references in the text. Many
HR leaders with whom I worked have contributed by their contributions and leading by example.
Thousands of employees in various states in various capacities have honoured me with their
ideas and cooperating with me to experiment and train during their tenure with me as a employee
as well as colleagues in the executive training classes and lectures of mine. To all the HR
executives with whom I had the privilege to work as Director /or Heading a Project was very
vital for contributing ideas to formulate it as a book.
Many colleagues, scholars, managers, students of Ph.D, M.B.A, and other executive training had
sharpened me and my thinking to contribute those as ideas and later into a book. I am indebted
to my wife, son, father and mother in law, sisters, brothers, cousins and other friends who had
been consistent in inspiring me to write.
To the reviewers and the publishers who reviewed and made many valuable suggestions in many
important ways whom I could not name here, and their contributions have been important for this
edition.
Finally, to my radhi and rajieth.
Prof. DR.C.Karthikeyan
3
TABLE OF CONTENTS
Chapter 1; UNDERSTANDING ETHICAL VALUES
Business ethics Overview
Functional business areas
Finance paradigm
Human resource management
Management strategy
Sales and marketing
Modern history of property rights
Intellectual property
International issues
Economic systems
Ethics officers
Sustainability Initiatives
Academic discipline
Religious views
Related disciplines
Applied ethics
Modern approach
Professional ethics
Codes of Conduct
4
Virtue ethics
CHAPTER 2- POST MODERN ETHICS
Applied ethics
Particular fields of application
Business ethics
Moral psychology
Evolutionary ethics
Descriptive ethics
Meta-ethics
Semantic theories
Ethical subjectivism
Centralism and non-centralism
Substantial theories
Justification theories
Ethical intuitionism
CHAPTER 3- BUSINESS ETHICS
Business ethics
Finance paradigm
Normative ethics
Binding force
5
Contemporary 'aretaic turn'
Lists of virtues
Moral Virtues
Intellectual Virtues
Utopianism and pluralism
CHAPTER 4- VIRTUE ETHICS
Virtue ethics as a category
Virtue and politics
Applied virtue ethics
Deontological ethics
Deontological philosophies
Divine command theory
Consequentialism
Ethical egoism
Ethical altruism
Rule consequentialism
Teleological ethics
3 Types of Unethical Behavior in a Business
Ethical code
CHAPTER 5- CODE OF CONDUCT AND CODE OF ETHICS
Code of ethics or a code of conduct? (corporate or business ethics)
Code of practice (professional ethics)
6
Values
Principles
CHAPTER 6- ETHICAL PROBLEMS IN MANAGEMENT
Utilitarianism
Kant’s Categorical Imperative
Compensatory Justice
What is Ethical Profitability?
10 Myths About Business Ethics
10 Benefits of Managing Ethics in the Workplace
Benefits of Managing Ethics as a Program
About Codes of Ethics
Developing Codes of Ethics
CHAPTER 7- METHODS TO RESOLVE ETHICAL DILEMMAS
Methods to Resolve Ethical Dilemmas
Six Essential Tasks
CHAPTER 8-Compliance and Ethics in Risk Management
The Relationship Between Ethics and Enterprise Management.

OCIE Considerations
CHAPTER-9- ETHICAL DILEMMA
Roles within structures
Legal ethics
Enforcement
7
Ethical code
Related disciplines
Western legal culture vs non-Western legal culture
Common law comparisons
Provisions of the Indian Constitution

Why Do Governments Intervene in Trade?
The Political spectrum
Totalitarianism
International Political System
Good Governance in International Affairs
Good Governance in Local Governments
Worldwide Governance Indicators
International humanitarian funding
Foreign Exchange Regulation Act
CHAPTER 10 -INTERNAL SOCIAL ENVIRONMENT
Diversity and Groupthink
Why undertake a PEST(ELI) Analysis
CHAPTER 11- BUSINESS CULTURAL ETHICS
Doing Business in India: 20 Cultural Norms You Need to Know
CHAPTER 12- ENVIRONMENTAL ETHICS
Environmental ethics
8
Marshall's categories of environmental ethics
Ecologic Extension
Humanist theories
Applied theology
Anthropocentrism
Contaminant cleanup
Sustainable Development
Environmental sociology
Existential dualism
New Ecological Paradigm
Societal-environmental dialectic
Ecotheology
CHAPTER 13- ENVIRONMENTAL HEALTH ETHICS
Environmental health ethics
Genetic Engineering, Food, and Nutrition
Conservation (ethic)
Earth Economics
Ecosystem Service Valuations
Environmental engineering
Environmental resource management
CHAPTER 14- CORPORATE SOCIAL RESPONSIBILITY AND ETHICS
Evolution of corporate social responsibility in India
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The Four Phases of CSR Development in India
Triple bottom line
Voluntary Guidance Standard for All Organizations
Key Principles and Core Subjects of ISO 26000
Development leadership
Shared value and the bottom of the pyramid
Application of Inclusive business models
Shared Value Initiative
CHAPTER 15-GOVERNANCE ANALYTICAL FRAMEWORK
The Governance Analytical Framework
Collaborative governance
Governance as a normative concept
Fair governance
CHAPTER -16- ANTI COMPETITIVE PRACTICES
Anti-competitive practices
CHAPTER 17- PRINCIPLES FOR RESPONSIBLE INVESTMENT
Principles for Responsible Investment
10
Chapter 1; UNDERSTANDING ETHICAL VALUES
Business ethics (also corporate ethics) is a form of applied ethics or professional ethics that
examines ethical principles and moral or ethical problems that arise in a business environment.
It applies to all aspects of business conduct and is relevant to the conduct of individuals and
entire organizations.
Business ethics
examines ethical principles and moral or ethical problems that arise in a business environment. It
applies to all aspects of business conduct and is relevant to the conduct of individuals and entire
organizations.Business ethics refers to contemporary standards or sets of values that govern the
actions and behaviour of an individual in the business organisation. Business ethics has
normative and descriptive dimensions. As a corporate practice and a career specialization, the
field is primarily normative. Academics attempting to understand business behavior employ
descriptive methods. The range and quantity of business ethical issues reflects the interaction of
profit-maximizing behavior with non-economic concerns. Interest in business ethics accelerated
dramatically during the 1980s and 1990s, both within major corporations and within academia.
For example, most major corporations today promote their commitment to non-economic values
under headings such as ethics codes and social responsibility charters. Adam Smith said, "People
of the same trade seldom meet together, even for merriment and diversion, but the conversation
ends in a conspiracy against the public, or in some contrivance to raise prices." [2] Governments
use laws and regulations to point business behavior in what they perceive to be beneficial
directions. Ethics implicitly regulates areas and details of behavior that lie beyond governmental
control. The emergence of large corporations with limited relationships and sensitivity to the
communities in which they operate accelerated the development of formal ethics regimes.
Business ethical norms reflect the norms of each historical period. As time passes norms evolve,
causing accepted behaviors to become objectionable. Business ethics and the resulting behavior
evolved as well. Business was involved in slavery, colonialism, and the cold war. The term
'business ethics' came into common use in the United States in the early 1970s. By the mid-1980s
at least 500 courses in business ethics reached 40,000 students, using some twenty textbooks and
at least ten casebooks along supported by professional societies, centers and journals of business
ethics. The Society for Business Ethics was started in 1980. European business schools adopted
business ethics after 1987 commencing with the European Business Ethics Network (EBEN). In
1982 the first single-authored books in the field appeared. Firms started highlighting their ethical
stature in the late 1980s and early 1990s, possibly trying to distance themselves from the
business scandals of the day, such as the savings and loan crisis. The idea of business ethics
caught the attention of academics, media and business firms by the end of the Cold War.
However, criticism of business practices was attacked for infringing the freedom of
entrepreneurs and critics were accused of supporting communists. This scuttled the discourse of
business ethics both in media and academia.
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Overview
Business ethics reflects the philosophy of business, of which one aim is to determine the
fundamental purposes of a company. If a company's purpose is to maximize shareholder returns,
then sacrificing profits to other concerns is a violation of its fiduciary responsibility. Corporate
entities are legally considered as persons in USA and in most nations. The 'corporate persons' are
legally entitled to the rights and liabilities due to citizens as persons.Ethics are the rules or
standards that govern our decisions on a daily basis. Many equate “ethics” with conscience or a
simplistic sense of “right” and “wrong.” Others would say that ethics is an internal code that
governs an individual’s conduct, ingrained into each person by family, faith, tradition,
community, laws, and personal mores. Corporations and professional organizations, particularly
licensing boards, generally will have a written “Code of Ethics” that governs standards of
professional conduct expected of all in the field. It is important to note that “law” and “ethics”
are not synonymous, nor are the “legal” and “ethical” courses of action in a given situation
necessarily the same. Statutes and regulations passed by legislative bodies and administrative
boards set forth the “law.” Slavery once was legal in the US, but one certainly wouldn’t say
forcibly enslaving humans was an “ethical” act.Economist Milton Friedman writes that corporate
executives' "responsibility... generally will be to make as much money as possible while
conforming to their basic rules of the society, both those embodied in law and those embodied in
ethical custom". Friedman also said, "the only entities who can have responsibilities are
individuals ... A business cannot have responsibilities. So the question is, do corporate
executives, provided they stay within the law, have responsibilities in their business activities
other than to make as much money for their stockholders as possible? And my answer to that is,
no, they do not." A multi-country 2011 survey found support for this view among the "informed
public" ranging from 30 to 80%. Ronald Duska views Friedman's argument as consequentialist
rather than pragmatic, implying that unrestrained corporate freedom would benefit the most in
long term. Similarly author business consultant Peter Drucker observed, "There is neither a
separate ethics of business nor is one needed", implying that standards of personal ethics cover
all business situations. However, Peter Drucker in another instance observed that the ultimate
responsibility of company directors is not to harm—primum non nocere. Another view of
business is that it must exhibit corporate social responsibility (CSR): an umbrella term indicating
that an ethical business must act as a responsible citizen of the communities in which it operates
even at the cost of profits or other goals. In the US and most other nations corporate entities are
legally treated as persons in some respects. For example, they can hold title to property, sue and
be sued and are subject to taxation, although their free speech rights are limited. This can be
interpreted to imply that they have independent ethical responsibilitiesDuska argues that
stakeholders have the right to expect a business to be ethical; if business has no ethical
obligations, other institutions could make the same claim which would be counterproductive to
the corporation. Ethical issues include the rights and duties between a company and its
employees, suppliers, customers and neighbors, its fiduciary responsibility to its shareholders.
Issues concerning relations between different companies include hostile take-overs and industrial
espionage. Related issues include corporate governance; corporate social entrepreneurship;
12
political contributions; legal issues such as the ethical debate over introducing a crime of
corporate manslaughter; and the marketing of corporations' ethics policies. According to IBE/
Ipsos MORI research published in late 2012, the three major areas of public concern regarding
business ethics in Britain are executive pay, corporate tax avoidance and bribery and corruption.
Ethical standards of an entire organisation can be badly damaged if a corporate psychopath is in
charge.
Finance
Fundamentally finance is a social science discipline. The discipline borders behavioral

economics, sociology, economics, accounting and management. It concerns technical issues such
as the mix of debt and equity, dividend policy, the evaluation of alternative investment projects,
options, futures, swaps, and other derivatives, portfolio diversification and many others. It is
often mistaken by the people to be a discipline free from ethical burdens. The 2008 financial
crisis caused critics to challenge the ethics of the executives in charge of U.S. and European
financial institutions and financial regulatory bodies. Finance ethics is overlooked for another
reason—issues in finance are often addressed as matters of law rather than ethics.
Finance paradigm
Aristotle said, "the end and purpose of the polis is the good life".Adam Smith characterized the
good life in terms of material goods and intellectual and moral excellences of character Smith in
his The Wealth of Nations commented, "All for ourselves, and nothing for other people, seems,
in every age of the world, to have been the vile maxim of the masters of mankind." However, a
section of economists influenced by the ideology of neoliberals, interpreted the objective of
economics to be maximization of economic growth through accelerated consumption and
production of goods and services. Neoliberal ideology promoted finance from its position as a
component of economics to its core. Proponents of the ideology hold that unrestricted financial
flows, if redeemed from the shackles of "financial repressions", best help impoverished nations
to grow. The theory holds that open financial systems accelerate economic growth by
encouraging foreign capital inflows, thereby enabling higher levels of savings, investment,
employment, productivity and "welfare", along with containing corruption. Neoliberals
recommended that governments open their financial systems to the global market with minimal
regulation over capital flows. The recommendations however, met with criticisms from various
schools of ethical philosophy. Some pragmatic ethicists, found these claims to unfalsifiable and a
priori, although neither of these makes the recommendations false or unethical per se. Raising
economic growth to the highest value necessarily means that welfare is subordinate, although
advocates dispute this saying that economic growth provides more welfare than known
alternatives. Since history shows that neither regulated nor unregulated firms always behave
ethically, neither regime offers an ethical panacea. The claim that deregulation and the opening
up of economies would reduce corruption was also contested. Dobson observes, "a rational agent
is simply one who pursues personal material advantage ad infinitum. In essence, to be rational in
finance is to be individualistic, materialistic, and competitive. Business is a game played by
individuals, as with all games the object is to win, and winning is measured in terms solely of
13
material wealth. Within the discipline this rationality concept is never questioned, and has indeed
become the theory-of-the-firm's sine qua non".Financial ethics is in this view a mathematical
function of shareholder wealth. Such simplifying assumptions were once necessary for the
construction of mathematically robust models. However signalling theory and agency theory
extended the paradigm to greater realism.
Other issues
Fairness in trading practices, trading conditions, financial contracting, sales practices,

consultancy services, tax payments, internal audit, external audit and executive compensation
also fall under the umbrella of finance and accounting. Particular corporate ethical/legal abuses
include: creative accounting, earnings management, misleading financial analysis, insider
trading, securities fraud, bribery/kickbacks and facilitation payments. Outside of corporations,
bucket shops and forex scams are criminal manipulations of financial markets. Cases include
accounting scandals, Enron, WorldCom and Satyam.
Human resource management occupies the sphere of activity of recruitment selection,

orientation, performance appraisal, training and development, industrial relations and health and
safety issues. Business Ethicists differ in their orientation towards labour ethics. Some assess
human resource policies according to whether they support an egalitarian workplace and the
dignity of labor. Issues including employment itself, privacy, compensation in accord with
comparable worth, collective bargaining (and/or its opposite) can be seen either as inalienable
rights or as negotiable Discrimination by age (preferring the young or the old), gender/sexual
harassment, race, religion, disability, weight and attractiveness. A common approach to
remedying discrimination is affirmative action.Once hired, employees have the right to
occasional cost of living increases, as well as raises based on merit. Promotions, however, are
not a right, and there are often fewer openings than qualified applicants. It may seem unfair if an
employee who has been with a company longer is passed over for a promotion, but it is not
unethical. It is only unethical if the employer did not give the employee proper consideration or
used improper criteria for the promotion. Potential employees have ethical obligations to
employers, involving intellectual property protection and whistle-blowing. Employers must
consider workplace safety, which may involve modifying the workplace, or providing
appropriate training or hazard disclosure. Larger economic issues such as immigration, trade
policy, globalization and trade unionism affect workplaces and have an ethical dimension, but
are often beyond the purview of individual companies.
Trade unions
Unions for example, may push employers to establish due process for workers, but may also cost
jobs by demanding unsustainable compensation and work rules. Unionized workplaces may
confront union busting and strike breaking and face the ethical implications of work rules that
advantage some workers over others.
Management strategy
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Among the many people management strategies that companies employ are a "soft" approach
that regards employees as a source of creative energy and participants in workplace decision
making, a "hard" version explicitly focused on control and Theory Z that emphasizes philosophy,
culture and consensus. None ensure ethical behavior. Some studies claim that sustainable success
requires a humanely treated and satisfied workforce.
Sales and marketing
Marketing ethics came of age only as late as 1990s.[92] Marketing ethics was approached from
ethical perspectives of virtue or virtue ethics, deontology, consequentialism, pragmatism and
relativism. Ethics in marketing deals with the principles, values and/or ideals by which marketers
(and marketing institutions) ought to act. Marketing ethics is also contested terrain, beyond the
previously described issue of potential conflicts between profitability and other concerns. Ethical
marketing issues include marketing redundant or dangerous products/services transparency about
environmental risks, transparency about product ingredients such as genetically modified
organisms possible health risks, financial risks, security risks, etc.,] respect for consumer privacy
and autonomy, advertising truthfulness and fairness in pricing & distribution. According to
Borgerson, and Schroeder (2008), marketing can influence individuals' perceptions of and
interactions with other people, implying an ethical responsibility to avoid distorting those
perceptions and interactions. Marketing ethics involves pricing practices, including illegal
actions such as price fixing and legal actions including price discrimination and price skimming.
Certain promotional activities have drawn fire, including greenwashing, bait and switch, shilling,
viral marketing, spam (electronic), pyramid schemes and multi-level marketing. Advertising has
raised objections about attack ads, subliminal messages, sex in advertising and marketing in
schools.
Production
This area of business ethics usually deals with the duties of a company to ensure that products
and production processes do not needlessly cause harm. Since few goods and services can be
produced and consumed with zero risk, determining the ethical course can be problematic. In
some case consumers demand products that harm them, such as tobacco products. Production
may have environmental impacts, including pollution, habitat destruction and urban sprawl. The
downstream effects of technologies nuclear power, genetically modified food and mobile phones
may not be well understood. While the precautionary principle may prohibit introducing new
technology whose consequences are not fully understood, that principle would have prohibited
most new technology introduced since the industrial revolution. Product testing protocols have
been attacked for violating the rights of both humans and animals.
Property
The etymological root of property is the Latin 'proprius'[107] which refers to 'nature', 'quality',
'one's own', 'special characteristic', 'proper', 'intrinsic', 'inherent', 'regular', 'normal', 'genuine',
'thorough, complete, perfect' etc. The word property is value loaded and associated with the
personal qualities of propriety and respectability, also implies questions relating to ownership. A
'proper' person owns and is true to herself or himself, and is thus genuine, perfect and pure.
15
Modern discourse on property emerged by the turn of 17th century within theological
discussions of that time. For instance, John Locke justified property rights saying that God had
made "the earth, and all inferior creatures, [in] common to all men".In 1802 Utilitarian Jeremy
Bentham stated, "property and law are born together and die together".One argument for
property ownership is that it enhances individual liberty by extending the line of non-interference
by the state or others around the person. Seen from this perspective, property right is absolute
and property has a special and distinctive character that precedes its legal protection. Blackstone
conceptualized property as the "sole and despotic dominion which one man claims and exercises
over the external things of the world, in total exclusion of the right of any other individual in the
universe".
Slaves as property
During the seventeenth and eighteenth centuries, slavery spread to European colonies including
America, where colonial legislatures defined the legal status of slaves as a form of property.
During this time settlers began the centuries-long process of dispossessing the natives of
America of millions of acres of land. Ironically, the natives lost about 200,000 square miles
(520,000 km2) of land in the Louisiana Territory under the leadership of Thomas Jefferson, who
championed property rights. Combined with theological justification, property was taken to be
essentially natural ordained by God. Property, which later gained meaning as ownership and
appeared natural to Locke, Jefferson and to many of the 18th and 19th century intellectuals as
land, labour or idea and property right over slaves had the same theological and essentialized
justification It was even held that the property in slaves was a sacred right. Wiecek noted,
"slavery was more clearly and explicitly established under the Constitution as it had been under
the Articles". Accordingly, US Supreme Court Chief Justice Roger B. Taney in his 1857
judgment stated, "The right of property in a slave is distinctly and expressly affirmed in the
Constitution".
Natural right vs social construct
Neoliberals hold that private property rights are a non-negotiable natural right. Davies counters
with "property is no different from other legal categories in that it is simply a consequence of the
significance attached by law to the relationships between legal persons." Singer claims,
"Property is a form of power, and the distribution of power is a political problem of the highest
order".Rose finds, "'Property' is only an effect, a construction, of relationships between people,
meaning that its objective character is contestable. Persons and things, are 'constituted' or
'fabricated' by legal and other normative techniques Singer observes, "A private property regime
is not, after all, a Hobbesian state of nature; it requires a working legal system that can define,
allocate, and enforce property rights." Davis claims that common law theory generally favors the
view that "property is not essentially a 'right to a thing', but rather a separable bundle of rights
subsisting between persons which may vary according to the context and the object which is at
stake".In common parlance property rights involve a 'bundle of rights'including occupancy, use
16
and enjoyment, and the right to sell, devise, give, or lease all or part of these rights. Custodians
of property have obligations as well as rights. Michelman writes, "A property regime thus
depends on a great deal of cooperation, trustworthiness, and self-restraint among the people who
enjoy it." Menon claims that the autonomous individual, responsible for his/her own existence is
a cultural construct moulded by Western culture rather than the truth about the human condition.
Penner views property as an "illusion"—a "normative phantasm" without substance. In the
neoliberal literature, property is part of the private side of a public/private dichotomy and acts a
counterweight to state power. Davies counters that "any space may be subject to plural meanings
or appropriations which do not necessarily come into conflict".Private property has never been a
universal doctrine, although since the end of the Cold War is it has become nearly so. Some
societies, e.g., Native American bands, held land, if not all property, in common. When groups
came into conflict, the victor often appropriated the loser's property. The rights paradigm tended
to stabilize the distribution of property holdings on the presumption that title had been lawfully
acquired.Property does not exist in isolation, and so property rights too. Bryan claimed that
property rights describe relations among people and not just relations between people and things
Singer holds that the idea that owners have no legal obligations to others wrongly supposes that
property rights hardly ever conflict with other legally protected interests. Singer continues
implying that legal realists "did not take the character and structure of social relations as an
important independent factor in choosing the rules that govern market life". Ethics of property
rights begins with recognizing the vacuous nature of the notion of property.
Intellectual property
Intellectual property (IP) encompasses expressions of ideas, thoughts, codes and information.
"Intellectual property rights" (IPR) treat IP as a kind of real property, subject to analogous
protections, rather than as a reproducible good or service. Boldrin and Levine argue that
"government does not ordinarily enforce monopolies for producers of other goods. This is
because it is widely recognized that monopoly creates many social costs. Intellectual monopoly
is no different in this respect. The question we address is whether it also creates social benefits
commensurate with these social costs." International standards relating to Intellectual Property
Rights are enforced through Agreement on Trade Related Aspects of Intellectual Property Rights
(TRIPS). In the US, IP other than copyrights is regulated by the United States Patent and
Trademark Office.The US Constitution included the power to protect intellectual property,
empowering the Federal government "to promote the progress of science and useful arts, by
securing for limited times to authors and inventors the exclusive right to their respective writings
and discoveries". Boldrin and Levine see no value in such state-enforced monopolies stating, "we
ordinarily think of innovative monopoly as an oxymoron. Further they comment, 'intellectual
property' "is not like ordinary property at all, but constitutes a government grant of a costly and
dangerous private monopoly over ideas. We show through theory and example that intellectual
monopoly is not necessary for innovation and as a practical matter is damaging to growth,
prosperity, and liberty" . Steelman defends patent monopolies, writing, "Consider prescription
drugs, for instance. Such drugs have benefited millions of people, improving or extending their
lives. Patent protection enables drug companies to recoup their development costs because for a
specific period of time they have the sole right to manufacture and distribute the products they
have invented." The court cases by 39 pharmaceutical companies against South Africa's 1997
Medicines and Related Substances Control Amendment Act, which intended to provide
17
affordable HIV medicines has been cited as a harmful effect of patents. One attack on IPR is
moral rather than utilitarian, claiming that inventions are mostly a collective, cumulative, path
dependent, social creation and therefore, no one person or firm should be able to monopolize
them even for a limited period. The opposing argument is that the benefits of innovation arrive
sooner when patents encourage innovators and their investors to increase their commitments.
Roderick Long, a libertarian philosopher, observes, "Ethically, property rights of any kind have
to be justified as extensions of the right of individuals to control their own lives. Thus any
alleged property rights that conflict with this moral basis—like the "right" to own slaves—are
invalidated. In my judgment, intellectual property rights also fail to pass this test. To enforce
copyright laws and the like is to prevent people from making peaceful use of the information
they possess. If you have acquired the information legitimately (say, by buying a book), then on
what grounds can you be prevented from using it, reproducing it, trading it? Is this not a
violation of the freedom of speech and press? It may be objected that the person who originated
the information deserves ownership rights over it. But information is not a concrete thing an
individual can control; it is a universal, existing in other people's minds and other people's
property, and over these the originator has no legitimate sovereignty. You cannot own
information without owning other people". Machlup concluded that patents do not have the
intended effect of enhancing innovation. Self-declared anarchist Proudhon, in his 1847 seminal
work noted, "Monopoly is the natural opposite of competition," and continued, "Competition is
the vital force which animates the collective being: to destroy it, if such a supposition were
possible, would be to kill society"Mindeli and Pipiya hold that the knowledge economy is an
economy of abundance because it relies on the "infinite potential" of knowledge and ideas rather
than on the limited resources of natural resources, labor and capital. Allison envisioned an
egalitarian distribution of knowledge. Kinsella claims that IPR create artificial scarcity and
reduce equality. Bouckaert wrote, "Natural scarcity is that which follows from the relationship
between man and nature. Scarcity is natural when it is possible to conceive of it before any
human, institutional, contractual arrangement. Artificial scarcity, on the other hand, is the
outcome of such arrangements. Artificial scarcity can hardly serve as a justification for the legal
framework that causes that scarcity. Such an argument would be completely circular. On the
contrary, artificial scarcity itself needs a justification" Corporations fund much IP creation and
can acquire IP they do not create, to which Menon and others object. Andersen claims that IPR
has increasingly become an instrument in eroding public domain.
International issues
While business ethics emerged as a field in the 1970s, international business ethics did not
emerge until the late 1990s, looking back on the international developments of that decade.
Many new practical issues arose out of the international context of business. Theoretical issues
such as cultural relativity of ethical values receive more emphasis in this field. Other, older
issues can be grouped here as well. Issues and subfields include:
• The search for universal values as a basis for international commercial behaviour.
• Comparison of business ethical traditions in different countries. Also on the basis of their
respective GDP and [Corruption rankings].
• Comparison of business ethical traditions from various religious perspectives.
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• Ethical issues arising out of international business transactions; e.g., bioprospecting and
biopiracy in the pharmaceutical industry; the fair trade movement; transfer pricing.
• Issues such as globalization and cultural imperialism.
• Varying global standards—e.g., the use of child labor.
• The way in which multinationals take advantage of international differences, such as
outsourcing production (e.g. clothes) and services (e.g. call centres) to low-wage
countries.
• The permissibility of international commerce with pariah states.
The success of any business depends on its financial performance. Financial accounting helps the
management to report and also control the business performance.The information regarding the
financial performance of the company plays an important role in enabling people to take right
decision about the company. Therefore, it becomes necessary to understand how to record based
on accounting conventions and concepts ensure unambling and accurate records. Foreign
countries often use dumping as a competitive threat, selling products at prices lower than their
normal value. This can lead to problems in domestic markets. It becomes difficult for these
markets to compete with the pricing set by foreign markets. In 2009, the International Trade
Commission has been researching anti-dumping laws. Dumping is often seen as an ethical issue,
as larger companies are taking advantage of other less economically advanced companies.
Economic systems
Political economy and political philosophy have ethical implications, particularly regarding the
distribution of economic benefits. John Rawls and Robert Nozick are both notable contributors.
For example, Rawls has been interpreted as offering a critique of offshore outsourcing on social
contract grounds, whereas Nozick's libertarian philosophy rejects the notion of any positive
corporate social obligation.
Law and regulation
“Laws” are the written statutes, codes, and opinions of government organizations by which
citizens, businesses, and persons present within a jurisdiction are expected to govern themselves
or face legal sanction. Sanctions for violating the law can include (a) civil penalties, such as
fines, pecuniary damages, and loss of licenses, property, rights, or privileges; (b) criminal
penalties, such as fines, probation, imprisonment, or a combination thereof; or (c) both civil and
criminal penalties.Very often it is held that business is not bound by any ethics other than
abiding by the law. Milton Friedman is the pioneer of the view. He held that corporations have
the obligation to make a profit within the framework of the legal system, nothing more.
Friedman made it explicit that the duty of the business leaders is, "to make as much money as
possible while conforming to the basic rules of the society, both those embodied in the law and
those embodied in ethical custom". Ethics for Friedman is nothing more than abiding by
'customs' and 'laws'. The reduction of ethics to abidance to laws and customs however have
drawn serious criticisms. Counter to Friedman's logic it is observed that legal procedures are
technocratic, bureaucratic, rigid and obligatory where as ethical act is conscientious, voluntary
choice beyond normativity. Law is retroactive. Crime precedes law. Law against a crime, to be
passed, the crime must have happened. Laws are blind to the crimes undefined in it. Further, as
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per law, "conduct is not criminal unless forbidden by law which gives advance warning that such
conduct is criminal. Also, law presumes the accused is innocent until proven guilty and that the
state must establish the guilt of the accused beyond reasonable doubt. As per liberal laws
followed in most of the democracies, until the government prosecutor proves the firm guilty with
the limited resources available to her, the accused is considered to be innocent. Though the
liberal premises of law are necessary to protect individuals from being persecuted by
Government, it is not a sufficient mechanism to make firms morally accountable.
Implementation
As part of more comprehensive compliance and ethics programs, many companies have
formulated internal policies pertaining to the ethical conduct of employees. These policies can be
simple exhortations in broad, highly generalized language (typically called a corporate ethics
statement), or they can be more detailed policies, containing specific behavioural requirements
(typically called corporate ethics codes). They are generally meant to identify the company's
expectations of workers and to offer guidance on handling some of the more common ethical
problems that might arise in the course of doing business. It is hoped that having such a policy
will lead to greater ethical awareness, consistency in application, and the avoidance of ethical
disasters.An increasing number of companies also require employees to attend seminars
regarding business conduct, which often include discussion of the company's policies, specific
case studies, and legal requirements. Some companies even require their employees to sign
agreements stating that they will abide by the company's rules of conduct.Many companies are
assessing the environmental factors that can lead employees to engage in unethical conduct. A
competitive business environment may call for unethical behaviour. Lying has become expected
in fields such as trading. An example of this are the issues surrounding the unethical actions of
the Salomon Brothers.Not everyone supports corporate policies that govern ethical conduct.
Some claim that ethical problems are better dealt with by depending upon employees to use their
own judgment.Others believe that corporate ethics policies are primarily rooted in utilitarian
concerns, and that they are mainly to limit the company's legal liability, or to curry public favour
by giving the appearance of being a good corporate citizen. Ideally, the company will avoid a
lawsuit because its employees will follow the rules. Should a lawsuit occur, the company can
claim that the problem would not have arisen if the employee had only followed the code
properly.Sometimes there is disconnection between the company's code of ethics and the
company's actual practices. Thus, whether or not such conduct is explicitly sanctioned by
management, at worst, this makes the policy duplicitous, and, at best, it is merely a marketing
tool.Jones and Parker write, "Most of what we read under the name business ethics is either
sentimental common sense, or a set of excuses for being unpleasant." Many manuals are
procedural form filling exercises unconcerned about the real ethical dilemmas. For instance, US
Department of Commerce ethics program treats business ethics as a set of instructions and
procedures to be followed by 'ethics officers'., some others claim being ethical is just for the sake
of being ethical. Business ethicists may trivialize the subject, offering standard answers that do
not reflect the situation's complexity. Author of 'Business Ethics,' Richard DeGeorge writes in
regard to the importance of maintaining a corporate code, "Corporate codes have a certain
usefulness and there are several advantages to developing them. First, the very exercise of doing
so in itself is worthwhile, especially if it forces a large number of people in the firm to think
through, in a fresh way, their mission and the important obligations they as a group and as
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individuals have to the firm, to each other, to their clients and customers, and to society as a
whole. Second, once adopted a code can be used to generate continuing discussion and possible
modification to the code. Third, it could help to inculcate in new employees at all levels the
perspective of responsibility, the need to think in moral terms about their actions, and the
importance of developing the virtues appropriate to their position."
Ethics officers
Ethics officers (sometimes called "compliance" or "business conduct officers") have been
appointed formally by organizations since the mid-1980s. One of the catalysts for the creation of
this new role was a series of fraud, corruption, and abuse scandals that afflicted the U.S. defense
industry at that time. This led to the creation of the Defense Industry Initiative (DII), a pan-
industry initiative to promote and ensure ethical business practices. The DII set an early
benchmark for ethics management in corporations. In 1991, the Ethics & Compliance Officer
Association (ECOA)—originally the Ethics Officer Association (EOA)—was founded at the
Center for Business Ethics (at Bentley College, Waltham, MA) as a professional association for
those responsible for managing organizations' efforts to achieve ethical best practices. The
membership grew rapidly (the ECOA now has over 1,200 members) and was soon established as
an independent organization.Another critical factor in the decisions of companies to appoint
ethics/compliance officers was the passing of the Federal Sentencing Guidelines for
Organizations in 1991, which set standards that organizations (large or small, commercial and
non-commercial) had to follow to obtain a reduction in sentence if they should be convicted of a
federal offense. Although intended to assist judges with sentencing, the influence in helping to
establish best practices has been far-reaching.
In the wake of numerous corporate scandals between 2001 and 2004 (affecting large
corporations like Enron, WorldCom and Tyco), even small and medium-sized companies have
begun to appoint ethics officers. They often report to the Chief Executive Officer and are
responsible for assessing the ethical implications of the company's activities, making
recommendations regarding the company's ethical policies, and disseminating information to
employees. They are particularly interested in uncovering or preventing unethical and illegal
actions. This trend is partly due to the Sarbanes–Oxley Act in the United States, which was
enacted in reaction to the above scandals. A related trend is the introduction of risk assessment
officers that monitor how shareholders' investments might be affected by the company's
decisions.The effectiveness of ethics officers is not clear. If the appointment is made primarily as
a reaction to legislative requirements, one might expect little impact, at least over the short term.
In part, this is because ethical business practices result from a corporate culture that consistently
places value on ethical behaviour, a culture and climate that usually emanates from the top of the
organization. The mere establishment of a position to oversee ethics will most likely be
insufficient to inculcate ethical behaviour: a more systemic programme with consistent support
from general management will be necessary.The foundation for ethical behaviour goes well
beyond corporate culture and the policies of any given company, for it also depends greatly upon
an individual's early moral training, the other institutions that affect an individual, the
competitive business environment the company is in and, indeed, society as a whole.
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Sustainability Initiatives
Many corporate and business strategies now include sustainability. In addition to the traditional
environmental 'green' sustainability concerns, business ethics practices have expanded to include
social sustainability. Social sustainability focuses on issues related to human capital in the
business supply chain, such as worker's rights, working conditions, child labor, and human
trafficking.[186] Incorporation of these considerations is increasing, as consumers and
procurement officials demand documentation of a business' compliance with national and
international initiatives, guidelines, and standards. Many industries have organizations dedicated
to verifying ethical delivery of products from start to finish, such as the Kimberly Process, which
aims to stop the flow of conflict diamonds into international markets, or the Fair Wear
Foundation, dedicated to sustainability and fairness in the garment industry.
Academic discipline
As an academic discipline, business ethics emerged in the 1970s. Since no academic business
ethics journals or conferences existed, researchers published in general management journals,
and attended general conferences. Over time, specialized peer-reviewed journals appeared, and
more researchers entered the field. Corporate scandals in the earlier 2000s increased the field's
popularity. As of 2009, sixteen academic journals devoted to various business ethics issues
existed, with Journal of Business Ethics and Business Ethics Quarterly considered the leaders.
The International Business Development Institute is a global non-profit organization that
represents 217 nations and all 50 United States. It offers a Charter in Business Development
(CBD) that focuses on ethical business practices and standards. The Charter is directed by
Harvard, MIT, and Fulbright Scholars, and it includes graduate-level coursework in economics,
politics, marketing, management, technology, and legal aspects of business development as it
pertains to business ethics. IBDI also oversees the International Business Development Institute
of Asia which provides individuals living in 20 Asian nations the opportunity to earn the Charter.
Religious views
In Sharia law, followed by many Muslims, banking specifically prohibits charging interest on
loans. Traditional Confucian thought discourages profit-seeking.[191] Christianity offers the
Golden Rule command, "Therefore all things whatsoever ye would that men should do to you, do
ye even so to them: for this is the law and the prophets." According to the article "Theory of the
real economy", there is a more narrow point of view from the Christianity faith towards the
relationship between ethics and religious traditions. This article stresses about how capable is
Christianity of establishing reliable boundaries for financial institutions. One criticism comes
from Pope Benedict by describing the "damaging effects of the real economy of badly managed
and largely speculative financial dealing." It is mentioned that Christianity has the potential to
transform the nature of finance and investment but only if theologians and ethicist provide more
evidence of what is real in the economic life. Business ethics receives an extensive treatment in
Jewish thought and Rabbinic literature, both from an ethical (Mussar) and a legal (Halakha)
perspective; see article Jewish business ethics for further discussion.
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Related disciplines
Business ethics is part of the philosophy of economics, the branch of philosophy that deals with
the philosophical, political, and ethical underpinnings of business and economics.[194] Business
ethics operates on the premise, for example, that the ethical operation of a private business is
possible—those who dispute that premise, such as libertarian socialists, (who contend that
"business ethics" is an oxymoron) do so by definition outside of the domain of business ethics
proper.The philosophy of economics also deals with questions such as what, if any, are the social
responsibilities of a business; business management theory; theories of individualism vs.
collectivism; free will among participants in the marketplace; the role of self interest; invisible
hand theories; the requirements of social justice; and natural rights, especially property rights, in
relation to the business enterprise.Business ethics is also related to political economy, which is
economic analysis from political and historical perspectives. Political economy deals with the
distributive consequences of economic actions.
Applied ethics
Applied ethics is the philosophical examination, from a moral standpoint, of particular issues in
private and public life which are matters of moral judgment. It is thus the attempts to use
philosophical methods to identify the morally correct course of action in various fields of
everyday life. For example, the bioethics community is concerned with identifying the correct
approach to legal issues in the life sciences, such as euthanasia, the allocation of scarce health
resources, or the use of human embryos in research. Environmental ethics is concerned with
ecological questions such as the responsibility of government and corporations to clean up
pollution. Social ethics includes the duties or duty of 'whistleblowers' to the general public as
opposed to their loyalty to their employers. As such, it is an area of professional philosophy that
is relatively well paid and highly valued both within and outside of academia. Applied ethics is
distinguished from normative ethics, which concerns what people should believe to be right and
wrong, and from meta-ethics, which concerns the nature of moral statements.An emerging
typology for applied ethics (Porter, 2006) uses six domains to help improve organizations and
social issues at the national and global level:
• Decision ethics, or ethical theories and ethical decision processes

• Professional ethics, or ethics to improve professionalism
• Clinical ethics, or ethics to improve our basic health needs
• Business ethics, or individual based morals to improve ethics in a business environment
• Organizational ethics, or ethics among organizations
• Social ethics, or ethics among nations and as one global unit
Modern approach
Much of applied ethics is concerned with just three theories:
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1. Utilitarianism, where the practical consequences of various policies are evaluated on the
assumption that the right policy will be the one which results in the greatest happiness.
This theories main developments came from Jeremy Bentham and John Stuart Mill who
distinguished between an act and rule utilitarianist morality. Later developments have
also adjusted the theory, most notably Henry Sidgwick who introduced the idea of motive
or intent in morality, and Peter Singer who introduced the idea of preference in to moral
decision making.
2. Deontological ethics, notions based on 'rules' i.e. that there is an obligation to perform the
'right' action, regardless of actual consequences (epitomized by Immanuel Kant's notion
of the Categorical Imperative which was the centre to Kant's ethical theory based on
duty). Another key deontological theory is Natural Law, which was heavily developed by
Thomas Aquinas and is the basis of the Roman Catholic Church.
3. Virtue ethics, derived from Aristotle's and Confucius's notions, which asserts that the
right action will be that chosen by a suitably 'virtuous' agent.
One modern approach which attempts to overcome the seemingly impossible divide between
deontology and utilitarianism (of which the divide is caused by the opposite takings of an
absolute and relativist moral view) is case-based reasoning, also known as casuistry. Casuistry
does not begin with theory, rather it starts with the immediate facts of a real and concrete case.
While casuistry makes use of ethical theory, it does not view ethical theory as the most important
feature of moral reasoning. Casuists, like Albert Jonsen and Stephen Toulmin (The Abuse of
Casuistry 1988), challenge the traditional paradigm of applied ethics. Instead of starting from
theory and applying theory to a particular case, casuists start with the particular case itself and
then ask what morally significant features (including both theory and practical considerations)
ought to be considered for that particular case. In their observations of medical ethics
committees, Jonsen and Toulmin note that a consensus on particularly problematic moral cases
often emerges when participants focus on the facts of the case, rather than on ideology or theory.
Thus, a Rabbi, a Catholic priest, and an agnostic might agree that, in this particular case, the best
approach is to withhold extraordinary medical care, while disagreeing on the reasons that support
their individual positions. By focusing on cases and not on theory, those engaged in moral debate
increase the possibility of agreement.
Professional ethics
A 12th-century Byzantine manuscript of the Hippocratic oath.Professional ethics encompass the

personal, organizational, and corporate standards of behavior expected of professionals. The term
professionalism originally applied to vows of a religious order. By at least the year 1675, the
term had seen secular application and was applied to the three learned professions: Divinity,
Law, and Medical. The term professionalism was also used for the military profession around
this same time.Professionals and those working in acknowledged professions exercise specialist
knowledge and skill. How the use of this knowledge should be governed when providing a
service to the public can be considered a moral issue and is termed professional ethics.
Professionals are capable of making judgments, applying their skills, and reaching informed
decisions in situations that the general public cannot because they have not attained the necessary
knowledge and skills. One of the earliest examples of professional ethics is the Hippocratic oath
to which medical doctors still adhere to this day.
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Components
Some professional organizations may define their ethical approach in terms of a number of
discrete components. Typically these include:
Implementation
Most professionals have internally enforced codes of practice that members of the profession
must follow to prevent exploitation of the client and to preserve the integrity of the profession.
This is not only for the benefit of the client but also for the benefit of those belonging to the
profession. Disciplinary codes allow the profession to define a standard of conduct and ensure
that individual practitioners meet this standard, by disciplining them from the professional body
if they do not practice accordingly. This allows those professionals who act with a conscience to
practice in the knowledge that they will not be undermined commercially by those who have
fewer ethical qualms. It also maintains the public’s trust in the profession, encouraging the public
to continue seeking their services.
Internal regulation
In cases where professional bodies regulate their own ethics, there are possibilities for such
bodies to become self-serving and fail to follow their own ethical code when dealing with
renegade members. This is particularly true of professions in which they have almost a complete
monopoly on a particular area of knowledge. For example, until recently, the English courts
deferred to the professional consensus on matters relating to their practice that lay outside case
law and legislation. professional means a person who has a knowledge of some specific fields.
Statutory regulation
In many countries there is some statutory regulation of professional ethical standards such as the
statutory bodies that regulate nursing and midwifery in England and Wales. Failure to comply
with these standards can thus become a matter for the courts.
Examples
For example, a lay member of the public should not be held responsible for failing to act to save
a car crash victim because they could not give an appropriate emergency treatment. Though, they
are responsible for attempting to get help for the victim. This is because they do not have the
relevant knowledge and experience. In contrast, a fully trained doctor (with the correct
equipment) would be capable of making the correct diagnosis and carrying out appropriate
procedures. Failure of a doctor to not help at all in such a situation would generally be regarded
as negligent and unethical. Though, if a doctor helps and makes a mistake that is considered
negligent and unethical, there could be egregious repercussions. An untrained person would only
be considered to be negligent for failing to act if they did nothing at all to help and is protected
by the “Good Samaritan” Laws if they unintentionally caused more damage and possible loss of
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life.A business may approach a professional engineer to certify the safety of a project which is
not safe. While one engineer may refuse to certify the project on moral grounds, the business
may find a less scrupulous engineer who will be prepared to certify the project for a bribe, thus
saving the business the expense of redesigning.
Separatism
On a theoretical level, there is debate as to whether an ethical code for a profession should be
consistent with the requirements of morality governing the public. Separatists argue that
professions should be allowed to go beyond such confines when they judge it necessary. This is
because they are trained to produce certain outcomes which may take moral precedence over
other functions of society. For example, it could be argued that a doctor may lie to a patient
about the severity of his or her condition if there is reason to believe that telling the patient
would cause so much distress that it would be detrimental to his or her health. This would be a
disrespect of the patient’s autonomy, as it denies the patient information that could have a great
impact on his or her life. This would generally be seen as morally wrong. However, if the end of
improving and maintaining health is given a moral priority in society, then it may be justifiable
to contravene other moral demands in order to meet this goal. Separatism is based on a relativist
conception of morality that there can be different, equally valid, moral codes that apply to
different sections of society and differences in codes between societies (see moral relativism). If
moral universalism is ascribed to, then this would be inconsistent with the view that professions
can have a different moral code, as the universalist holds that there is only one valid moral code
for all.:
Student ethics
As attending college after high school graduation becomes a standard in the lives of young
people, Colleges and Universities are becoming more business-like in their expectations of the
students. Although people have differing opinions about if it is effective, surveys state that it is
the overall goal of the University administrators. Setting up a business-like atmosphere helps
students get adjusted from a more relaxed nature, like high school, towards what will be
expected of them in the business world upon graduating from College.
Codes of conduct
Codes of conduct, such as the St. Xavier Code of Conduct, are becoming more a staple in the
academic lives of students. While some of these rules are based solely on academics others are
more in depth than in previous years. Such as, detailing the level of respect expected towards
staff and gambling.Not only do codes of conduct apply while attending the schools at home, but
also while studying abroad. Schools also implement a code of conduct for international study
abroad programs which carry over many of the same rules found in most student handbooks.
Norm (philosophy)
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Norms are concepts (sentences) of practical import, oriented to effecting an action, rather than
conceptual abstractions that describe, explain, and express. Normative sentences imply "ought-
to" types of statements and assertions, in distinction to sentences that provide "is" types of
statements and assertions. Common normative sentences include commands, permissions, and
prohibitions; common normative abstract concepts include sincerity, justification, and honesty. A
popular account of norms describes them as reasons to take action, to believe, and to feel.
Types of norms
Orders and permissions express norms. Such norm sentences do not describe how the world is,
they rather prescribe how the world should be. Imperative sentences are the most obvious way to
express norms, but declarative sentences also may be norms, as is the case with laws or
'principles'. Generally, whether an expression is a norm depends on what the sentence intends to
assert. For instance, a sentence of the form "All Ravens are Black" could on one account be
taken as descriptive, in which case an instance of a white raven would contradict it, or
alternatively "All Ravens are Black" could be interpreted as a norm, in which case it stands as a
principle and definition, so 'a white raven' would then not be a raven.Those norms purporting to
create obligations (or duties) and permissions are called deontic norms (see also deontic logic).
The concept of deontic norm is already an extension of a previous concept of norm, which would
only include imperatives, that is, norms purporting to create duties. The understanding that
permissions are norms in the same way was an important step in ethics and philosophy of law.In
addition to deontic norms, many other varieties have been identified. For instance, some
constitutions establish the national anthem. These norms do not directly create any duty or
permission. They create a "national symbol". Other norms create nations themselves or political
and administrative regions within a nation. The action orientation of such norms is less obvious
than in the case of a command or permission, but is essential for understanding the relevance of
issuing such norms: When a folk song becomes a "national anthem" the meaning of singing one
and the same song changes; likewise, when a piece of land becomes an administrative region,
this has legal consequences for many activities taking place on that territory; and without these
consequences concerning action, the norms would be irrelevant. A more obviously action-
oriented variety of such constitutive norms (as opposed to deontic or regulatory norms)
establishes social institutions which give rise to new, previously inexistent types of actions or
activities (a standard example is the institution of marriage without which "getting married"
would not be a feasible action; another is the rules constituting a game: without the norms of
soccer, there would not exist such an action as executing an indirect free kick).Any convention
can create a norm, although the relation between both is not settled.There is a significant
discussion about (legal) norms that give someone the power to create other norms. They are
called power-conferring norms or norms of competence. Some authors argue that they are still
deontic norms, while others argue for a close connection between them and institutional facts
(see Raz 1975, Ruiter 1993).Linguistic conventions, for example, the convention in English that
"cat" means cat or the convention in Portuguese that "gato" means cat, are among the most
important norms.Games completely depend on norms. The fundamental norm of many games is
the norm establishing who wins and loses. In other games, it is the norm establishing how to
score points.
Major characteristics
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One major characteristic of norms is that, unlike propositions, they are not descriptively true or
false, since norms do not purport to describe anything, but to prescribe, create or change
something. Some people say they are "prescriptively true" or false. Whereas the truth of a
descriptive statement is purportedly based on its correspondence to reality, some philosophers,
beginning with Aristotle, assert that the (prescriptive) truth of a prescriptive statement is based
on its correspondence to right desire. Other philosophers maintain that norms are ultimately
neither true or false, but only successful or unsuccessful (valid or invalid), as their propositional
content obtains or not (see also John Searle and speech act).There is an important difference
between norms and normative propositions, although they are often expressed by identical
sentences. "You may go out." usually expresses a norm if it is uttered by the teacher to one of the
students, but it usually expresses a normative proposition if it is uttered to one of the students by
one of his or her classmates. Some ethical theories reject that there can be normative
propositions, but these are accepted by cognitivism. One can also think of propositional norms;
assertions and questions arguably express propositional norms (they set a proposition as asserted
or questioned).Another purported feature of norms, it is often argued, is that they never regard
only natural properties or entities. Norms always bring something artificial, conventional,
institutional or "unworldly". This might be related to Hume's assertion that it is not possible to
derive ought from is and to G.E. Moore's claim that there is a naturalistic fallacy when one tries
to analyse "good" and "bad" in terms of a natural concept. In aesthetics, it has also been argued
that it is impossible to derive an aesthetical predicate from a non-aesthetical one. The
acceptability of non-natural properties, however, is strongly debated in present-day philosophy.
Some authors deny their existence, some others try to reduce them to natural ones, on which the
former supervene.Other thinkers (Adler, 1986) assert that norms can be natural in a different
sense than that of "corresponding to something proceeding from the object of the prescription as
a strictly internal source of action". Rather, those who assert the existence of natural
prescriptions say norms can suit a natural need on the part of the prescribed entity. More to the
point, however, is the putting forward of the notion that just as descriptive statements being
considered true are conditioned upon certain self-evident descriptive truths suiting the nature of
reality (such as: it is impossible for the same thing to be and not be at the same time and in the
same manner), a prescriptive truth can suit the nature of the will through the authority of it being
based upon self-evident prescriptive truths (such as: one ought to desire what is really good for
one and nothing else).Recent works maintain that normativity has an important role in several
different philosophical subjects, not only in ethics and philosophy of law (see Dancy, 2000).
Philosophy of business
The philosophy of business considers the fundamental principles that underlie the formation and
operation of a business enterprise; the nature and purpose of a business, and the moral
obligations that pertain to it.
Moral obligation
The term moral obligation has a number of meanings in moral philosophy, in religion, and in
layman's terms. Generally speaking, when someone says of an act that it is a "moral obligation,"
they refer to a belief that the act is one prescribed by their set of values.Moral philosophers differ
as to the origin of moral obligation, and whether such obligations are external to the agent (that
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is, are, in some sense, objective and applicable to all agents) or are internal (that is, are based on
the agent's personal desires, upbringing, conscience, and so on).
Obligation being a set code by which a person is to follow. (Obligations) can be found by an
individual's peers that set a code that may go against the individual's own desires. The individual
will express their morality by the person following the set code(s) through seeing it as good to
appease society.
Ethics
Ethics or moral philosophy is the branch of philosophy that involves systematizing, defending,
and recommending concepts of right and wrong conduct.[1] The term ethics derives from the
Ancient Greek word ethikos, which is derived from the word ethos (habit, "custom"). The branch
of philosophy axiology comprises the sub-branches of ethics and aesthetics, each concerned with
values. As a branch of philosophy, ethics investigates the questions "What is the best way for
people to live?" and "What actions are right or wrong in particular circumstances?" In practice,
ethics seeks to resolve questions of human morality, by defining concepts such as good and evil,
right and wrong, virtue and vice, justice and crime. As a field of intellectual enquiry, moral
philosophy also is related to the fields of moral psychology, descriptive ethics, and value theory.
Three major areas of study within ethics recognised today are:
Meta-ethics, concerning the theoretical meaning and reference of moral propositions, and how
their truth values (if any) can be determined
1. Normative ethics, concerning the practical means of determining a moral course of action
2. Applied ethics, concerning what a person is obligated (or permitted) to do in a specific
situation or a particular domain of action[1]
Defining ethics
Rushworth Kidder states that "standard definitions of ethics have typically included such phrases
as 'the science of the ideal human character' or 'the science of moral duty' ". Richard William
Paul and Linda Elder define ethics as "a set of concepts and principles that guide us in
determining what behavior helps or harms sentient creatures". The Cambridge Dictionary of
Philosophy states that the word ethics is "commonly used interchangeably with 'morality' ... and
sometimes it is used more narrowly to mean the moral principles of a particular tradition, group
or individual." Paul and Elder state that most people confuse ethics with behaving in accordance
with social conventions, religious beliefs and the law and don't treat ethics as a stand-alone
concept. The word "ethics" in English refers to several things. It can refer to philosophical ethics
or moral philosophy—a project that attempts to use reason in order to answer various kinds of
ethical questions. As the English philosopher Bernard Williams writes, attempting to explain
moral philosophy: "What makes an inquiry a philosophical one is reflective generality and a
style of argument that claims to be rationally persuasive." And Williams describes the content of
this area of inquiry as addressing the very broad question, "how one should live"Ethics can also
refer to a common human ability to think about ethical problems that is not particular to
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philosophy. As bioethicist Larry Churchill has written: "Ethics, understood as the capacity to
think critically about moral values and direct our actions in terms of such values, is a generic
human capacity."] Ethics can also be used to describe a particular person's own idiosyncratic
principles or habits. For example: "Joe has strange ethics."
The English word ethics is derived from an Ancient Greek word êthikos, which means "relating
to one's character." The Ancient Greek adjective êthikos is itself derived from another Greek
word, the noun êthos meaning "character, disposition."
Meta-ethics
Meta-ethics asks how we understand, know about, and what we mean when we talk about what
is right and what is wrong.[12] An ethical question fixed on some particular practical question—
such as, "Should I eat this particular piece of chocolate cake?"—cannot be a meta-ethical
question. A meta-ethical question is abstract and relates to a wide range of more specific
practical questions. For example, "Is it ever possible to have secure knowledge of what is right
and wrong?" would be a meta-ethical question.Meta-ethics has always accompanied
philosophical ethics. For example, Aristotle implies that less precise knowledge is possible in
ethics than in other spheres of inquiry, and he regards ethical knowledge as depending upon habit
and acculturation in a way that makes it distinctive from other kinds of knowledge. Meta-ethics
is also important in G.E. Moore's Principia Ethica from 1903. In it he first wrote about what he
called the naturalistic fallacy. Moore was seen to reject naturalism in ethics, in his Open
Question Argument. This made thinkers look again at second order questions about ethics.
Earlier, the Scottish philosopher David Hume had put forward a similar view on the difference
between facts and values.Studies of how we know in ethics divide into cognitivism and non-
cognitivism; this is similar to the contrast between descriptivists and non-descriptivists. Non-
cognitivism is the claim that when we judge something as right or wrong, this is neither true nor
false. We may for example be only expressing our emotional feelings about these things. [13]
Cognitivism can then be seen as the claim that when we talk about right and wrong, we are
talking about matters of fact.The ontology of ethics is about value-bearing things or properties,
i.e. the kind of things or stuff referred to by ethical propositions. Non-descriptivists and non-
cognitivists believe that ethics does not need a specific ontology, since ethical propositions do
not refer. This is known as an anti-realist position. Realists on the other hand must explain what
kind of entities, properties or states are relevant for ethics, how they have value, and why they
guide and motivate our actions.
Normative ethics
Normative ethics is the study of ethical action. It is the branch of ethics that investigates the set
of questions that arise when considering how one ought to act, morally speaking. Normative
ethics is distinct from meta-ethics because it examines standards for the rightness and wrongness
of actions, while meta-ethics studies the meaning of moral language and the metaphysics of
moral facts. Normative ethics is also distinct from descriptive ethics, as the latter is an empirical
investigation of people's moral beliefs. To put it another way, descriptive ethics would be
concerned with determining what proportion of people believe that killing is always wrong,
while normative ethics is concerned with whether it is correct to hold such a belief. Hence,
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normative ethics is sometimes called prescriptive, rather than descriptive. However, on certain
versions of the meta-ethical view called moral realism, moral facts are both descriptive and
prescriptive at the same time. Traditionally, normative ethics (also known as moral theory) was
the study of what makes actions right and wrong. These theories offered an overarching moral
principle one could appeal to in resolving difficult moral decisions. At the turn of the 20th
century, moral theories became more complex and are no longer concerned solely with rightness
and wrongness, but are interested in many different kinds of moral status. During the middle of
the century, the study of normative ethics declined as meta-ethics grew in prominence. This
focus on meta-ethics was in part caused by an intense linguistic focus in analytic philosophy and
by the popularity of logical positivism. In 1971 John Rawls published A Theory of Justice,
noteworthy in its pursuit of moral arguments and eschewing of meta-ethics. This publication set
the trend for renewed interest in normative ethics.
Virtue ethics
Virtue ethics describes the character of a moral agent as a driving force for ethical behavior, and
is used to describe the ethics of Socrates, Aristotle, and other early Greek philosophers. Socrates
(469–399 BC) was one of the first Greek philosophers to encourage both scholars and the
common citizen to turn their attention from the outside world to the condition of humankind. In
this view, knowledge bearing on human life was placed highest, while all other knowledge were
secondary. Self-knowledge was considered necessary for success and inherently an essential
good. A self-aware person will act completely within his capabilities to his pinnacle, while an
ignorant person will flounder and encounter difficulty. To Socrates, a person must become aware
of every fact (and its context) relevant to his existence, if he wishes to attain self-knowledge. He
posited that people will naturally do what is good, if they know what is right. Evil or bad actions
are the result of ignorance. If a criminal was truly aware of the intellectual and spiritual
consequences of his actions, he would neither commit nor even consider committing those
actions. Any person who knows what is truly right will automatically do it, according to
Socrates. While he correlated knowledge with virtue, he similarly equated virtue with joy. The
truly wise man will know what is right, do what is good, and therefore be happy. Aristotle (384–
323 BC) posited an ethical system that may be termed "self-realizationism." In Aristotle's view,
when a person acts in accordance with his nature and realizes his full potential, he will do good
and be content. At birth, a baby is not a person, but a potential person. To become a "real"
person, the child's inherent potential must be realized. Unhappiness and frustration are caused by
the unrealized potential of a person, leading to failed goals and a poor life. Aristotle said, "Nature
does nothing in vain." Therefore, it is imperative for people to act in accordance with their nature
and develop their latent talents in order to be content and complete. Happiness was held to be the
ultimate goal. All other things, such as civic life or wealth, are merely means to the end. Self-
realization, the awareness of one's nature and the development of one's talents, is the surest path
to happiness. Aristotle asserted that man had three natures: vegetable (physical/metabolism),
animal (emotional/appetite) and rational (mental/conceptual). Physical nature can be assuaged
through exercise and care, emotional nature through indulgence of instinct and urges, and mental
through human reason and developed potential. Rational development was considered the most
important, as essential to philosophical self-awareness and as uniquely human. Moderation was
encouraged, with the extremes seen as degraded and immoral. For example, courage is the
moderate virtue between the extremes of cowardice and recklessness. Man should not simply
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live, but live well with conduct governed by moderate virtue. This is regarded as difficult, as
virtue denotes doing the right thing, to the right person, at the right time, to the proper extent, in
the correct fashion, for the right reason.
Stoicism
The Stoic philosopher Epictetus posited that the greatest good was contentment and serenity.
Peace of mind, or Apatheia, was of the highest value; self-mastery over one's desires and
emotions leads to spiritual peace. The "unconquerable will" is central to this philosophy. The
individual's will should be independent and inviolate. Allowing a person to disturb the mental
equilibrium is in essence offering yourself in slavery. If a person is free to anger you at will, you
have no control over your internal world, and therefore no freedom. Freedom from material
attachments is also necessary. If a thing breaks, the person should not be upset, but realize it was
a thing that could break. Similarly, if someone should die, those close to them should hold to
their serenity because the loved one was made of flesh and blood destined to death. Stoic
philosophy says to accept things that cannot be changed, resigning oneself to existence and
enduring in a rational fashion. Death is not feared. People do not "lose" their life, but instead
"return", for they are returning to God (who initially gave what the person is as a person).
Epictetus said difficult problems in life should not be avoided, but rather embraced. They are
spiritual exercises needed for the health of the spirit, just as physical exercise is required for the
health of the body. He also stated that sex and sexual desire are to be avoided as the greatest
threat to the integrity and equilibrium of a man's mind. Abstinence is highly desirable. Epictetus
said remaining abstinent in the face of temptation was a victory for which a man could be proud.
Contemporary virtue ethics
Modern virtue ethics was popularized during the late 20th century in large part as a response to
G. E. M. Anscombe's "Modern Moral Philosophy". Anscombe argues that consequentialist and
deontological ethics are only feasible as universal theories if the two schools ground themselves
in divine law. As a deeply devoted Christian herself, Anscombe proposed that either those who
do not give ethical credence to notions of divine law take up virtue ethics, which does not
necessitate universal laws as agents themselves are investigated for virtue or vice and held up to
"universal standards," or that those who wish to be utilitarian or consequentialist ground their
theories in religious conviction. Alasdair MacIntyre, who wrote the book After Virtue, was a key
contributor and proponent of modern virtue ethics, although MacIntyre supports a relativistic
account of virtue based on cultural norms, not objective standards. Martha Nussbaum, a
contemporary virtue ethicist, objects to MacIntyre's relativism, among that of others, and
responds to relativist objections to form an objective account in her work "Non-Relative Virtues:
An Aristotelian Approach." Complete Conduct Principles for the 21st Century blended the
Eastern virtue ethics and the Western virtue ethics, with some modifications to suit the 21st
Century, and formed a part of contemporary virtue ethics.
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Hedonism
Hedonism posits that the principal ethic is maximizing pleasure and minimizing pain. There are
several schools of Hedonist thought ranging from those advocating the indulgence of even
momentary desires to those teaching a pursuit of spiritual bliss. In their consideration of
consequences, they range from those advocating self-gratification regardless of the pain and
expense to others, to those stating that the most ethical pursuit maximizes pleasure and happiness
for the most people.
Cyrenaic hedonism
Founded by Aristippus of Cyrene, Cyrenaics supported immediate gratification or pleasure. "Eat,

drink and be merry, for tomorrow we die." Even fleeting desires should be indulged, for fear the
opportunity should be forever lost. There was little to no concern with the future, the present
dominating in the pursuit for immediate pleasure. Cyrenaic hedonism encouraged the pursuit of
enjoyment and indulgence without hesitation, believing pleasure to be the only good.
Epicureanism
Epicurean ethics is a hedonist form of virtue ethics. Epicurus "presented a sustained argument
that pleasure, correctly understood, will coincide with virtue". He rejected the extremism of the
Cyrenaics, believing some pleasures and indulgences to be detrimental to human beings.
Epicureans observed that indiscriminate indulgence sometimes resulted in negative
consequences. Some experiences were therefore rejected out of hand, and some unpleasant
experiences endured in the present to ensure a better life in the future. To Epicurus the summum
bonum, or greatest good, was prudence, exercised through moderation and caution. Excessive
indulgence can be destructive to pleasure and can even lead to pain. For example, eating one
food too often will cause a person to lose taste for it. Eating too much food at once will lead to
discomfort and ill-health. Pain and fear were to be avoided. Living was essentially good, barring
pain and illness. Death was not to be feared. Fear was considered the source of most
unhappiness. Conquering the fear of death would naturally lead to a happier life. Epicurus
reasoned if there was an afterlife and immortality, the fear of death was irrational. If there was no
life after death, then the person would not be alive to suffer, fear or worry; he would be non-
existent in death. It is irrational to fret over circumstances that do not exist, such as one's state in
death in the absence of an afterlife.
State consequentialism
State consequentialism, also known as Mohist consequentialism, is an ethical theory that

evaluates the moral worth of an action based on how much it contributes to the basic goods of a
state. The Stanford Encyclopedia of Philosophy describes Mohist consequentialism, dating back
to the 5th century BC, as "a remarkably sophisticated version based on a plurality of intrinsic
goods taken as constitutive of human welfare." Unlike utilitarianism, which views pleasure as a
moral good, "the basic goods in Mohist consequentialist thinking are ... order, material wealth,
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and increase in population". During Mozi's era, war and famines were common, and population
growth was seen as a moral necessity for a harmonious society. The "material wealth" of Mohist
consequentialism refers to basic needs like shelter and clothing, and the "order" of Mohist
consequentialism refers to Mozi's stance against warfare and violence, which he viewed as
pointless and a threat to social stability. Stanford sinologist David Shepherd Nivison, in The
Cambridge History of Ancient China, writes that the moral goods of Mohism "are interrelated:
more basic wealth, then more reproduction; more people, then more production and wealth ... if
people have plenty, they would be good, filial, kind, and so on unproblematically." The Mohists
believed that morality is based on "promoting the benefit of all under heaven and eliminating
harm to all under heaven." In contrast to Bentham's views, state consequentialism is not
utilitarian because it is not hedonistic or individualistic. The importance of outcomes that are
good for the community outweigh the importance of individual pleasure and pain.
Consequentialism/Teleology
Consequentialism refers to moral theories that hold that the consequences of a particular action
form the basis for any valid moral judgment about that action (or create a structure for judgment,
see rule consequentialism). Thus, from a consequentialist standpoint, a morally right action is
one that produces a good outcome, or consequence. This view is often expressed as the aphorism
"The ends justify the means".The term "consequentialism" was coined by G. E. M. Anscombe in
her essay "Modern Moral Philosophy" in 1958, to describe what she saw as the central error of
certain moral theories, such as those propounded by Mill and Sidgwick.[26] Since then, the term
has become common in English-language ethical theory. The defining feature of
consequentialist moral theories is the weight given to the consequences in evaluating the
rightness and wrongness of actions. In consequentialist theories, the consequences of an action or
rule generally outweigh other considerations. Apart from this basic outline, there is little else that
can be unequivocally said about consequentialism as such. However, there are some questions
that many consequentialist theories address:
• What sort of consequences count as good consequences?

• Who is the primary beneficiary of moral action?
• How are the consequences judged and who judges them?
One way to divide various consequentialisms is by the types of consequences that are taken to
matter most, that is, which consequences count as good states of affairs. According to
utilitarianism, a good action is one that results in an increase in a positive effect, and the best
action is one that results in that effect for the greatest number. Closely related is eudaimonic
consequentialism, according to which a full, flourishing life, which may or may not be the same
as enjoying a great deal of pleasure, is the ultimate aim. Similarly, one might adopt an aesthetic
consequentialism, in which the ultimate aim is to produce beauty. However, one might fix on
non-psychological goods as the relevant effect. Thus, one might pursue an increase in material
equality or political liberty instead of something like the more ephemeral "pleasure". Other
theories adopt a package of several goods, all to be promoted equally. Whether a particular
consequentialist theory focuses on a single good or many, conflicts and tensions between
different good states of affairs are to be expected and must be adjudicated.
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Utilitarianism
of action is one that maximizes a positive effect, such as "happiness", "welfare", or the ability to
live according to personal preferences. Jeremy Bentham and John Stuart Mill are influential
proponents of this school of thought. In A Fragment on Government Bentham says 'it is the
greatest happiness of the greatest number that is the measure of right and wrong' and describes
this as a fundamental axiom. In An Introduction to the Principles of Morals and Legislation he
talks of 'the principle of utility' but later prefers "the greatest happiness principle".
Utilitarianism is the paradigmatic example of a consequentialist moral theory. This form of

utilitarianism holds that what matters is the aggregate positive effect of everyone and not only of
any one person. John Stuart Mill, in his exposition of utilitarianism, proposed a hierarchy of
pleasures, meaning that the pursuit of certain kinds of pleasure is more highly valued than the
pursuit of other pleasures. Other noteworthy proponents of utilitarianism are neuroscientist Sam
Harris, author of The Moral Landscape, and moral philosopher Peter Singer, author of, amongst
other works, Practical Ethics.
There are two types of utilitarianism, act utilitarianism and rule utilitarianism. In act
utilitarianism the principle of utility is applied directly to each alternative act in a situation of
choice. The right act is then defined as the one which brings about the best results (or the least
amount of bad results). In rule utilitarianism the principle of utility is used to determine the
validity of rules of conduct (moral principles). A rule like promise-keeping is established by
looking at the consequences of a world in which people broke promises at will and a world in
which promises were binding. Right and wrong are then defined as following or breaking those
rules.
Deontology
Deontological ethics or deontology (from Greek δέον, deon, "obligation, duty"; and -λογία, -
logia) is an approach to ethics that determines goodness or rightness from examining acts, or the
rules and duties that the person doing the act strove to fulfill. This is in contrast to
consequentialism, in which rightness is based on the consequences of an act, and not the act by
itself. In deontology, an act may be considered right even if the act produces a bad consequence,
if it follows the rule that "one should do unto others as they would have done unto them", and
even if the person who does the act lacks virtue and had a bad intention in doing the act.
According to deontology, we have a duty to act in a way that does those things that are
inherently good as acts ("truth-telling" for example), or follow an objectively obligatory rule (as
in rule utilitarianism). For deontologists, the ends or consequences of our actions are not
important in and of themselves, and our intentions are not important in and of themselves.
Immanuel Kant's theory of ethics is considered deontological for several different reasons. First,
Kant argues that to act in the morally right way, people must act from duty (deon). Second, Kant
argued that it was not the consequences of actions that make them right or wrong but the motives
(maxime) of the person who carries out the action. Kant's argument that to act in the morally
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right way, one must act from duty, begins with an argument that the highest good must be both
good in itself, and good without qualification. Something is 'good in itself' when it is intrinsically
good, and 'good without qualification' when the addition of that thing never makes a situation
ethically worse. Kant then argues that those things that are usually thought to be good, such as
intelligence, perseverance and pleasure, fail to be either intrinsically good or good without
qualification. Pleasure, for example, appears to not be good without qualification, because when
people take pleasure in watching someone suffer, they make the situation ethically worse. He
concludes that there is only one thing that is truly good:Nothing in the world—indeed nothing
even beyond the world—can possibly be conceived which could be called good without
qualification except a good will.
Pragmatic ethics
Associated with the pragmatists, Charles Sanders Peirce, William James, and especially John
Dewey, pragmatic ethics holds that moral correctness evolves similarly to scientific knowledge:
socially over the course of many lifetimes. Thus, we should prioritize social reform over attempts
to account for consequences, individual virtue or duty (although these may be worthwhile
attempts, provided social reform is provided for).
Role ethics
Role ethics is an ethical theory based on family roles. Unlike virtue ethics, role ethics is not
individualistic. Morality is derived from a person's relationship with their community.[42]
Confucian ethics is an example of role ethics. Confucian roles center around the concept of filial
piety or xiao, a respect for family members.[43] According to Roger Ames and Henry Rosemont,
"Confucian normativity is defined by living one's family roles to maximum effect." Morality is
determined through a person's fulfillment of a role, such as that of a parent or a child. Confucian
roles are not rational, and originate through the xin, or human emotions.
Anarchist ethics
Anarchist ethics is an ethical theory based on the studies of anarchist thinkers. The biggest
contributor to the anarchist ethics is the Russian zoologist, geographer, economist and political
activist Peter Kropotkin. The anarchist ethics is a big and vague field which can depend upon
different historical situations and different anarchist thinkers, but as Peter Kropotkin explains,
"any “bourgeois” or “proletarian” ethics rests, after all, on the common basis, on the common
ethnological foundation, which at times exerts a very strong influence on the principles of the
class or group morality." Still, most of the anarchist ethics schools are based on three
fundamental ideas, which are: "solidarity, equality and justice". Kropotkin argues that Ethics is
evolutionary and is inherited as a sort of a social instinct through History, and by so, he rejects
any religious and transcendental explanation of ethics. Kropotkin suggests that the principle of
equality which lies at the basis of anarchism is the same as the Golden rule:This principle of
treating others as one wishes to be treated oneself, what is it but the very same principle as
equality, the fundamental principle of anarchism? And how can any one manage to believe
himself an anarchist unless he practices it? We do not wish to be ruled. And by this very fact, do
we not declare that we ourselves wish to rule nobody? We do not wish to be deceived, we wish
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always to be told nothing but the truth. And by this very fact, do we not declare that we
ourselves do not wish to deceive anybody, that we promise to always tell the truth, nothing but
the truth, the whole truth? We do not wish to have the fruits of our labor stolen from us. And by
that very fact, do we not declare that we respect the fruits of others' labor? By what right indeed
can we demand that we should be treated in one fashion, reserving it to ourselves to treat others
in a fashion entirely different? Our sense of equality revolts at such an idea.
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CHAPTER 2- POST MODERN ETHICS
Postmodern ethics
The 20th century saw a remarkable expansion and evolution of critical theory, following on
earlier Marxist Theory efforts to locate individuals within larger structural frameworks of
ideology and action.
Antihumanists such as Louis Althusser and Michel Foucault and structuralists such as Roland
Barthes challenged the possibilities of individual agency and the coherence of the notion of the
'individual' itself. As critical theory developed in the later 20th century, post-structuralism
sought to problematize human relationships to knowledge and 'objective' reality. Jacques Derrida
argued that access to meaning and the 'real' was always deferred, and sought to demonstrate via
recourse to the linguistic realm that "there is nothing outside context" ("il n'y a pas de hors-texte"
is often mistranslated as "there is nothing outside the text"); at the same time, Jean Baudrillard
theorised that signs and symbols or simulacra mask reality (and eventually the absence of reality
itself), particularly in the consumer world.Post-structuralism and postmodernism argue that
ethics must study the complex and relational conditions of actions. A simple alignment of ideas
of right and particular acts is not possible. There will always be an ethical remainder that cannot
be taken into account or often even recognized. Such theorists find narrative (or, following
Nietzsche and Foucault, genealogy) to be a helpful tool for understanding ethics because
narrative is always about particular lived experiences in all their complexity rather than the
assignment of an idea or norm to separate and individuated actions.Zygmunt Bauman says
Postmodernity is best described as Modernity without illusion, the illusion being the belief that
humanity can be repaired by some ethic principle. Postmodernity can be seen in this light as
accepting the messy nature of humanity as unchangeable.David Couzens Hoy states that
Emmanuel Levinas's writings on the face of the Other and Derrida's meditations on the relevance
of death to ethics are signs of the "ethical turn" in Continental philosophy that occurred in the
1980s and 1990s. Hoy describes post-critique ethics as the "obligations that present themselves
as necessarily to be fulfilled but are neither forced on one or are enforceable" (2004,
p. 103).Hoy's post-critique model uses the term ethical resistance. Examples of this would be an
individual's resistance to consumerism in a retreat to a simpler but perhaps harder lifestyle, or an
individual's resistance to a terminal illness. Hoy describes Levinas's account as "not the attempt
to use power against itself, or to mobilize sectors of the population to exert their political power;
the ethical resistance is instead the resistance of the powerless.
Hoy concludes that; The ethical resistance of the powerless others to our capacity to exert power
over them is therefore what imposes unenforceable obligations on us. The obligations are
unenforceable precisely because of the other's lack of power. Those actions are at once
obligatory and at the same time unenforceable is what put them in the category of the ethical.
Obligations that were enforced would, by the virtue of the force behind them, not be freely
undertaken and would not be in the realm of the ethical. In present-day terms the powerless may
include the unborn, the terminally sick, the aged, and the insane and non-human animals. It is in
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these areas that ethical action in Hoy's sense will apply. Until legislation or the state apparatus
enforces a moral order that addresses the causes of resistance these issues will remain in the
ethical realm. For example, should animal experimentation become illegal in a society, it will no
longer be an ethical issue on Hoy's definition. Likewise one hundred and fifty years ago, not
having a black slave in America would have been an ethical choice. This later issue has been
absorbed into the fabric of an enforceable social order and is therefore no longer an ethical issue
in Hoy's sense.
Applied ethics
Applied ethics is a discipline of philosophy that attempts to apply ethical theory to real-life
situations. The discipline has many specialized fields, such as engineering ethics, bioethics,
geoethics, public service ethics and business ethics. Applied ethics is used in some aspects of
determining public policy, as well as by individuals facing difficult decisions. The sort of
questions addressed by applied ethics include: "Is getting an abortion immoral?" "Is euthanasia
immoral?" "Is affirmative action right or wrong?" "What are human rights, and how do we
determine them?" "Do animals have rights as well?" and "Do individuals have the right of self
determination?" A more specific question could be: "If someone else can make better out of
his/her life than I can, is it then moral to sacrifice myself for them if needed?" Without these
questions there is no clear fulcrum on which to balance law, politics, and the practice of
arbitration — in fact, no common assumptions of all participants—so the ability to formulate the
questions are prior to rights balancing. But not all questions studied in applied ethics concern
public policy. For example, making ethical judgments regarding questions such as, "Is lying
always wrong?" and, "If not, when is it permissible?" is prior to any etiquette.People in-general
are more comfortable with dichotomies (two opposites). However, in ethics the issues are most
often multifaceted and the best proposed actions address many different areas concurrently. In
ethical decisions the answer is almost never a "yes or no", "right or wrong" statement. Many
buttons are pushed so that the overall condition is improved and not to the benefit of any
particular faction.
Particular fields of application
Bioethics is the study of controversial ethics brought about by advances in biology and medicine.
Bioethicists are concerned with the ethical questions that arise in the relationships among life
sciences, biotechnology, medicine, politics, law, and philosophy. It also includes the study of the
more commonplace questions of values ("the ethics of the ordinary") that arise in primary care
and other branches of medicine.Bioethics also needs to address emerging biotechnologies that
affect basic biology and future humans. These developments include cloning, gene therapy,
human genetic engineering, astroethics and life in space, and manipulation of basic biology
through altered DNA, RNA and proteins,e.g.- "three parent baby,where baby is born from
genetically modified embryos, would have DNA from a mother, a father and from a female
donor. Correspondingly, new bioethics also need to address life at its core. For example, biotic
ethics value organic gene/protein life itself and seek to propagate it. With such life-centered
principles, ethics may secure a cosmological future for life.
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Business ethics
examines ethical principles and moral or ethical problems that arise in a business environment,
including fields like Medical ethics. It applies to all aspects of business conduct and is relevant to
the conduct of individuals and entire organizations.Business ethics has both normative and
descriptive dimensions. As a corporate practice and a career specialization, the field is primarily
normative. Academics attempting to understand business behavior employ descriptive methods.
The range and quantity of business ethical issues reflects the interaction of profit-maximizing
behavior with non-economic concerns. Interest in business ethics accelerated dramatically during
the 1980s and 1990s, both within major corporations and within academia. For example, today
most major corporations promote their commitment to non-economic values under headings such
as ethics codes and social responsibility charters. Adam Smith said, "People of the same trade
seldom meet together, even for merriment and diversion, but the conversation ends in a
conspiracy against the public, or in some contrivance to raise prices." Governments use laws and
regulations to point business behavior in what they perceive to be beneficial directions. Ethics
implicitly regulates areas and details of behavior that lie beyond governmental control. The
emergence of large corporations with limited relationships and sensitivity to the communities in
which they operate accelerated the development of formal ethics regimes.
Machine ethics
In Moral Machines: Teaching Robots Right from Wrong, Wendell Wallach and Colin Allen
conclude that issues in machine ethics will likely drive advancement in understanding of human
ethics by forcing us to address gaps in modern normative theory and by providing a platform for
experimental investigation. The effort to actually program a machine or artificial agent to behave
as though instilled with a sense of ethics requires new specificity in our normative theories,
especially regarding aspects customarily considered common-sense. For example, machines,
unlike humans, can support a wide selection of learning algorithms, and controversy has arisen
over the relative ethical merits of these options. This may reopen classic debates of normative
ethics framed in new (highly technical) terms.
Military ethics
Military ethics are concerned with questions regarding the application of force and the ethos of
the soldier and are often understood as applied professional ethics. Just war theory is generally
seen to set the background terms of military ethics. However individual countries and traditions
have different fields of attention. Military ethics involves multiple subareas, including the
following among others:
1. what, if any, should be the laws of war

2. justification for the initiation of military force
3. decisions about who may be targeted in warfare
4. decisions on choice of weaponry, and what collateral effects such weaponry may have
40
5. standards for handling military prisoners
6. methods of dealing with violations of the laws of war.
Political ethics
Political ethics (also known as political morality or public ethics) is the practice of making moral
judgements about political action and political agents.
Public sector ethics
Public sector ethics is a set of principles that guide public officials in their service to their
constituents, including their decision-making on behalf of their constituents. Fundamental to the
concept of public sector ethics is the notion that decisions and actions are based on what best
serves the public's interests, as opposed to the official's personal interests (including financial
interests) or self-serving political interests.
Publication ethics
Publication ethics is the set of principles that guide the writing and publishing process for all
professional publications. In order to follow the set of principles, authors should verify that the
publication does not contain plagiarism or publication bias.[58] As a way to avoid misconduct in
research these principles can also be applied to experiments which are referenced or analyzed in
publications by ensuring the data is recorded, honestly and accurately. Plagiarism is the failure to
give credit to another author’s work or ideas, when it is used in the publication. It is the
obligation of the editor of the journal to ensure the article does not contain any plagiarism before
it is published. If a publication which has already been published is proven to contain plagiarism,
then the editor of the journal can proceed to have the article retracted. Publication bias occurs
when the publication is one-sided or "prejudiced against results". In best practice, an author
should try to include information from all parties involved, or affected by the topic. If an author
is prejudiced against certain results, than it can "lead to erroneous conclusions being drawn.”
Misconduct in research can occur when information from an experiment is falsely recorded or
altered. Falsely recorded information occurs when the researcher "fakes" information or data,
which was not used when conducting the actual experiment. By faking the data, the researcher
can alter the results from the experiment to better fit the hypothesis they originally predicted.
When conducting medical research, it is important to honor the healthcare rights of a patient by
protecting their anonymity in the publication.
Relational ethics
Relational ethics are related to an ethics of care. They are used in qualitative research, especially
ethnography and autoethnography. Researchers who employ relational ethics value and respect
the connection between themselves and the people they study, and "between researchers and the
communities in which they live and work" (Ellis, 2007, p. 4). Relational ethics also help
researchers understand difficult issues such as conducting research on intimate others that have
died and developing friendships with their participants. Relational ethics in close personal
relationships form a central concept of contextual therapy.
41
Moral psychology
Moral psychology is a field of study that began as an issue in philosophy and that is now
properly considered part of the discipline of psychology. Some use the term "moral psychology"
relatively narrowly to refer to the study of moral development. However, others tend to use the
term more broadly to include any topics at the intersection of ethics and psychology (and
philosophy of mind). Such topics are ones that involve the mind and are relevant to moral issues.
Some of the main topics of the field are moral responsibility, moral development, moral
character (especially as related to virtue ethics), altruism, psychological egoism, moral luck, and
moral disagreement.
Evolutionary ethics
Evolutionary ethics concerns approaches to ethics (morality) based on the role of evolution in
shaping human psychology and behavior. Such approaches may be based in scientific fields such
as evolutionary psychology or sociobiology, with a focus on understanding and explaining
observed ethical preferences and choices.
Descriptive ethics
Descriptive ethics is on the less philosophical end of the spectrum, since it seeks to gather
particular information about how people live and draw general conclusions based on observed
patterns. Abstract and theoretical questions that are more clearly philosophical—such as, "Is
ethical knowledge possible?"—are not central to descriptive ethics. Descriptive ethics offers a
value-free approach to ethics, which defines it as a social science rather than a humanity. Its
examination of ethics doesn't start with a preconceived theory, but rather investigates
observations of actual choices made by moral agents in practice. Some philosophers rely on
descriptive ethics and choices made and unchallenged by a society or culture to derive
categories, which typically vary by context. This can lead to situational ethics and situated ethics.
These philosophers often view aesthetics, etiquette, and arbitration as more fundamental,
percolating "bottom up" to imply the existence of, rather than explicitly prescribe, theories of
value or of conduct. The study of descriptive ethics may include examinations of the following:
• Ethical codes applied by various groups. Some consider aesthetics itself the basis of
ethics– and a personal moral core developed through art and storytelling as very
influential in one's later ethical choices.
• Informal theories of etiquette that tend to be less rigorous and more situational. Some
consider etiquette a simple negative ethics, i.e., where can one evade an uncomfortable
truth without doing wrong? One notable advocate of this view is Judith Martin ("Miss
Manners"). According to this view, ethics is more a summary of common sense social
decisions.
• Practices in arbitration and law, e.g., the claim that ethics itself is a matter of balancing
"right versus right," i.e., putting priorities on two things that are both right, but that must
be traded off carefully in each situation.
42
• Observed choices made by ordinary people, without expert aid or advice, who vote, buy,
and decide what is worth valuing. This is a major concern of sociology, political science,
and economics.
Meta-ethics
Meta-ethics is the branch of ethics that seeks to understand the nature of ethical properties,
statements, attitudes, and judgments. Meta-ethics is one of the four branches of ethics generally
recognized by philosophers, the others being descriptive ethics, normative ethics and applied
ethics.While normative ethics addresses such questions as "What should I do?", thus endorsing
some ethical evaluations and rejecting others, meta-ethics addresses questions such as "What is
goodness?" and "How can we tell what is good from what is bad?", seeking to understand the
nature of ethical properties and evaluations.Some theorists argue that a metaphysical account of
morality is necessary for the proper evaluation of actual moral theories and for making practical
moral decisions; others reason from opposite premises and suggest that we must impart ideas of
moral intuition onto proper action before we can give a proper account of morality's
metaphysics.
Meta-ethical questions
According to Richard Garner and Bernard Rosen, there are three kinds of meta-ethical problems,
or three general questions:
1. What is the meaning of moral terms or judgments? (Moral semantics)

2. What is the nature of moral judgments? (Moral ontology)
3. How may moral judgments be supported or defended? (Moral epistemology)
A question of the first type might be, "What do the words 'good', 'bad', 'right' and 'wrong' mean?"
(see value theory). The second category includes questions of whether moral judgments are
universal or relative, of one kind or many kinds, etc. Questions of the third kind ask, for
example, how we can know if something is right or wrong, if at all. Garner and Rosen say that
answers to the three basic questions "are not unrelated, and sometimes an answer to one will
strongly suggest, or perhaps even entail, an answer to another." A meta-ethical theory, unlike a
normative ethical theory, does not attempt to evaluate specific choices as being better, worse,
good, bad, or evil; although it may have profound implications as to the validity and meaning of
normative ethical claims. An answer to any of the three example questions above would not itself
be a normative ethical statement.
Semantic theories
These theories mainly put forward a position on the first of the three questions above, "What is
the meaning of moral terms or judgments?" They may however imply or even entail answers to
the other two questions as well.Cognitivist theories hold that evaluative moral sentences express
propositions (that is, they are "truth apt" or "truth bearers", capable of being true or false), as
opposed to non-cognitivism. Most forms of cognitivism hold that some such propositions are
true, as opposed to error theory, which asserts that all are erroneous.
43
Moral realism (in the robust sense; see moral universalism for the minimalist sense) holds that
such propositions are about robust or mind-independent facts, that is, not facts about any person
or group's subjective opinion, but about objective features of the world. Meta-ethical theories are
commonly categorized as either a form of realism or as one of three forms of "anti-realism"
regarding moral facts: ethical subjectivism, error theory, or non-cognitivism. Realism comes in
two main varieties:
Ethical naturalism holds that there are objective moral properties and that these properties are
reducible or stand in some metaphysical relation (such as supervenience) to entirely non-ethical
properties. Most ethical naturalists hold that we have empirical knowledge of moral truths.
Ethical naturalism was implicitly assumed by many modern ethical theorists, particularly
utilitarians.
Ethical non-naturalism, as put forward by G. E. Moore, holds that there are objective and
irreducible moral properties (such as the property of 'goodness'), and that we sometimes have
intuitive or otherwise a priori awareness of moral properties or of moral truths. Moore's open
question argument against what he considered the naturalistic fallacy was largely responsible for
the birth of meta-ethical research in contemporary analytic philosophy.
Ethical subjectivism is one form of moral anti-realism. It holds that moral statements are made
true or false by the attitudes and/or conventions of people, either those of each society, those of
each individual, or those of some particular individual. Most forms of ethical subjectivism are
relativist, but there are notable forms that are universalist:
Ideal observer theory holds that what is right is determined by the attitudes that a hypothetical
ideal observer would have. An ideal observer is usually characterized as a being who is perfectly
rational, imaginative, and informed, among other things. Though a subjectivist theory due to its
reference to a particular (albeit hypothetical) subject, Ideal Observer Theory still purports to
provide universal answers to moral questions.
Divine command theory holds that for a thing to be right is for a unique being, God, to approve
of it, and that what is right for non-God beings is obedience to the divine will. This view was
criticized by Plato in the Euthyphro (see the Euthyphro problem) but retains some modern
defenders (Robert Adams, Philip Quinn, and others). Like Ideal Observer Theory, Divine
Command Theory purports to be universalist despite its subjectivism.
Error theory, another form of moral anti-realism, holds that although ethical claims do express
propositions, all such propositions are false. Thus, both the statement "Murder is morally wrong"
and the statement "Murder is morally permissible" are false, according to error theory. J. L.
Mackie is probably the best-known proponent of this view. Since error theory denies that there
are moral truths, error theory entails moral nihilism and, thus, moral skepticism; however,
neither moral nihilism nor moral skepticism conversely entail error theory.
Non-cognitivist theories hold that ethical sentences are neither true nor false because they do not
express genuine propositions. Non-cognitivism is another form of moral anti-realism. Most
forms of non-cognitivism are also forms of expressivism, however some such as Mark Timmons
44
and Terrence Horgan distinguish the two and allow the possibility of cognitivist forms of
expressivism.
Emotivism, defended by A. J. Ayer and Charles Stevenson, holds that ethical sentences serve
merely to express emotions. Ayer argues that ethical sentences are expressions of approval or
disapproval, not assertions. So "Killing is wrong" means something like "Boo on killing!".
Quasi-realism, defended by Simon Blackburn, holds that ethical statements behave

linguistically like factual claims and can be appropriately called "true" or "false", even though
there are no ethical facts for them to correspond to. Projectivism and moral fictionalism are
related theories.
Universal prescriptivism, defended by R. M. Hare, holds that moral statements function like
universalized imperative sentences. So "Killing is wrong" means something like "Don't kill!"
Hare's version of prescriptivism requires that moral prescriptions be universalizable, and hence
actually have objective values, in spite of failing to be indicative statements with truth-values per
se.
Centralism and non-centralism
Yet another way of categorizing meta-ethical theories is to distinguish between centralist and
non-centralist theories. The debate between centralism and non-centralism revolves around the
relationship between the so-called "thin" and "thick" concepts of morality. Thin moral concepts
are those such as good, bad, right, and wrong; thick moral concepts are those such as courageous,
inequitable, just, or dishonest. While both sides agree that the thin concepts are more general and
the thick more specific, centralists hold that the thin concepts are antecedent to the thick ones
and that the latter are therefore dependent on the former. That is, centralists argue that one must
understand words like "right" and "ought" before understanding words like "just" and "unkind."
Non-centralism rejects this view, holding that thin and thick concepts are on par with one another
and even that the thick concepts are a sufficient starting point for understanding the thin ones.
Non-centralism has been of particular importance to ethical naturalists in the late 20th and early
21st centuries as part of their argument that normativity is a non-excisable aspect of language
and that there is no way of analyzing thick moral concepts into a purely descriptive element
attached to a thin moral evaluation, thus undermining any fundamental division between facts
and norms. Allan Gibbard, R. M. Hare, and Simon Blackburn have argued in favor of the
fact/norm distinction, meanwhile, with Gibbard going so far as to argue that, even if
conventional English has only mixed normative terms (that is, terms that are neither purely
descriptive nor purely normative), we could develop a nominally English metalanguage that still
allowed us to maintain the division between factual descriptions and normative evaluations.
Substantial theories
These theories attempt to answer the second of the above questions: "What is the nature of moral
judgments?"
45
• Amongst those who believe there to be some standard(s) of morality (as opposed to moral
nihilists), there are two divisions: universalists, who hold that the same moral facts or
principles apply to everyone everywhere; and relativists, who hold that different moral
facts or principles apply to different people or societies.
Moral universalism (or universal morality) is the meta-ethical position that some system of
ethics, or a universal ethic, applies universally, that is to all people regardless of culture, race,
sex, religion, nationality, sexuality, or other distinguishing feature. The source or justification of
this system may be thought to be, for instance, human nature, shared vulnerability to suffering,
the demands of universal reason, what is common among existing moral codes, or the common
mandates of religion (although it can be argued that the latter is not in fact moral universalism
because it may distinguish between Gods and mortals). Moral universalism is the opposing
position to various forms of moral relativism. Universalist theories are generally forms of moral
realism, though exceptions exists, such as the subjectivist ideal observer and divine command
theories, and the non-cognitivist universal prescriptivism of R.M. Hare.
Value monism is the common form of universalism, which holds that all goods are
commensurable on a single value scale.
Value pluralism contends that there are two or more genuine scales of value, knowable as such,
yet incommensurable, so that any prioritization of these values is either non-cognitive or
subjective. A value pluralist might, for example, contend that both a life as a nun and a life as a
mother realize genuine values (in a universalist sense), yet they are incompatible (nuns may not
have children), and there is no purely rational way to measure which is preferable. A notable
proponent of this view is Isaiah Berlin.
Moral relativism maintains that all moral judgments have their origins either in societal or in
individual standards, and that no single objective standard exists by which one can assess the
truth of a moral proposition. Meta-ethical relativists, in general, believe that the descriptive
properties of terms such as "good", "bad", "right", and "wrong" do not stand subject to universal
truth conditions, but only to societal convention and personal preference. Given the same set of
verifiable facts, some societies or individuals will have a fundamental disagreement about what
one ought to do based on societal or individual norms, and one cannot adjudicate these using
some independent standard of evaluation. The latter standard will always be societal or personal
and not universal, unlike, for example, the scientific standards for assessing temperature or for
determining mathematical truths. Some philosophers maintain that moral relativism entails non-
cognitivism. Some but not all relativist theories are forms of moral subjectivism, although not all
subjectivist theories are relativistic.
Moral nihilism, also known as ethical nihilism, is the meta-ethical view that nothing is morally
preferable to anything else. For example, a moral nihilist would say that killing someone, for
whatever reason, is neither morally right nor morally wrong. Moral nihilism must be
distinguished from moral relativism, which does allow for moral statements to be true or false in
a non-universal sense, but does not assign any static truth-values to moral statements. Insofar as
only true statements can be known, moral nihilists are moral skeptics. Most forms of moral
46
nihilism are non-cognitivist and vice versa, though there are notable exceptions such as universal
prescriptivism (which is semantically non-cognitive but substantially universal).
Justification theories
These are theories that attempt to answer questions like, "How may moral judgments be
supported or defended?" or "Why should I be moral?"If one presupposes a cognitivist
interpretation of moral sentences, morality is justified by the moralist's knowledge of moral facts,
and the theories to justify moral judgements are epistemological theories. Most moral
epistemologies, of course, posit that moral knowledge is somehow possible, as opposed to moral
skepticism. Amongst them, there are those who hold that moral knowledge is gained inferentially
on the basis of some sort of non-moral epistemic process, as opposed to ethical intuitionism.
Empiricism is the doctrine that knowledge is gained primarily through observation and
experience. Meta-ethical theories that imply an empirical epistemology include ethical
naturalism, which holds moral facts to be reducible to non-moral facts and thus knowable in the
same ways; and most common forms of ethical subjectivism, which hold that moral facts reduce
to facts about individual opinions or cultural conventions and thus are knowable by observation
of those conventions. There are exceptions within subjectivism however, such as ideal observer
theory, which implies that moral facts may be known through a rational process, and
individualist ethical subjectivism, which holds that moral facts are merely personal opinions and
so may be known only through introspection. Empirical arguments for ethics run into the is-
ought problem, which assert that the way the world is cannot alone instruct people how they
ought to act.
Moral rationalism, also called ethical rationalism, is the view according to which moral truths
(or at least general moral principles) are knowable a priori, by reason alone. Some prominent
figures in the history of philosophy who have defended moral rationalism are Plato and
Immanuel Kant. Perhaps the most prominent figures in the history of philosophy who have
rejected moral rationalism are David Hume and Friedrich Nietzsche. Recent philosophers who
defended moral rationalism include R. M. Hare, Christine Korsgaard, Alan Gewirth, and Michael
Smith. A moral rationalist may adhere to any number of different semantic theories as well;
moral realism is compatible with rationalism, and the subjectivist ideal observer theory and
noncognitivist universal prescriptivism both entail it.
Ethical intuitionism, on the other hand, is the view according to which some moral truths can be
known without inference. That is, the view is at its core a foundationalism about moral beliefs.
Of course, such an epistemological view implies that there are moral beliefs with propositional
contents; so it implies cognitivism. Ethical intuitionism commonly suggests moral realism, the
view that there are objective facts of morality and, to be more specific, ethical non-naturalism,
the view that these evaluative facts cannot be reduced to natural fact. However, neither moral
realism nor ethical non-naturalism are essential to the view; most ethical intuitionists simply
happen to hold those views as well. Ethical intuitionism comes in both a "rationalist" variety, and
a more "empiricist" variety known as moral sense theory.
47
Moral skepticism is the class of meta-ethical theories all members of which entail that no one
has any moral knowledge. Many moral skeptics also make the stronger, modal, claim that moral
knowledge is impossible. Forms of moral skepticism include, but are not limited to, error theory
and most but not all forms of non-cognitivism.
48
CHAPTER 3- BUSINESS ETHICS
Business ethics
examines ethical principles and moral or ethical problems that arise in a business environment. It
applies to all aspects of business conduct and is relevant to the conduct of individuals and entire
organizations.Business ethics refers to contemporary standards or sets of values that govern the
actions and behaviour of an individual in the business organisation.Business ethics has normative
and descriptive dimensions. As a corporate practice and a career specialization, the field is
primarily normative. Academics attempting to understand business behavior employ descriptive
methods. The range and quantity of business ethical issues reflects the interaction of profit-
maximizing behavior with non-economic concerns. Interest in business ethics accelerated
dramatically during the 1980s and 1990s, both within major corporations and within academia.
For example, most major corporations today promote their commitment to non-economic values
under headings such as ethics codes and social responsibility charters. Adam Smith said, "People
of the same trade seldom meet together, even for merriment and diversion, but the conversation
ends in a conspiracy against the public, or in some contrivance to raise prices." [2] Governments
use laws and regulations to point business behavior in what they perceive to be beneficial
directions. Ethics implicitly regulates areas and details of behavior that lie beyond governmental
control. The emergence of large corporations with limited relationships and sensitivity to the
communities in which they operate accelerated the development of formal ethics regimes.[3]
Business ethical norms reflect the norms of each historical period. As time passes norms evolve,
causing accepted behaviors to become objectionable. Business ethics and the resulting behavior
evolved as well. Business was involved in slavery, colonialism, and the cold war. The term
'business ethics' came into common use in the United States in the early 1970s. By the mid-1980s
at least 500 courses in business ethics reached 40,000 students, using some twenty textbooks and
at least ten casebooks along supported by professional societies, centers and journals of business
ethics. The Society for Business Ethics was started in 1980. European business schools adopted
business ethics after 1987 commencing with the European Business Ethics Network
(EBEN).[10][11][12] In 1982 the first single-authored books in the field appeared. Firms started
highlighting their ethical stature in the late 1980s and early 1990s, possibly trying to distance
themselves from the business scandals of the day, such as the savings and loan crisis. The idea of
business ethics caught the attention of academics, media and business firms by the end of the
Cold War. However, criticism of business practices was attacked for infringing the freedom of
entrepreneurs and critics were accused of supporting communists. This scuttled the discourse of
business ethics both in media and academia.
Overview
Business ethics reflects the philosophy of business, of which one aim is to determine the
fundamental purposes of a company. If a company's purpose is to maximize shareholder returns,
then sacrificing profits to other concerns is a violation of its fiduciary responsibility. Corporate
entities are legally considered as persons in USA and in most nations. The 'corporate persons' are
legally entitled to the rights and liabilities due to citizens as persons.Ethics are the rules or
49
standards that govern our decisions on a daily basis. Many equate “ethics” with conscience or a
simplistic sense of “right” and “wrong.” Others would say that ethics is an internal code that
governs an individual’s conduct, ingrained into each person by family, faith, tradition,
community, laws, and personal mores. Corporations and professional organizations, particularly
licensing boards, generally will have a written “Code of Ethics” that governs standards of
professional conduct expected of all in the field. It is important to note that “law” and “ethics”
are not synonymous, nor are the “legal” and “ethical” courses of action in a given situation
necessarily the same. Statutes and regulations passed by legislative bodies and administrative
boards set forth the “law.” Slavery once was legal in the US, but one certainly wouldn’t say
forcibly enslaving humans was an “ethical” act.Economist Milton Friedman writes that corporate
executives' "responsibility... generally will be to make as much money as possible while
conforming to their basic rules of the society, both those embodied in law and those embodied in
ethical custom".Friedman also said, "the only entities who can have responsibilities are
individuals ... A business cannot have responsibilities. So the question is, do corporate
executives, provided they stay within the law, have responsibilities in their business activities
other than to make as much money for their stockholders as possible? And my answer to that is,
no, they do not." A multi-country 2011 survey found support for this view among the "informed
public" ranging from 30 to 80%. Ronald Duska views Friedman's argument as consequentialist
rather than pragmatic, implying that unrestrained corporate freedom would benefit the most in
long term. Similarly author business consultant Peter Drucker observed, "There is neither a
separate ethics of business nor is one needed", implying that standards of personal ethics cover
all business situations. However, Peter Drucker in another instance observed that the ultimate
responsibility of company directors is not to harm—primum non nocere, Another view of
business is that it must exhibit corporate social responsibility (CSR): an umbrella term indicating
that an ethical business must act as a responsible citizen of the communities in which it operates
even at the cost of profits or other goals. In the US and most other nations corporate entities are
legally treated as persons in some respects. For example, they can hold title to property, sue and
be sued and are subject to taxation, although their free speech rights are limited. This can be
interpreted to imply that they have independent ethical responsibilities Duska argues that
stakeholders have the right to expect a business to be ethical; if business has no ethical
obligations, other institutions could make the same claim which would be counterproductive to
the corporation. Ethical issues include the rights and duties between a company and its
employees, suppliers, customers and neighbors, its fiduciary responsibility to its shareholders.
Issues concerning relations between different companies include hostile take-overs and industrial
espionage. Related issues include corporate governance;corporate social entrepreneurship;
political contributions; legal issues such as the ethical debate over introducing a crime of
corporate manslaughter; and the marketing of corporations' ethics policies. According to IBE/
Ipsos MORI research published in late 2012, the three major areas of public concern regarding
business ethics in Britain are executive pay, corporate tax avoidance and bribery and corruption.
Ethical standards of an entire organisation can be badly damaged if a corporate psychopath is in
charge.
50
Finance
Fundamentally finance is a social science discipline.[32] The discipline borders behavioral

economics, sociology,[33] economics, accounting and management. It concerns technical issues
such as the mix of debt and equity, dividend policy, the evaluation of alternative investment
projects, options, futures, swaps, and other derivatives, portfolio diversification and many others.
It is often mistaken by the people to be a discipline free from ethical burdens.[32] The 2008
financial crisis caused critics to challenge the ethics of the executives in charge of U.S. and
European financial institutions and financial regulatory bodies.[34] Finance ethics is overlooked
for another reason—issues in finance are often addressed as matters of law rather than ethics.
Finance paradigm
Aristotle said, "the end and purpose of the polis is the good life".[36] Adam Smith characterized
the good life in terms of material goods and intellectual and moral excellences of character.
Smith in his The Wealth of Nations commented, "All for ourselves, and nothing for other people,
seems, in every age of the world, to have been the vile maxim of the masters of mankind."
However, a section of economists influenced by the ideology of neoliberalism, interpreted the
objective of economics to be maximization of economic growth through accelerated
consumption and production of goods and services. Neoliberal ideology promoted finance from
its position as a component of economics to its core. Proponents of the ideology hold that
unrestricted financial flows, if redeemed from the shackles of "financial repressions", best help
impoverished nations to grow. The theory holds that open financial systems accelerate economic
growth by encouraging foreign capital inflows, thereby enabling higher levels of savings,
investment, employment, productivity and "welfare", along with containing corruption.
Neoliberals recommended that governments open their financial systems to the global market
with minimal regulation over capital flows. The recommendations however, met with criticisms
from various schools of ethical philosophy. Some pragmatic ethicists, found these claims to
unfalsifiable and a priori, although neither of these makes the recommendations false or
unethical per se. Raising economic growth to the highest value necessarily means that welfare is
subordinate, although advocates dispute this saying that economic growth provides more welfare
than known alternatives. Since history shows that neither regulated nor unregulated firms always
behave ethically, neither regime offers an ethical panacea. The claim that deregulation and the
opening up of economies would reduce corruption was also contested. Dobson observes, "a
rational agent is simply one who pursues personal material advantage ad infinitum. In essence, to
be rational in finance is to be individualistic, materialistic, and competitive. Business is a game
played by individuals, as with all games the object is to win, and winning is measured in terms
solely of material wealth. Within the discipline this rationality concept is never questioned, and
has indeed become the theory-of-the-firm's sine qua non". Financial ethics is in this view a
mathematical function of shareholder wealth. Such simplifying assumptions were once necessary
for the construction of mathematically robust models. However signalling theory and agency
theory extended the paradigm to greater realism.
51
Other issues
Fairness in trading practices, trading conditions, financial contracting, sales practices,

consultancy services, tax payments, internal audit, external audit and executive compensation
also fall under the umbrella of finance and accounting. Particular corporate ethical/legal abuses
include: creative accounting, earnings management, misleading financial analysis, insider
trading, securities fraud, bribery/kickbacks and facilitation payments. Outside of corporations,
bucket shops and forex scams are criminal manipulations of financial markets. Cases include
accounting scandals, Enron, WorldCom and Satyam.
Human resource management occupies the sphere of activity of recruitment selection,

orientation, performance appraisal, training and development, industrial relations and health and
safety issues. Business Ethicists differ in their orientation towards labour ethics. Some assess
human resource policies according to whether they support an egalitarian workplace and the
dignity of labor. Issues including employment itself, privacy, compensation in accord with
comparable worth, collective bargaining (and/or its opposite) can be seen either as inalienable
rights or as negotiable. Discrimination by age (preferring the young or the old), gender/sexual
harassment, race, religion, disability, weight and attractiveness. A common approach to
remedying discrimination is affirmative action. Once hired, employees have the right to
occasional cost of living increases, as well as raises based on merit. Promotions, however, are
not a right, and there are often fewer openings than qualified applicants. It may seem unfair if an
employee who has been with a company longer is passed over for a promotion, but it is not
unethical. It is only unethical if the employer did not give the employee proper consideration or
used improper criteria for the promotion. Potential employees have ethical obligations to
employers, involving intellectual property protection and whistle-blowing. Employers must
consider workplace safety, which may involve modifying the workplace, or providing
appropriate training or hazard disclosure. Larger economic issues such as immigration, trade
policy, globalization and trade unionism affect workplaces and have an ethical dimension, but
are often beyond the purview of individual companies.
Trade unions
Unions for example, may push employers to establish due process for workers, but may also cost
jobs by demanding unsustainable compensation and work rules. Unionized workplaces may
confront union busting and strike breaking and face the ethical implications of work rules that
advantage some workers over others.
Management strategy
Among the many people management strategies that companies employ are a "soft" approach
that regards employees as a source of creative energy and participants in workplace decision
making, a "hard" version explicitly focused on control and Theory Z that emphasizes philosophy,
culture and consensus.[87] None ensure ethical behavior. Some studies claim that sustainable
success requires a humanely treated and satisfied workforce.
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Sales and marketing
Marketing ethics came of age only as late as 1990s. Marketing ethics was approached from
ethical perspectives of virtue or virtue ethics, deontology, consequentialism, pragmatism and
relativism. Ethics in marketing deals with the principles, values and/or ideals by which marketers
(and marketing institutions) ought to act. Marketing ethics is also contested terrain, beyond the
previously described issue of potential conflicts between profitability and other concerns. Ethical
marketing issues include marketing redundant or dangerous products/services transparency about
environmental risks, transparency about product ingredients such as genetically modified
organisms possible health risks, financial risks, security risks, etc., respect for consumer privacy
and autonomy, advertising truthfulness and fairness in pricing & distribution. According to
Borgerson, and Schroeder (2008), marketing can influence individuals' perceptions of and
interactions with other people, implying an ethical responsibility to avoid distorting those
perceptions and interactions. Marketing ethics involves pricing practices, including illegal
actions such as price fixing and legal actions including price discrimination and price skimming.
Certain promotional activities have drawn fire, including greenwashing, bait and switch, shilling,
viral marketing, spam (electronic), pyramid schemes and multi-level marketing. Advertising has
raised objections about attack ads, subliminal messages, sex in advertising and marketing in
schools.
Production
This area of business ethics usually deals with the duties of a company to ensure that products
and production processes do not needlessly cause harm. Since few goods and services can be
produced and consumed with zero risk, determining the ethical course can be problematic. In
some case consumers demand products that harm them, such as tobacco products. Production
may have environmental impacts, including pollution, habitat destruction and urban sprawl. The
downstream effects of technologies nuclear power, genetically modified food and mobile phones
may not be well understood. While the precautionary principle may prohibit introducing new
technology whose consequences are not fully understood, that principle would have prohibited
most new technology introduced since the industrial revolution. Product testing protocols have
been attacked for violating the rights of both humans and animals.
Normative ethics
Normative ethics is the study of ethical action. It is the branch of philosophical ethics that
investigates the set of questions that arise when considering how one ought to act, morally
speaking. Normative ethics is distinct from meta-ethics because it examines standards for the
rightness and wrongness of actions, while meta-ethics studies the meaning of moral language and
the metaphysics of moral facts. Normative ethics is also distinct from descriptive ethics, as the
latter is an empirical investigation of people’s moral beliefs. To put it another way, descriptive
ethics would be concerned with determining what proportion of people believe that killing is
always wrong, while normative ethics is concerned with whether it is correct to hold such a
belief. Hence, normative ethics is sometimes called prescriptive, rather than descriptive.
However, on certain versions of the meta-ethical view called moral realism, moral facts are both
descriptive and prescriptive at the same time. Most traditional moral theories rest on principles
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that determine whether an action is right or wrong. Classical theories in this vein include
utilitarianism, Kantianism, and some forms of contractarianism. These theories mainly offered
the use of overarching moral principles to resolve difficult moral decisions.
Normative ethical theories
There are disagreements about what precisely gives an action, rule, or disposition its ethical
force. Broadly speaking, there are three competing views on how moral questions should be
answered, along with hybrid positions that combine some elements of each. Virtue ethics focuses
on the character of those who are acting, while both deontological ethics and consequentialism
focus on the status of the action, rule, or disposition itself. The latter two conceptions of ethics
themselves come in various forms.
• Virtue ethics, advocated by Aristotle and Thomas Aquinas, focuses on the inherent
character of a person rather than on specific actions. There has been a significant revival
of virtue ethics in the past half-century, through the work of such philosophers as G. E.
M. Anscombe, Philippa Foot, Alasdair Macintyre, Mortimer J. Adler, Jacques Maritain,
Yves Simon, and Rosalind Hursthouse.
• Deontology argues that decisions should be made considering the factors of one's duties
and others' rights. Some deontological theories include:
o Immanuel Kant's Categorical Imperative, which roots morality in humanity's
rational capacity and asserts certain inviolable moral laws.
o The contractualism of John Rawls, which holds that the moral acts are those that
we would all agree to if we were unbiased.
o Natural rights theories, such that of John Locke or Robert Nozick, which hold that
human beings have absolute, natural rights.
• Consequentialism (Teleology) argues that the morality of an action is contingent on the
action's outcome or result. Consequentialist theories, differing in what they consider
valuable (Axiology), include:
o Utilitarianism, which holds that an action is right if it leads to the most happiness
for the greatest number of people. (Historical Note: Prior to the coining of the
term "consequentialism" by Anscombe in 1958 and the adoption of that term in
the literature that followed, "utilitarianism" was the generic term for
consequentialism, referring to all theories that promoted maximizing any form of
utility, not just those that promoted maximizing happiness.)
o State consequentialism or Mohist consequentialism, which holds that an action is
right if it leads to state welfare, through order, material wealth, and population
growth
o Egoism, the belief that the moral person is the self-interested person, holds that an
action is right if it maximizes good for the self.
o Situation Ethics, which holds that the correct action is the one that creates the
most loving result, and that love should always be our goal.
o Intellectualism, which dictates that the best action is the one that best fosters and
promotes knowledge.
o Welfarism, which argues that the best action is the one that most increases
economic well-being or welfare.
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o Preference utilitarianism, which holds that the best action is the one that leads to
the most overall preference satisfaction.
• Ethics of care or relational ethics, founded by feminist theorists, notably Carol Gilligan,
argues that morality arises out of the experiences of empathy and compassion. It
emphasizes the importance of interdependence and relationships in achieving ethical
goals.
• Pragmatic ethics is difficult to classify fully within any of the four preceding conceptions.
This view argues that moral correctness evolves similarly to scientific knowledge:
socially over the course of many lifetimes. Thus, we should prioritize social reform over
concern with consequences, individual virtue or duty (although these may be worthwhile
concerns, provided social reform is also addressed). Charles Sanders Peirce, William
James, and John Dewey, are known as the founders of pragmatism.
• Role ethics is based on the concept of family roles.
Binding force
It can be unclear what it means to say that a person "ought to do X because it is moral, whether
they like it or not". Morality is sometimes presumed to have some kind of special binding force
on behaviour, but some philosophers think that, used this way, the word "ought" seems to
wrongly attribute magic powers to morality. For instance, G. E. M. Anscombe worries that
"ought" has become "a word of mere mesmeric force". British ethicist Philippa Foot elaborates
that morality does not seem to have any special binding force, and she clarifies that people only
behave morally when motivated by other factors.
Foot says "People talk, for instance, about the 'binding force' of morality, but it is not clear what
this means if not that we feel ourselves unable to escape." The idea is that, faced with an
opportunity to steal a book because we can get away with it, moral obligation itself has no power
to stop us unless we feel an obligation. Morality may therefore have no binding force beyond
regular human motivations, and people must be motivated to behave morally. The question then
arises: what role does reason play in motivating moral behaviour?
Motivating morality
The categorical imperative perspective suggests that proper reason always leads to particular
moral behaviour. As mentioned above, Foot instead believes that humans are actually motivated
by desires. Proper reason, on this view, allows humans to discover actions that get them what
they want (i.e., hypothetical imperatives)—not necessarily actions that are moral. Social
structure and motivation can make morality binding in a sense, but only because it makes moral
norms feel inescapable, according to Foot. John Stuart Mill adds that external pressures, to
please others for instance, also influence this felt binding force, which he calls human
"conscience". Mill says that humans must first reason about what is moral, then try to bring the
feelings of our conscience in line with our reason. At the same time, Mill says that a good moral
system (in his case, utilitarianism) ultimately appeals to aspects of human nature — which, must
themselves be nurtured during upbringing. Mill explains:This firm foundation is that of the social
feelings of mankind; the desire to be in unity with our fellow creatures, which is already a
powerful principle in human nature, and happily one of those which tend to become stronger,
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even without express inculcation, from the influences of advancing civilisation.Mill thus believes
that it is important to appreciate that it is feelings that drive moral behavior, but also that they
may not be present in some people (e.g. psychopaths). Mill goes on to describe factors that help
ensure people develop a conscience and behave morally, and thinkers like Joseph Daleiden
describe how societies can use science to figure out how to make people more likely to be good.
Virtue ethics
Virtue ethics is a term that refers to normative ethical theories which emphasize virtues of mind
and character. Virtue ethicists discuss the nature and definition of virtues and other related
problems. For example, how are virtues acquired? How are they applied in various real life
contexts? Are virtues rooted in a universal human nature or in a plurality of cultures? Virtuest
can be partially met by demonstrating that Buddhist morality is a virtue-oriented, character-
based, community-focused ethics, commensurate with the Western 'ethics of virtue' tradition."
Key Concepts
The western tradition's key concepts derive from ancient Greek philosophy. These concepts
include arete (excellence or virtue), phronesis (practical or moral wisdom), and eudaimonia
(flourishing).A virtue is generally agreed to be a character trait, such as a habitual action or
settled sentiment. Specifically, a virtue is positive trait that makes its possessor a good human
being. A virtue is thus to be distinguished from single actions or feelings. Rosalind Hursthouse
says:A virtue such as honesty or generosity is not just a tendency to do what is honest or
generous, nor is it to be helpfully specified as a “desirable” or “morally valuable” character trait.
It is, indeed a character trait—that is, a disposition which is well entrenched in its possessor,
something that, as we say “goes all the way down”, unlike a habit such as being a tea-drinker—
but the disposition in question, far from being a single track disposition to do honest actions, or
even honest actions for certain reasons, is multi-track. It is concerned with many other actions as
well, with emotions and emotional reactions, choices, values, desires, perceptions, attitudes,
interests, expectations and sensibilities. To possess a virtue is to be a certain sort of person with a
certain complex mindset. Practical wisdom is an acquired trait that enables its possessor to
identify the thing to do in any given situation. Unlike theoretical wisdom, practical reason results
in action or decision. As John McDowell puts it, practical wisdom involves a "perceptual
sensitivity" to what a situation requires. Eudaimonia is a state variously translated from Greek as
'well-being', 'happiness', 'blessedness', and in the context of virtue ethics, 'human flourishing'.
Eudaimonia in this sense is not a subjective, but an objective, state. It characterizes the well-lived
life. According to Aristotle, the most prominent exponent of eudaimonia in the Western
philosophical tradition, eudaimonia is the proper goal of human life. It consists of exercising the
characteristic human quality -- reason—as the soul's most proper and nourishing activity. In his
Nicomachean Ethics, Aristotle, like Plato before him, argued that the pursuit of eudaimonia is an
"activity of the soul in accordance with perfect virtue",[8] which further could only properly be
exercised in the characteristic human community—the polis or city-state. Although eudaimonia
was first popularized by Aristotle, it now belongs to the tradition of virtue theories generally. For
the virtue theorist, eudaimonia describes that state achieved by the person who lives the proper
human life, an outcome that can be reached by practicing the virtues. A virtue is a habit or
quality that allows the bearer to succeed at his, her, or its purpose. The virtue of a knife, for
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example, is sharpness; among the virtues of a racehorse is speed. Thus to identify the virtues for
human beings, one must have an account of what the human purpose is.
History of virtue
Like much of the Western tradition, virtue theory seems to have originated in ancient Greek
philosophy. While the theory of virtue ethics was born with Plato and Aristotle, their theories are
not the only that are recognized. What virtue ethics refers to, rather, is a collection of normative
ethical philosophies that place an emphasis on being rather than doing. Another way to say this is
that in virtue ethics, morality stems from the identity and/or character of the individual, rather
than being a reflection of the actions (or consequences thereof) of the individual. Today, there is
debate among various adherents of virtue ethics concerning what specific virtues are morally
praiseworthy. However, most theorists agree that morality comes as a result of intrinsic virtues.
Intrinsic virtues are the common link that unites the disparate normative philosophies into the
field known as virtue ethics. Plato and Aristotle's treatment of virtues are not the same. Plato
believes virtue is effectively an end to be sought, for which a friend might be a useful means.
Aristotle states that the virtues function more as means to safeguard human relations, particularly
authentic friendship, without which one's quest for happiness is frustrated. Discussion of what
were known as the Four Cardinal Virtues – wisdom, justice, fortitude and temperance – can be
found in Plato's Republic. The virtues also figure prominently in Aristotle's moral theory (see
below). Virtue theory was inserted into the study of history by moralistic historians such as Livy,
Plutarch, and Tacitus. The Greek idea of the virtues was passed on in Roman philosophy through
Cicero and later incorporated into Christian moral theology by St. Ambrose of Milan. During the
scholastic period, the most comprehensive consideration of the virtues from a theological
perspective was provided by St. Thomas Aquinas in his Summa Theologiae and his
Commentaries on the Nicomachean Ethics. Though the tradition receded into the background of
European philosophical thought in these centuries, the term "virtue" remained current during this
period, and in fact appears prominently in the tradition of classical republicanism or classical
liberalism. This tradition was prominent in the intellectual life of 16th-century Italy, as well as
17th- and 18th-century Britain and America; indeed the term "virtue" appears frequently in the
work of Niccolò Machiavelli, David Hume, the republicans of the English Civil War period, the
18th-century English Whigs, and the prominent figures among the Scottish Enlightenment and
the American Founding Fathers.
Contemporary 'aretaic turn'
Although some Enlightenment philosophers (e.g. Hume) continued to emphasize the virtues,
with the ascendancy of utilitarianism and deontology, virtue theory moved to the margins of
Western philosophy. The contemporary revival of virtue theory is frequently traced to the
philosopher G. E. M. Anscombe's 1958 essay "Modern Moral Philosophy". Following this:
• In the 1976 paper "The Schizophrenia of Modern Ethical Theories", Michael Stocker
summarises the main aretaic criticisms of deontological and consequentialist ethics.[9]
• Philippa Foot, who published a collection of essays in 1978 entitled Virtues and Vices.
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• Alasdair MacIntyre has made an effort to reconstruct a virtue-based theory in dialogue
with the problems of modern and postmodern thought; his works include After Virtue
and Three Rival Versions of Moral Enquiry.
• Paul Ricoeur has accorded an important place to Aristotelian teleological ethics in his
hermeneutical phenomenology of the subject, most notably in his book Oneself as
Another.
• Theologian Stanley Hauerwas has also found the language of virtue quite helpful in his
own project.
• Rosalind Hursthouse has published On Virtue Ethics.
• Roger Crisp and Michael Slote have edited a collection of important essays titled Virtue
Ethics
• Martha Nussbaum and Amartya Sen have employed virtue theory in theorising the
capability approach to international development.
The aretaic turn in moral philosophy is paralleled by analogous developments in other

philosophical disciplines. One of these is epistemology, where a distinctive virtue epistemology
has been developed by Linda Zagzebski and others. In political theory, there has been discussion
of "virtue politics", and in legal theory, there is a small but growing body of literature on virtue
jurisprudence. The aretaic turn also exists in American constitutional theory, where proponents
argue for an emphasis on virtue and vice of constitutional adjudicators.Aretaic approaches to
morality, epistemology, and jurisprudence have been the subject of intense debates. One
criticism that is frequently made focuses on the problem of guidance; opponents, such as Robert
Louden in his article "Some Vices of Virtue Ethics", question whether the idea of a virtuous
moral actor, believer, or judge can provide the guidance necessary for action, belief formation, or
the decision of legal disputes.
Lists of virtues
There are several different lists of particular virtues. Socrates argued that virtue is knowledge,
which suggests that there is really only one virtue.[10] John McDowell is a recent defender of this
conception. He argues that virtue is a "perceptual capacity" to identify how one ought to act, and
that all particular virtues are merely "specialized sensitivities" to a range of reasons for acting.[11]
Aristotle's List
Aristotle identifies approximately eighteen virtues that enable a person to perform their human
function well. He distinguished virtues pertaining to emotion and desire from those pertaining to
the mind. The first he calls "moral" virtues, and the second intellectual virtues (though both are
"moral" in the modern sense of the word). Each moral virtue was a mean (see golden mean)
between two corresponding vices, one of excess and one of deficiency. Each intellectual virtue is
a mental skill or habit by which the mind arrives at truth, affirming what is or denying what is
not.[14] In the Nicomachean Ethics he discusses about 12 moral virtues:
Moral Virtues
1. Courage in the face of fear
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2. Temperance in the face of pleasure and pain
3. Liberality with wealth and possessions
4. Magnificence with great wealth and possessions
5. Magnanimity with great honors
6. Proper ambition with normal honors
7. Patience in the face of irritation
8. Truthfulness with self-expression
9. Wittiness in conversation
10. Friendliness in social conduct
11. Modesty in the face of shame or shamelessness
12. Righteous indignation in the face of injury
Intellectual Virtues
1. Nous (intelligence), which apprehends fundamental truths (such as definitions, self-

evident principles)
2. Episteme (science), which is skill with inferential reasoning (such as proofs, syllogisms,
demonstrations)
3. Sophia (theoretical wisdom), which combines fundamental truths with valid, necessary
inferences to reason well about unchanging truths.
Aristotle also mentions several other traits:
• Gnome (good sense) -- passing judgment, "sympathetic understanding"

• Synesis (understanding) -- comprehending what others say, does not issue commands
• Phronesis (practical wisdom) -- knowledge of what to do, knowledge of changing truths,
issues commands
• Techne (art, craftsmanship)
Aristotle's list is not the only list, however. As Alasdair MacIntyre observed in After Virtue,
thinkers as diverse as Homer, Aristotle, the authors of the New Testament, Thomas Aquinas, and
Benjamin Franklin have all proposed lists.[15]
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Criticisms
Some philosophers criticize virtue ethics as culturally relative. Since different people, cultures
and societies often have different opinions on what constitutes a virtue, perhaps there is no one
objectively right list.
Other proponents of virtue theory, notably Alasdair MacIntyre, respond to this objection by
arguing that any account of the virtues must indeed be generated out of the community in which
those virtues are to be practiced: the very word 'ethics' implies 'ethos'. That is to say that the
virtues are, and necessarily must be, grounded in a particular time and place. What counts as
virtue in 4th-century Athens would be a ludicrous guide to proper behavior in 21st-century
Toronto, and vice versa. To take this view does not necessarily commit one to the argument that
accounts of the virtues must therefore be static: moral activity—that is, attempts to contemplate
and practice the virtues—can provide the cultural resources that allow people to change, albeit
slowly, the ethos of their own societies. MacIntyre appears to take this position in his seminal
work on virtue ethics, After Virtue. One might cite (though MacIntyre does not) the rapid
emergence of abolitionist thought in the slave-holding societies of the 18th-century Atlantic
world as an example of this sort of change: over a relatively short period of time, perhaps 1760
to 1800, in Britain, France, and British America, slave-holding, previously thought to be morally
neutral or even virtuous, rapidly became seen as vicious among wide swathes of society. While
the emergence of abolitionist thought derived from many sources, the work of David Brion
Davis, among others, has established that one source was the rapid, internal evolution of moral
theory among certain sectors of these societies, notably the Quakers.
Another objection to virtue theory is that the school does not focus on what sorts of actions are
morally permitted and which ones are not, but rather on what sort of qualities someone ought to
foster in order to become a good person. In other words, while some virtue theorists may not
condemn, for example, murder as an inherently immoral or impermissible sort of action, they
may argue that someone who commits a murder is severely lacking in several important virtues,
such as compassion and fairness. Still, antagonists of the theory often object that this particular
feature of the theory makes virtue ethics useless as a universal norm of acceptable conduct
suitable as a base for legislation. Some virtue theorists concede this point, but respond by
opposing the very notion of legitimate legislative authority instead, effectively advocating some
form of anarchism as the political ideal, Others argue that laws should be made by virtuous
legislators. Still others argue that it is possible to base a judicial system on the moral notion of
virtues rather than rules.
Some virtue theorists might respond to this overall objection with the notion of a "bad act" also
being an act characteristic of vice. That is to say that those acts that do not aim at virtue, or stray
from virtue, would constitute our conception of "bad behavior". Although not all virtue ethicists
agree to this notion, this is one way the virtue ethicist can re-introduce the concept of the
"morally impermissible". One could raise objection with Foot that she is committing an
argument from ignorance by postulating that what is not virtuous is unvirtuous. In other words,
just because an action or person 'lacks of evidence' for virtue does not, all else constant, imply
that said action or person is unvirtuous.
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Subsumed in deontology and utilitarianism
Martha Nussbaum has suggested that while virtue ethics are often considered to be anti-
Enlightenment, "suspicious of theory and respectful of the wisdom embodied in local practices",
they are actually neither fundamentally distinct from, nor do they qualify as a rival approach to
deontology and utilitarianism. She argues that philosophers from these two Enlightenment
traditions often include theories of virtue. She pointed out that Kant's "Doctrine of Virtue" (in
The Metaphysics of Morals) "covers most of the same topics as do classical Greek theories",
"that he offers a general account of virtue, in terms of the strength of the will in overcoming
wayward and selfish inclinations; that he offers detailed analyses of standard virtues such as
courage and self-control, and of vices, such as avarice, mendacity, servility, and pride; that,
although in general he portrays inclination as inimical to virtue, he also recognizes that
sympathetic inclinations offer crucial support to virtue, and urges their deliberate cultivation."
Nussbaum also points to considerations of virtue by utilitarians such as Henry Sidgwick (The
Methods of Ethics), Jeremy Bentham (The Principles of Morals and Legislation), and John Stuart
Mill, who writes of moral development as part of an argument for the moral equality of women
(The Subjection of Women). She argues that contemporary virtue ethicists such as Alasdair
MacIntyre, Bernard Williams, Philippa Foot, and John McDowell have few points of agreement,
and that the common core of their work does not represent a break from Kant.
Utopianism and pluralism
Robert Louden criticises virtue ethics on the basis that it promotes a form of unsustainable
utopianism. Trying to come to a single set of virtues is immensely difficult in contemporary
societies as, according to Louden, they contain "more ethnic, religious, and class groups than did
the moral community which Aristotle theorized about" with each of these groups having "not
only its own interests but its own set of virtues as well". Louden notes in passing that MacIntyre,
a supporter of virtue-based ethics, has grappled with this in After Virtue but that ethics cannot
dispense with building rules around acts and rely only on discussing the moral character of
persons.
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CHAPTER 4- VIRTUE ETHICS
Virtue ethics as a category
Virtue ethics can be contrasted to deontological ethics and consequentialist ethics by an

examination of the other two (the three being together the most predominant contemporary
normative ethical theories).Deontological ethics, sometimes referred to as duty ethics, places the
emphasis on adhering to ethical principles or duties. How these duties are defined, however, is
often a point of contention and debate in deontological ethics. One of the predominant rule
schemes utilized by deontologists is the Divine Command Theory. Deontology also depends
upon meta-ethical realism, in that it postulates the existence of moral absolutes that make an
action moral, regardless of circumstances. For more information on deontological ethics refer to
the work of Immanuel Kant.The next predominant school of thought in normative ethics is
consequentialism. While deontology places the emphasis on doing one's duty, which is
established by some kind of moral imperative (in other words, the emphasis is on obedience to
some higher moral absolute), consequentialism bases the morality of an action upon the
consequences of the outcome. Instead of saying that one has a moral duty to abstain from
murder, a consequentialist would say that we should abstain from murder because it causes
undesirable effects. The main contention here is what outcomes should/can be identified as
objectively desirable. The Greatest Happiness Principle of John Stuart Mill is one of the most
commonly adopted criteria. Mill asserts that our determinant of the desirability of an action is the
net amount of happiness it brings, the number of people it brings it to, and the duration of the
happiness. He also tries to delineate classes of happiness, some being preferable to others, but
there is a great deal of difficulty in classifying such concepts. For a more complete outline of the
niceties of Mill's classification system see the page on utilitarianism or read Mill's works
Utilitarianism, Defense of Utilitarianism, and On Liberty. Examining the meta-ethical theories of
naturalism, upon which many consequentialist theories rely, may provide further clarification.
Having looked at the other two normative ethical theories we come at last to virtue ethics.As
stated before, deontology focuses on adhering to ethical duties, while consequentialism focuses
on the outcomes (consequences) of actions. Here virtue ethics differs in that the focus is instead
upon being rather than doing. A virtue ethics philosopher will identify virtues, desirable
characteristics, that the moral or virtuous person embodies. Possessing these virtues, in virtue
ethics, is what makes one moral, and one's actions are a mere reflection of one's inner morality.
To the virtue philosopher, action cannot be used as a demarcation of morality, because a virtue
encompasses more than just a simple selection of action. Instead, it is about a way of being that
would cause the person exhibiting the virtue to make a certain "virtuous" choice consistently in
each situation. There is a great deal of disagreement within virtue ethics over what are virtues
and what are not. There are also difficulties in identifying what is the "virtuous" action to take in
all circumstances, and how to define a virtue.Consequentialist and deontological theories often
still employ the term 'virtue', but in a restricted sense, namely as a tendency or disposition to
adhere to the system's principles or rules. These very different senses of what constitutes virtue,
hidden behind the same word, are a potential source of confusion. This disagreement over the
meaning of virtue points to a larger conflict between virtue theory and its philosophical rivals. A
system of virtue theory is only intelligible if it is teleological: that is, if it includes an account of
the purpose (telos) of human life, or in popular language, the meaning of life. Obviously, strong
claims about the purpose of human life, or of what the good life for human beings is, will be
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highly controversial. Virtue theory's necessary commitment to a teleological account of human
life thus puts the tradition in sharp tension with other dominant approaches to normative ethics,
which, because they focus on actions, do not bear this burden.
Virtue and politics
Virtue theory emphasizes Aristotle's belief in the polis as the acme of political organisation, and
the role of the virtues in enabling human beings to flourish in that environment. Classical
republicanism in contrast emphasizes Tacitus' concern that power and luxury can corrupt
individuals and destroy liberty, as Tacitus perceived in the transformation of the Roman republic
into an empire; virtue for classical republicans is a shield against this sort of corruption and a
means to preserve the good life one has, rather than a means by which to achieve the good life
one does not yet have. Another way to put the distinction between the two traditions is that virtue
ethics relies on Aristotle's fundamental distinction between the human-being-as-he-is from the
human-being-as-he-should-be, while classical republicanism relies on the Tacitean distinction of
the human-being-as-he-is from the human-being-as-he-is-at-risk-of-becoming..
Applied virtue ethics
Virtue ethics has a number of contemporary applications. Social and political philosophy within
the field of social ethics, Deirdre McCloskey. argues that virtue ethics can provide a basis for a
balanced approach to understanding capitalism and capitalist societies. Education; Within the
field of philosophy of education, James Page argues that virtue ethics can provide a rationale and
foundation for peace education. Schools like the Intellectual Virtue Academy in Long Beach CA
build their pedagogy around cultivating intellectual virtues.
Deontological ethics
Deontological ethics or deontology is the normative ethical position that judges the morality of
an action based on the action's adherence to a rule or rules. It is sometimes described as "duty-"
or "obligation-" or "rule-" based ethics, because rules "bind you to your duty." Deontological
ethics is commonly contrasted to consequentialism, virtue ethics, and pragmatic ethics. In this
terminology, action is more important than the consequences. The term deontological was first
used to describe the current, specialised definition by C. D. Broad in his book, Five Types of
Ethical Theory, which was published in 1930. Older usage of the term goes back to Jeremy
Bentham, who coined it in c. 1826 to mean more generally "the knowledge of what is right and
proper". The more general sense of the word is retained in French, especially in the term code de
déontologie "ethical code", in the context of professional ethics.
Terminology
Deontology is the study of that which is an "obligation or duty," and consequent moral judgment
on the actor on whether he or she has complied.[2] In philosophy and religion, states Bocheński,
there is an important distinction between deontic and epistemic authority. A typical example of
epistemic authority, explains Anna Brożek, is "the relation of a teacher to his students; a typical
example of deontic authority is the relation between an employer and his employee." A teacher
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has epistemic authority when making declarative sentences that the student presumes is reliable
knowledge and appropriate but feels no obligation to accept or obey; in contrast, an employer has
deontic authority in the act of issuing an order that the employee is obliged to accept and obey
regardless of its reliability or appropriateness.
Deontological philosophies
Immanuel Kant's theory of ethics is considered deontological for several different reasons. First,
Kant argues that to act in the morally right way, people must act from duty (deon). Second, Kant
argued that it was not the consequences of actions that make them right or wrong but the motives
of the person who carries out the action.Kant's argument that to act in the morally right way one
must act purely from duty begins with an argument that the highest good must be both good in
itself and good without qualification. Something is "good in itself" when it is intrinsically good,
and "good without qualification", when the addition of that thing never makes a situation
ethically worse. Kant then argues that those things that are usually thought to be good, such as
intelligence, perseverance and pleasure, fail to be either intrinsically good or good without
qualification. Pleasure, for example, appears not to be good without qualification, because when
people take pleasure in watching someone suffer, this seems to make the situation ethically
worse. He concludes that there is only one thing that is truly good:Nothing in the world—indeed
nothing even beyond the world—can possibly be conceived which could be called good without
qualification except a good will. Kant then argues that the consequences of an act of willing
cannot be used to determine that the person has a good will; good consequences could arise by
accident from an action that was motivated by a desire to cause harm to an innocent person, and
bad consequences could arise from an action that was well-motivated. Instead, he claims, a
person has a good will when he 'acts out of respect for the moral law'. People 'act out of respect
for the moral law' when they act in some way because they have a duty to do so. So, the only
thing that is truly good in itself is a good will, and a good will is only good when the willer
chooses to do something because it is that person's duty, i.e. out of "respect" for the law. He
defines respect as "the concept of a worth which thwarts my self-love." Kant's three significant
formulations of the categorical imperative are:
• Act only according to that maxim by which you can also will that it would become a
universal law.
• Act in such a way that you always treat humanity, whether in your own person or in the
person of any other, never simply as a means, but always at the same time as an end.
• Every rational being must so act as if he were through his maxim always a legislating
member in a universal kingdom of ends.
Moral absolutism
Some deontologists are moral absolutists, believing that certain actions are absolutely right or
wrong, regardless of the intentions behind them as well as the consequences. Immanuel Kant, for
example, argued that the only absolutely good thing is a good will, and so the single determining
factor of whether an action is morally right is the will, or motive of the person doing it. If they
are acting on a bad maxim, e.g. "I will lie", then their action is wrong, even if some good
consequences come of it.
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Divine command theory
Although not all deontologists are religious, some believe in the 'divine command theory'. The
divine command theory is a cluster of related theories that state that an action is right if God has
decreed that it is right.[14] William of Ockham, René Descartes and eighteenth-century Calvinists
all accepted versions of this moral theory, according to Ralph Cudworth, as they all held that
moral obligations arise from God's commands. The Divine Command Theory is a form of
deontology because, according to it, the rightness of any action depends upon that action being
performed because it is a duty, not because of any good consequences arising from that action. If
God commands people not to work on Sabbath, then people act rightly if they do not work on
Sabbath because God has commanded that they do not do so. If they do not work on Sabbath
because they are lazy, then their action is not truly speaking "right", even though the actual
physical action performed is the same. If God commands not to covet a neighbour's goods, this
theory holds that it would be immoral to do so, even if coveting provides the beneficial outcome
of a drive to succeed or do well.One thing that is clearly distinguishes Kantian deontologism
from divine command deontology is that Kantianism maintains that man, as a rational being,
makes the moral law universal. Whereas, divine command maintains that God makes the moral
law universal.
Contemporary deontology
Contemporary deontologists include Thomas Nagel, Thomas Scanlon, Roger Scruton and
Frances Kamm.Frances Kamm's "Principle of Permissible Harm" is an effort to derive a
deontological constraint which coheres with our considered case judgments while also relying
heavily on Kant's categorical imperative. The Principle states that one may harm in order to save
more if and only if the harm is an effect or an aspect of the greater good itself. This principle is
meant to address what Kamm feels are most people's considered case judgments, many of which
involve deontological intuitions. For instance, Kamm argues that we believe it would be
impermissible to kill one person to harvest his organs in order to save the lives of five others.
Yet, we think it is morally permissible to divert a runaway trolley that would otherwise kill five
innocent and immobile people onto a side track where one innocent and immobile person will be
killed. Kamm believes the Principle of Permissible Harm explains the moral difference between
these and other cases, and more importantly expresses a constraint telling us exactly when we
may not act to bring about good ends—such as in the organ harvesting case. In 2007, Kamm
published a book that presents new theory that incorporates aspects of her "Principle of
Permissible Harm", the "Doctrine of Productive Purity". Like the "Principle of Permissible
Harm", the "Doctrine of Productive Purity" is an attempt to provide a deontological prescription
for determining the circumstances in which people are permitted to act in a way that harms
others.Attempts have been made to reconcile deontology with virtue-based ethics and
consequentialism. Iain King's 2008 book How to Make Good Decisions and Be Right All the
Time uses quasi-realism and a modified form of utilitarianism to develop deontological
principles which are compatible with ethics based on virtues and consequences. King develops a
hierarchy of principles to link his meta-ethics, which are more inclined towards
consequentialism, with the deontological conclusions he presents in his book.
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Consequentialism
Every advantage in the past is judged in the light of the final issue. —Demosthenes.
Consequentialism is the class of normative ethical theories holding that the consequences of
one's conduct are the ultimate basis for any judgment about the rightness or wrongness of that
conduct. It is the doctrine that the morality of an action is to be judged solely by its
consequences. Consequentialism is usually contrasted with deontological ethics (or deontology),
in that deontology, in which rules and moral duty are central, derives the rightness or wrongness
of one's conduct from the character of the behaviour itself rather than the outcomes of the
conduct. It is also contrasted with virtue ethics, which focuses on the character of the agent rather
than on the nature or consequences of the act (or omission) itself, and pragmatic ethics which
treats morality like science: advancing socially over the course of many lifetimes, such that any
moral criterion is subject to revision. Consequentialist theories differ in how they define moral
goods.Some argue that consequentialist and deontological theories are not necessarily mutually
exclusive. For example, T. M. Scanlon advances the idea that human rights, which are
commonly considered a "deontological" concept, can only be justified with reference to the
consequences of having those rights. Similarly, Robert Nozick argues for a theory that is mostly
consequentialist, but incorporates inviolable "side-constraints" which restrict the sort of actions
agents are permitted to do.
Philosophies
Mozi supported a communitarian form of consequentialism, rather than individual pleasure or

pain.It is the business of the benevolent man to seek to promote what is beneficial to the world
and to eliminate what is harmful, and to provide a model for the world. What benefits he will
carry out; what does not benefit men he will leave alone. Mohist consequentialism, also known
as state consequentialism, is an ethical theory which evaluates the moral worth of an action based
on how much it contributes to the welfare of a state. According to the Stanford Encyclopedia of
Philosophy, Mohist consequentialism, dating back to the 5th century BCE, is the "world's earliest
form of consequentialism, a remarkably sophisticated version based on a plurality of intrinsic
goods taken as constitutive of human welfare." Unlike utilitarianism, which views utility as the
sole moral good, "the basic goods in Mohist consequentialist thinking are... order, material
wealth, and increase in population".During Mozi's era, war and famines were common, and
population growth was seen as a moral necessity for a harmonious society. The "material wealth"
of Mohist consequentialism refers to basic needs like shelter and clothing, and the "order" of
Mohist consequentialism refers to Mozi's stance against warfare and violence, which he viewed
as pointless and a threat to social stability. Stanford sinologist David Shepherd Nivison, in the
The Cambridge History of Ancient China, writes that the moral goods of Mohism "are
interrelated: more basic wealth, then more reproduction; more people, then more production and
wealth... if people have plenty, they would be good, filial, kind, and so on unproblematically."
The Mohists believed that morality is based on "promoting the benefit of all under heaven and
eliminating harm to all under heaven." In contrast to Jeremy Bentham's views, state
consequentialism is not utilitarian because it is not hedonistic or individualistic. The importance
of outcomes that are good for the community outweigh the importance of individual pleasure and
pain. The term state consequentialism has also been applied to the political philosophy of the
Confucian philosopher Xunzi.
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Utilitarianism
Jeremy Bentham, best known for his advocacy of utilitarianism.Nature has placed mankind
under the governance of two sovereign masters, pain and pleasure. It is for them alone to point
out what we ought to do, as well as to determine what we shall do. In summary, Jeremy Bentham
states that people are driven by their interests and their fears, but their interests take precedence
over their fears, and their interests are carried out in accordance with how people view the
consequences that might be involved with their interests. "Happiness" on this account is defined
as the maximization of pleasure and the minimization of pain. Historically, hedonistic
utilitarianism is the paradigmatic example of a consequentialist moral theory. This form of
utilitarianism holds that what matters are the aggregate happiness; the happiness of everyone and
not the happiness of any particular person. John Stuart Mill, in his exposition of hedonistic
utilitarianism, proposed a hierarchy of pleasures, meaning that the pursuit of certain kinds of
pleasure is more highly valued than the pursuit of other pleasures. However, some contemporary
utilitarians, such as Peter Singer, are concerned with maximizing the satisfaction of preferences,
hence "preference utilitarianism". Other contemporary forms of utilitarianism mirror the forms of
consequentialism outlined below.
Ethical egoism
Ethical egoism can be understood as a consequentialist theory according to which the

consequences for the individual agent are taken to matter more than any other result. Thus,
egoism will prescribe actions that may be beneficial, detrimental, or neutral to the welfare of
others. Some, like Henry Sidgwick, argue that a certain degree of egoism promotes the general
welfare of society for two reasons: because individuals know how to please themselves best, and
because if everyone were an austere altruist then general welfare would inevitably decrease.
Ethical altruism
Ethical altruism can be seen as a consequentialist ethic which prescribes that an individual take
actions that have the best consequences for everyone except for himself. This was advocated by
Auguste Comte, who coined the term "altruism," and whose ethics can be summed up in the
phrase "Live for others".
Rule consequentialism
In general, consequentialist theories focus on actions. However, this need not be the case. Rule
consequentialism is a theory that is sometimes seen as an attempt to reconcile deontology and
consequentialism—and in some cases, this is stated as a criticism of rule consequentialism. Like
deontology, rule consequentialism holds that moral behavior involves following certain rules.
However, rule consequentialism chooses rules based on the consequences that the selection of
those rules have. Rule consequentialism exists in the forms of rule utilitarianism and rule
egoism.Various theorists are split as to whether the rules are the only determinant of moral
behavior or not. For example, Robert Nozick holds that a certain set of minimal rules, which he
calls "side-constraints", are necessary to ensure appropriate actions. There are also differences as
to how absolute these moral rules are. Thus, while Nozick's side-constraints are absolute
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restrictions on behavior, Amartya Sen proposes a theory that recognizes the importance of
certain rules, but these rules are not absolute. That is, they may be violated if strict adherence to
the rule would lead to much more undesirable consequences.One of the most common objections
to rule-consequentialism is that it is incoherent, because it is based on the consequentialist
principle that what we should be concerned with is maximizing the good, but then it tells us not
to act to maximize the good, but to follow rules (even in cases where we know that breaking the
rule could produce better results).Brad Hooker avoided this objection by not basing his form of
rule-consequentialism on the ideal of maximizing the good. He writes:…the best argument for
rule-consequentialism is not that it derives from an overarching commitment to maximise the
good. The best argument for rule-consequentialism is that it does a better job than its rivals of
matching and tying together our moral convictions, as well as offering us help with our moral
disagreements and uncertaintiesDerek Parfit described Brad Hooker's book on rule-
consequentialism Ideal Code, Real World as the "best statement and defence, so far, of one of the
most important moral theories."
Two-level consequentialism
The two-level approach involves engaging in critical reasoning and considering all the possible
ramifications of one's actions before making an ethical decision, but reverting to generally
reliable moral rules when one is not in a position to stand back and examine the dilemma as a
whole. In practice, this equates to adhering to rule consequentialism when one can only reason
on an intuitive level, and to act consequentialism when in a position to stand back and reason on
a more critical level. This position can be described as a reconciliation between act
consequentialism - in which the morality of an action is determined by that action's effects - and
rule consequentialism - in which moral behavior is derived from following rules that lead to
positive outcomes.The two-level approach to consequentialism is most often associated with R.
M. Hare and Peter Singer.
Motive consequentialism
Another consequentialist version is motive consequentialism which looks at whether the state of
affairs that results from the motive to choose an action is better or at least as good as each of the
alternative state of affairs that would have resulted from alternative actions. This version gives
relevance to the motive of an act and links it to its consequences. An act can therefore not be
wrong if the decision to act was based on a right motive. A possible inference is, that one can not
be blamed for mistaken judgements if the motivation was to do good.
Negative consequentialism
Most consequentialist theories focus on promoting some sort of good consequences. However,
Negative utilitarianism lays out a consequentialist theory that focuses solely on minimizing bad
consequences.One major difference between these two approaches is the agent's responsibility.
Positive consequentialism demands that we bring about good states of affairs, whereas negative
consequentialism requires that we avoid bad ones. Stronger versions of negative
consequentialism will require active intervention to prevent bad and ameliorate existing harm. In
weaker versions, simple forbearance from acts tending to harm others is sufficient. Often
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"negative" consequentialist theories assert that reducing suffering is more important than
increasing pleasure. Karl Popper, for example, claimed "…from the moral point of view, pain
cannot be outweighed by pleasure...". (While Popper is not a consequentialist per se, this is taken
as a classic statement of negative utilitarianism.) When considering a theory of justice, negative
consequentialists may use a statewide or global-reaching principle: the reduction of suffering (for
the disadvantaged) is more valuable than increased pleasure (for the affluent or luxurious).
Teleological ethics
Teleological ethics (Greek telos, "end"; logos, "science") is an ethical theory that holds that the
ends or consequences of an act determine whether an act is good or evil. Teleological theories
are often discussed in opposition to deontological ethical theories, which hold that acts
themselves are inherently good or evil, regardless of the consequences of actsTeleological
theories differ on the nature of the end that actions ought to promote. Eudaemonist theories
(Greek eudaimonia, "happiness") hold that the goal of ethics consists in some function or activity
appropriate to man as a human being, and thus tend to emphasize the cultivation of virtue or
excellence in the agent as the end of all action. These could be the classical virtues—courage,
temperance, justice, and wisdom—that promoted the Greek ideal of man as the "rational animal",
or the theological virtues—faith, hope, and love—that distinguished the Christian ideal of man as
a being created in the image of God.
John Stuart Mill, an influential liberal thinker of the 19th century and a teacher of utilitarianism
Utilitarian-type theories hold that the end consists in an experience or feeling produced by the
action. Hedonism, for example, teaches that this feeling is pleasure—either one's own, as in
egoism (the 17th-century English philosopher Thomas Hobbes), or everyone's, as in
universalistic hedonism, or utilitarianism (the 19th-century English philosophers Jeremy
Bentham, John Stuart Mill, and Henry Sidgwick), with its formula of the "greatest pleasure of
the greatest number.
Other utilitarian-type views include the claims that the end of action is survival and growth, as in
evolutionary ethics (the 19th-century English philosopher Herbert Spencer); the experience of
power, as in despotism; satisfaction and adjustment, as in pragmatism (20th-century American
philosophers Ralph Barton Perry and John Dewey); and freedom, as in existentialism (the 20th-
century French philosopher Jean-Paul Sartre). The chief problem for eudaemonist theories is to
show that leading a life of virtue will also be attended by happiness—by the winning of the
goods regarded as the chief end of action. That Job should suffer and Socrates and Jesus die
while the wicked prosper, then seems unjust. Eudaemonists generally reply that the universe is
moral and that, in Socrates' words, "No evil can happen to a good man, either in life or after
death," or, in Jesus' words, "But he who endures to the end will be saved." (Matt 10:22).
Utilitarian theories, on the other hand, must answer the charge that ends do not justify the means.
The problem arises in these theories because they tend to separate the achieved ends from the
action by which these ends were produced. One implication of utilitarianism is that one's
intention in performing an act may include all of its foreseen consequences. The goodness of the
intention then reflects the balance of the good and evil of these consequences, with no limits
imposed upon it by the nature of the act itself—even if it be, say, the breaking of a promise or the
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execution of an innocent man. Utilitarianism, in answering this charge, must show either that
what is apparently immoral is not really so or that, if it really is so, then closer examination of
the consequences will bring this fact to light. Ideal utilitarianism (G.E. Moore and Hastings
Rashdall) tries to meet the difficulty by advocating a plurality of ends and including among them
the attainment of virtue itself, which, as John Stuart Mill affirmed, "may be felt a good in itself,
and desired as such with as great intensity as any other good,.
Acts and omissions, and the "act and omissions doctrine.
Since pure consequentialism holds that an action is to be judged solely by its result, most
consequentialist theories hold that a deliberate action is no different from a deliberate decision
not to act. This contrasts with the "acts and omissions doctrine", which is upheld by some
medical ethicists and some religions: it asserts there is a significant moral distinction between
acts and deliberate non-actions which lead to the same outcome. This contrast is brought out in
issues such as voluntary euthanasia.
Action guidance
One important characteristic of many normative moral theories such as consequentialism is the
ability to produce practical moral judgements. At the very least, any moral theory needs to define
the standpoint from which the goodness of the consequences are to be determined. What is
primarily at stake here is the responsibility of the agent.
The ideal observer
One common tactic among consequentialists, particularly those committed to an altruistic

(selfless) account of consequentialism, is to employ an ideal, neutral observer from which moral
judgements can be made. John Rawls, a critic of utilitarianism, argues that utilitarianism, in
common with other forms of consequentialism, relies on the perspective of such an ideal
observer.[1] The particular characteristics of this ideal observer can vary from an omniscient
observer, who would grasp all the consequences of any action, to an ideally informed observer,
who knows as much as could reasonably be expected, but not necessarily all the circumstances or
all the possible consequences. Consequentialist theories that adopt this paradigm hold that right
action is the action that will bring about the best consequences from this ideal observer's
perspective.
The real observer
In practice, it is very difficult, and at times arguably impossible, to adopt the point of view of an
ideal observer. Individual moral agents do not know everything about their particular situations,
and thus do not know all the possible consequences of their potential actions. For this reason,
some theorists have argued that consequentialist theories can only require agents to choose the
best action in line with what they know about the situation. However, if this approach is naïvely
adopted, then moral agents who, for example, recklessly fail to reflect on their situation, and act
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in a way that brings about terrible results, could be said to be acting in a morally justifiable way.
Acting in a situation without first informing oneself of the circumstances of the situation can lead
to even the most well-intended actions yielding miserable consequences. As a result, it could be
argued that there is a moral imperative for an agent to inform himself as much as possible about
a situation before judging the appropriate course of action. This imperative, of course, is derived
from consequential thinking: a better-informed agent is able to bring about better consequences
Agent-focused or agent-neutral
A fundamental distinction can be drawn between theories which require that agents act for ends
perhaps disconnected from their own interests and drives, and theories which permit that agents
act for ends in which they have some personal interest or motivation. These are called "agent-
neutral" and "agent-focused" theories respectively.Agent-n eutral consequentialism ignores the
specific value a state of affairs has for any particular agent. Thus, in an agent-neutral theory, an
actor's personal goals do not count any more than anyone else's goals in evaluating what action
the actor should take. Agent-focused consequentialism, on the other hand, focuses on the
particular needs of the moral agent. Thus, in an agent-focused account, such as one that Peter
Railton outlines, the agent might be concerned with the general welfare, but the agent is more
concerned with the immediate welfare of herself and her friends and family. These two
approaches could be reconciled by acknowledging the tension between an agent's interests as an
individual and as a member of various groups, and seeking to somehow optimize among all of
these interests For example, it may be meaningful to speak of an action as being good for
someone as an individual, but bad for them as a citizen of their town.
Human-centered?
Many consequentialist theories may seem primarily concerned with human beings and their
relationships with other human beings. However, some philosophers argue that we should not
limit our ethical consideration to the interests of human beings alone. Jeremy Bentham, who is
regarded as the founder of utilitarianism, argues that animals can experience pleasure and pain,
thus demanding that 'non-human animals' should be a serious object of moral concern. More
recently, Peter Singer has argued that it is unreasonable that we do not give equal consideration
to the interests of animals as to those of human beings when we choose the way we are to treat
them. Such equal consideration does not necessarily imply identical treatment of humans and
non-humans, any more than it necessarily implies identical treatment of all humans.
Value of consequences
One way to divide various consequentialisms is by the types of consequences that are taken to
matter most, that is, which consequences count as good states of affairs. According to
utilitarianism, a good action is one that results in an increase in pleasure, and the best action is
one that results in the most pleasure for the greatest number. Closely related is eudaimonic
consequentialism, according to which a full, flourishing life, which may or may not be the same
as enjoying a great deal of pleasure, is the ultimate aim. Similarly, one might adopt an aesthetic
consequentialism, in which the ultimate aim is to produce beauty. However, one might fix on
non-psychological goods as the relevant effect. Thus, one might pursue an increase in material
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equality or political liberty instead of something like the more ephemeral "pleasure". Other
theories adopt a package of several goods, all to be promoted equally.
Virtue ethics
Consequentialism can also be contrasted with aretaic moral theories such as virtue ethics.
Whereas consequentialist theories posit that consequences of action should be the primary focus
of our thinking about ethics, virtue ethics insists that it is the character rather than the
consequences of actions that should be the focal point. Some virtue ethicists hold that
consequentialist theories totally disregard the development and importance of moral character.
For example, Philippa Foot argues that consequences in themselves have no ethical content,
unless it has been provided by a virtue such as benevolence. However, consequentialism and
virtue ethics need not be entirely antagonistic. Philosopher Iain King has developed an approach
which reconciles the two schools. Other consequentialists consider effects on the character of
people involved in an action when assessing consequence. Similarly, a consequentialist theory
may aim at the maximization of a particular virtue or set of virtues. Finally, following Foot's
lead, one might adopt a sort of consequentialism that argues that virtuous activity ultimately
produces the best consequences.
Ultimate end
The ultimate end is a concept in the moral philosophy of Max Weber, in which individuals act in
a faithful, rather than rational, manner. We must be clear about the fact that all ethically oriented
conduct may be guided by one of two fundamentally differing and irreconcilably opposed
maxims: conduct can be oriented to an "ethic of ultimate ends" or to an "ethic of responsibility."
This is not to say that an ethic of ultimate ends is identical with irresponsibility, or that an ethic
of responsibility is identical with unprincipled opportunism. Naturally, nobody says that.
However, there is an abysmal contrast between conduct that follows the maxim of an ethic of
ultimate ends—that, is in religious terms, "the Christian does rightly and leaves the results with
the Lord"—and conduct that follows the maxim of an ethic of responsibility, in which case one
has to give an account of the foreseeable results of one's action.
Etymology
The term "consequentialism" was coined by[G. E. M. Anscombe in her essay "Modern Moral
Philosophy" in 1958, to describe what she saw as the central error of certain moral theories, such
as those propounded by Mill and Sidgwick. The phrase and concept of "The end justifies the
means" are at least as old as the first century BC. Ovid wrote in his Heroides that Exitus acta
probat "The result justifies the deed".
Criticisms
G. E. M. Anscombe objects to consequentialism on the grounds that it does not provide ethical
guidance in what one ought to do because there is no distinction between consequences that are
foreseen and those that are intended. Bernard Williams has argued that consequentialism is
alienating because it requires moral agents to put too much distance between themselves and
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their own projects and commitments. Williams argues that consequentialism requires moral
agents to take a strictly impersonal view of all actions, since it is only the consequences, and not
who produces them, that is said to matter. Williams argues that this demands too much of moral
agents—since (he claims) consequentialism demands that they be willing to sacrifice any and all
personal projects and commitments in any given circumstance in order to pursue the most
beneficent course of action possible. He argues further that consequentialism fails to make sense
of intuitions that it can matter whether or not someone is personally the author of a particular
consequence. For example, that participating in a crime can matter, even if the crime would have
been committed anyway, or would even have been worse, without the agent's participation.
Some consequentialists—most notably Peter Railton—have attempted to develop a form of
consequentialism that acknowledges and avoids the objections raised by Williams. Railton
argues that Williams's criticisms can be avoided by adopting a form of consequentialism in
which moral decisions are to be determined by the sort of life that they express. On his account,
the agent should choose the sort of life that will, on the whole, produce the best overall effects.
Unethical behavior in the workplace can be defined as any action that does not conform with the
standards of conduct established by the organization. Unethical behavior can occur in the
relationships between employees, in the way an employee goes about his business or how he
uses company resources. Unethical behavior can even break the law in some situations.
Inappropriate Computer Use
Employees may use company computers to engage in unethical behavior. For example, an
employee who is not permitted to use the Internet for personal reasons commits an unethical act
by shopping online while at work. Random Internet surfing takes away from the time she spends
on work-related activities. Employees sometimes use company email to spread inappropriate
websites or videos to co-workers, some of which could be deemed offensive by the recipients.
Time Misuse
Unethical behavior can include "stealing" time from the company, as the company is
compensating employees and receiving no productivity in return. In addition to time spent on
aimless Internet surfing, time misuse can consist of extending breaks beyond the allotted time,
congregating around the water cooler or engaging in lengthy gossip sessions during working
time, falsifying time sheets, coming into work late or leaving early and running personal errands
while traveling on company business.
Sexual Harassment and Bullying
An employee could commit unethical behavior by sexually harassing co-workers. This could
involve making lewd comments, touching inappropriately or making unwanted sexual advances.
Bullying typically involves attempting to intimidate a co-worker by making demeaning
comments about him, spreading gossip or even making verbal or physical threats. In general, a
bully attempts to make the workplace as uncomfortable as possible for a co-worker. In some
cases, ongoing bullying can escalate into violence in the workplace.
Illegal Acts
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Some unethical acts can also be illegal. For example, an employee who has access to a
company's financial records, such as a bookkeeper or accountant, could use her access and
expertise to embezzle company funds. An employee having access to personnel files, such as a
human resources representative, could commit identity theft and use employees' Social Security
numbers to raid bank accounts or fraudulently obtain credit cards. In cases such as the 2001
Enron scandal, top company executives used questionable accounting practices to manipulate the
company's stock price for their own financial gain
3 Types of Unethical Behavior in a Business
Mistreating Employees
Many examples exist of unethical corporate conduct toward employees or other workers in the
supply chain. Many U.S. corporations used Third- World sweatshops to produce their goods;
some have even been found to use child labor. Every year, lawsuits are filed against employers
who are accused of sexual harassment or discrimination against their employees. Some
employers have been sued for threatening or firing whistle-blowers, or employees who point out
illegal practices or safety violations in the workplace. Some U.S. businesses use undocumented
workers because they can pay them less than minimum wage.
Financial Misconduct
Examples of financial misconduct include price-fixing, or an illegal agreement between industry

competitors to "fix" the price of a product at an artificially inflated level; physicians who refuse
to treat non-insured patients, or perform unnecessary procedures to make more money; tax
evasion; tax fraud; and "cooking the books" to make the company look more profitable than it is.
Other possibilities include paying unjustifiable salaries and bonuses to top officials regardless of
work performance -- sometimes in spite of it -- and chasing short-term profit by placing
investor's money in questionable investments.
Misrepresentation
Corporate misrepresentation can take many forms. It can be as simple as a salesman who lies
about his company's products, or it can be false or misleading advertising. Misrepresentation can
involve a coverup of illegal workplace conditions or transactions; falsified data in a shareholder
report; lying to a union about corporate profits; or hiding or denying safety problems with a
product. Other examples include corporate board members with conflict of interests, doctors who
push the most expensive drugs rather than the most effective ones, and brokers who recommend
stocks that they own in an effort to drive up the price.
Misusing company time
Whether it is covering for someone who shows up late or altering a time sheet, misusing
company time tops the list. This category includes knowing that one of your co-workers is
conducting personal business on company time. By "personal business" the survey recognizes
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the difference between making cold calls to advance your freelance business and calling your
spouse to find out how your sick child is doing.
Abusive behavior
Too many workplaces are filled with managers and supervisors who use their position and power
to mistreat or disrespect others. Unfortunately, unless the situation you're in involves race,
gender or ethnic origin, there is often no legal protection against abusive behavior in the
workplace. To learn more, check out the Workplace Bullying Institute.
3. Employee theft
According to a recent study by Jack L. Hayes International, one out of every 40 employees in
2012 was caught stealing from their employer. Even more startling is that these employees steal
on average 5.5 times more than shoplifters. Employee fraud is also on the uptick, whether its
check tampering, not recording sales in order to skim, or manipulating expense reimbursements.
Ethical alert: The FBI recently reported that employee theft is the fasting growing crime in the
U.S. today.
4. Lying to employees
The fastest way to lose the trust of your employees is to lie to them, yet employers do it all the
time. One of out every five employees report that their manager or supervisor has lied to them
within the past year.
Integrity
Integrity stretches to all aspects of an employee's job. An employee with integrity fosters trusting
relationships with clients, coworkers and supervisors. Coworkers value the employee's ability to
give honest feedback. Clients trust the employee's advice. Supervisors rely on the employee's
high moral standards, trusting him not to steal from the company or create problems.
Sense of Responsibility
A strong sense of responsibility affects how an employee works and the amount of work she
does. When the employee feels personally responsible for her job performance, she shows up on
time, puts in her best effort and completes projects to the best of her ability.
Emphasis on Quality
Some employees do only the bare minimum, just enough to keep their job intact. Employees
with a strong work ethic care about the quality of their work. They do their best to produce great
work, not merely churn out what is needed. The employee's commitment to quality improves the
company's overall quality.
Discipline
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It takes a certain level of commitment to finish your tasks every day. An employee with good
discipline stays focused on his goals and is determined to complete his assignments. These
employees show a high level of dedication to the company, always ensuring they do their part.
Sense of Teamwork
Most employees have to work together to meet a company's objectives. An employee with a high
sense of teamwork helps a team meet its goals and deliver quality work. These employees
respect their peers and help where they can, making collaborations go smoother
Ethical code
Ethical codes are adopted by organizations to assist members in understanding the difference
between 'right' and 'wrong' and in applying that understanding to their decisions. An ethical code
generally implies documents at three levels: codes of business ethics, codes of conduct for
employees, and codes of professional practice.
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CHAPTER 5- CODE OF CONDUCT AND CODE OF ETHICS
Code of ethics or a code of conduct? (corporate or business ethics)
Many companies use the phrases 'ethical code' and 'code of conduct' interchangeably but it may
be useful to make a distinction. A code of ethics will start by setting out the values that underpin
the code and will describe a company's obligation to its stakeholders. The code is publicly
available and addressed to anyone with an interest in the company's activities and the way it does
business. It will include details of how the company plans to implement its values and vision, as
well as guidance to staff on ethical standards and how to achieve them. However, a code of
conduct is generally addressed to and intended for employees alone. It usually sets out
restrictions on behavior, and will be far more compliance or rules focused than value or principle
focused. Also this code is good for the Non Governmental Organization.
Code of practice (professional ethics)
A code of practice is adopted by a profession or by a governmental or non-governmental

organization to regulate that profession. A code of practice may be styled as a code of
professional responsibility, which will discuss difficult issues, difficult decisions that will often
need to be made, and provide a clear account of what behavior is considered "ethical" or
"correct" or "right" in the circumstances. In a membership context, failure to comply with a code
of practice can result in expulsion from the professional organization. In its 2007 International
Good Practice Guidance, Defining and Developing an Effective Code of Conduct for
Organizations, the International Federation of Accountants provided the following working
definition: "Principles, values, standards, or rules of behavior that guide the decisions,
procedures and systems of an organization in a way that (a) contributes to the welfare of its key
stakeholders, and (b) respects the rights of all constituents affected by its operations." Listed
below are a few examples of professional codes from the Society of Professional Journalists
(SPJ), and Public Relations Society of America (PRSA).
• Minimize Harm (Honesty) - Public Relations Society of America Code of Ethics – It is

possible to get the truth out without having to put someone’s life and reputation in
jeopardy.
• Proper Conduct (Patience) - Public Relations Society of America Code of Ethics – Being
able to work under individuals and get the job done despite differences will help you
move forward in the long run with your career. Being patient and being able to listen and
make the right decisions make a better PR.
• Enhancing Professional Relationships (kindness) - public relations society of America
Code of Ethics – being able to get along with your clients, gain their trust and them being
able to confide in you and get the best possible results from your services always starts
with kindness. Being able to get along with the individual is beneficial to both yourself
and the client.
• Show Loyalty (Faithfulness) - Public Relations Society of America Code of Ethics - be
faithful to those we represent, while honoring our obligation to serve the public interest.
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• Act Fairly (Fairness) - Public Relations Society of America Code of Ethics - deal fairly
with clients, employers, competitors, peers, vendors, the media, and the general public.
Respect all opinions and support the right of free expression.
• Act Independently (Courage) - Society of Professional Journalists Code of Ethics – being
independent and taking on your own ventures and missions to get the story takes courage.
This means that you take risks to get the job done.
• Minimize Harm (Honesty) - Society of Professional Journalists Code of Ethics - Balance
the public’s need for information against potential harm or discomfort. Pursuit of the
news is not a license for arrogance or undue intrusiveness. Balance a suspect’s right to a
fair trial with the public’s right to know. Consider the implications of identifying criminal
suspects before they face legal charges.
• Act Independently (Independency) - Society of Professional Journalist Code of Ethics -
Avoid conflicts of interest, real or perceived. Disclose unavoidable conflicts.
Ethical codes are often adopted by management, not to promote a particular moral theory, but
rather because they are seen as pragmatic necessities for running an organization in a complex
society in which moral concepts play an important part. They are distinct from moral codes that
may apply to the culture, education, and religion of a whole society. It is debated whether the
politicians should apply a code of ethics, or whether it is a profession entirely discretionary, just
subject to compliance with the law: however, recently codes of practice have been approved in
this field. Often, acts that violate ethical codes may also violate a law or regulation and can be
punishable at law or by government agency remedies.
Even organizations and communities that may be considered criminal in nature may have ethical
codes of conduct, official or unofficial. Examples could include hacker communities, bands of
thieves, and street gangs. A code of ethics, also called a code of conduct or ethical code, sets out
the company's values, ethics, objective and responsibilities. A well-written code of ethics should
also give guidance to employees on how to deal with certain ethical situations. Every code of
ethics is different and should reflect the company's ethos, values and business style. Some codes
are short, setting out only general guidelines, and others are large manuals, encompassing a huge
variety of situations.
Kraft
The Kraft code of ethics contains just 10 short rules of ethical behavior that all employees must
follow. The introduction to the Kraft code of ethics suggests that employees should let values
guide their actions in all cases. The code also stresses that if something seems wrong, it should
be addressed directly. The code includes a speaking-up policy that requires employees to speak
up if they are aware of any violations of the code, even those they have committed themselves.
The 10 rules are: Make food that is safe to eat; market responsibly; treat people fairly; respect the
free market; compete fairy; respect the environment; deal honesty with the government; keep
honest books and records; never trade on inside information; give Kraft Foods your complete
business loyalty.
Verizon
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The Verizon code of ethics is a lengthy document that contains four short core values, followed
by 16 pages of specific rules and guidelines to follow in certain situations. The core values are
integrity, respect, performance excellence and accountability. The specific guidelines cover
situations, such as how to deal with workplace violence, alcohol use and harassment. They also
cover areas of integrity and fairness, such as how to avoid conflicts of interest and how to
safeguard company information. There is also a section on protecting Verizon's company assets,
including what to do in cases of sabotage and how to create accurate records.
Colgate-Palmolive
The Colgate-Palmolive code of ethics is a long document, but is broken down into individual
areas of conduct. The code is intended as a guide to all daily business interactions and is used in
conjunction with the company's business practice guidelines. The code covers 10 areas,
including: Our Relationship with Each Other; Our Relationship with the Company; Our
Relationship with Consumers; Our Relationship with Government and the Law; Our
Relationship with Society and Our Relationship with the Environment.
Baylor College of Medicine
The Baylor College of Medicine, in Houston, has a short code of ethics that sets out basic rules
and refers employees to other guidelines for more detail. For example, the code instructs all
employees to follow Baylor's Mission Statement, Compliance Program and Conflict of Interest
policy. The code includes basic guidelines for how employees should handle business conduct;
financial and medical records; confidentiality; Baylor property; the workplace environment; and
contact with the government
For Example: As infamous cases such as Enron and Goldman Sachs show, code of ethics
violations go far beyond the company walls. The code of ethics is the set of behavioral rules
employees should follow to ensure the company's values are reflected in all business dealings.
Regardless of the size of the business, clearly defined codes and closely monitored transactions
should keep your company from violating laws and make it a place where employees feel
comfortable doing the right thing.
Values
Business values typically are expressed in terms of how the company performs its day-to-day
interactions with suppliers, employees and customers. A primary objective of the code of ethics
is to define what the company is about and make it clear that the company is based on honesty
and fairness. Another commonly defined value is respect in all interactions, regardless of the
circumstances.
Principles
Principles are used to further support the business values by including operational credos
employees should follow. Customer satisfaction, business profitability and continuous
improvement are key factors in documenting business principles. Corporate responsibility to the
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environmentally friendly use of natural resources is another business principle that often is found
in code of ethics.
Management Support
Manager support of the values and principles may be documented in the code of ethics. Open
door policies for reporting ethics violations can be included in the code, along with a process to
anonymously report any code of ethics issues. To reflect how seriously management considers
the code, some businesses display the code of ethics with management signatures in prominent
areas, such as the break room, where employees will see it on a daily basis.
Personal Responsibility
Another component is a statement regarding each employee's personal responsibility to uphold

the code of ethics. This may contain information regarding both the legal and moral
consequences if an employee violates the code. The requirement to report any violators is
normally a component of the ethics code's personal responsibility. This is meant to show that it is
not sufficient to merely adhere to the values and principles but to help ensure every employee
supports the code of ethics by reporting violators.
Compliance
Any laws or regulations may be referenced as rules to adhere to as part of daily business
interactions. The Sarbanes-Oxley Act--which was enacted as a direct result of the Enron case, in
which executives falsified financial records to overstate the company's worth--details what
financial reporting a company must do. Compliance to all financial reporting and any licensing
requirements such as ISO 9000 by the International Organization for Standardization can be
documented, along with the expectation that all licenses will be maintained and legal regulations
met.
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CHAPTER 6- ETHICAL PROBLEMS IN MANAGEMENT
Utilitarianism
The utilitarian principle holds that: “An action is right from an ethical point of view if and only
if the sum total of utilities produced by that act is greater than the sum total of utilities produced
by any other act the agent could have performed in its place.” (Jeremy Bentham, 1748-1832).
This view holds that profit maximization leads automatically from the satisfaction of individual
consumer wants to the generation of maximum social benefits. Profit maximization is the only
moral standard needed for management.
Three steps are performed:
1. Determine what alternative actions or policies are available.
2. For each alternative action, estimate the direct and indirect benefits and costs that the
action would produce for each and every person affected by the action in the
foreseeable future.
3. The alternative that produces the greatest sum total of utility must be chosen as the
ethically appropriate course of action.
Rights and Duties
In general, a right is an individual’s entitlement to something. If it derives from a legal system, it

is a legal right. Legal rights are limited to the particular jurisdiction within which the legal
system is in force. Moral rights or human rights are based on moral norms and principles that
specify that all human beings are permitted or empowered to do something or are entitled to have
something done for them.
Contractual rights and duties (sometimes called special rights and duties or special obligations)
are the limited rights and correlative duties that arise when one person enters an agreement with
another person.
Kant’s Categorical Imperative
Kant’s first formulation of the categorical imperative is as says an action is morally right for a
person in a certain situation if, and only if, the person’s reason for carrying out the action is a
reason that he or she would be willing to have every person act on, in any similar situation.
The second formulation Kant gives of the categorical imperative says never treat people only as
means, but always also as ends. “An action is morally right for a person if, and only if, in
performing the action, the person does not use others merely as a means for advancing his or her
own interests, but also both respects and develops their capacity to choose freely for themselves.
Justice and Fairness
Distributive justice is concerned with the fair distribution of society’s benefits and burdens.
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Egalitarian justice holds that there are no relevant differences among people that can
justify unequal treatment. Every person should be given exactly equal shares of a
society’s or a group’s benefits and burdens.
Capitalist justice is based on effort. Benefits should be distributed according to the value
of the contribution the individual makes to a society, a task, a group, or an exchange
(based on work effort).
Socialist justice is based on ability and need. First proposed by Louis Blanc (1870-1924),
“From each according to his ability, to each according to his needs.”
Justice as fairness (Rawls) says that the distribution of benefits and burdens in a society is just if
and only if:
A. Each person has an equal right to the most extensive basic liberties compatible with
similar liberties for all, and
B. Social and economic inequalities are arranged so that they are both:
1. To the greatest benefit of the least advantaged persons
2. Attached to offices and positions open to all under conditions of fair equality of
opportunity
Retributive Justice
Retributive justice refers to the just imposition of punishments and penalties on those who do
wrong. Major conditions under which a person could not be held responsible include ignorance
and inability. Punishments must be consistent and proportioned to the wrong.
Compensatory Justice
Compensatory justice concerns the best way of compensating people for what they lost when
they were wronged by others. Traditional moralists have argued that a person has a moral
obligation to compensate an injured party only if three conditions are present:
1. The action that inflicted the injury was wrong or negligent.
2. The person’s action was the real cause of the injury.
3. The person inflicted the injury voluntarily.
An Ethic of Care
An ethic of care emphasizes two moral demands:
• We each exist in a web of relationships and should preserve and nurture those concrete
and valuable relationships we have with specific persons.
• We each should exercise special care for those with whom we are concretely related by
attending to their particular needs, values, desires, and concrete well-being as seen from
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their own personal perspective, and by responding positively to these needs, values,
desires, and concrete well-being, particularly of those who are vulnerable and dependant
on our care.
Virtue Theory & Ethical Relativism
Virtue theory argues that the aim of the moral life is to develop those general dispositions we
call the moral virtues, and to exercise and exhibit them in the many situations that human life
sets before us.
Ethical relativism questions if there are objective universal principles upon which one can
construct an ethical system of belief that is applicable to all groups in all cultures at all times?
Fortunately there is one principle that does seem to exist across all groups, cultures, and times
and that does form part of every ethical system; that is the belief that members of a group do bear
some form of responsibility for the well-being of other members of that group.
A Moral Reasoning Framework (Velesquez)
This suggests that moral reasoning should incorporate all four kinds of moral considerations,
although only one or the other may turn out to be relevant or decisive in a particular situation.
One simple strategy for ensuring that all four kinds of considerations are incorporated into one’s
moral reasoning is to inquire systematically into the utility, rights, justice and caring involved in
a given moral judgment. Ask a series of questions about an action that one is considering:
1. Does the action, as far as possible, maximize social benefits and minimize social
injuries?
2. Is the action consistent with the moral rights of those whom it will affect?
3. Will the action lead to a just distribution of benefits and burdens?
4. Does the action exhibit appropriate care for the well-being of those who are closely
related to or dependent on oneself?
Manager's Decision Checklist (Hosmer)
1. What are the best economic alternatives?

2. What are the legal alternatives?
3. Does a given decision result in greater benefits than damages for society as a whole, not
just for our organization as part of that society?
4. Is the decision self-serving, or would we be willing to have everyone else take the same
action when faced with the same circumstances?
5. We understand the need for social cooperation; will our decision increase or decrease the
willingness of others to contribute?
6. We recognize the importance of personal freedom; will our decision increase or decrease
the libery of others to act?
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7. Lastly, we know that the universe is large and infinite, while we are small and our lives
are short; is our personal improvement that important, measured against the immensity of
that other scale?
What is Ethical Profitability?
Five Ways to Judge a Company's Level of Ethical Profitability
In the fallout from Enron and others, many investors are paying closer attention to a company's
ethics, as well as their profits. These investors realize that a corporate focus on profits alone—
with little regard to ethical standards, conduct and enforcement—may result in short-term
revenue gain, but long-term profitability may be limited. In cases like Enron, long-term viability
is limited too.
Consider this balance between profits and ethics to be "ethical profitability." Well-balanced
companies not only consistently reward owners, investors and employees with profitable
performance, they also genuinely focus on these five key areas:
1. Leadership by example
The chasm between managing and managing well is wide and deep. To manage is to merely lead
employees. To manage well is to lead employees effectively, ethically and without arrogance.
Company owners, executives and managers must set the highest examples of attitude and
conduct for their employees. "Do what I say, not what I do," is a parental anachronism with no
value in management.
2. Company-wide ethical awareness
Most employees, when not at work, practice personal ethics in areas such as caring for others,
being kind and honest, and not harming others. Do these same people, when they arrive at work,
maintain their personal guidelines? In-the-office ethical behavior includes demonstrating
trustworthiness to managers and coworkers, respecting privacy and avoiding conflicts of interest.
Ethics knows no time clock. Occasional classes can help, by reminding employees of the
simplicity of determining ethical behavior. In a nutshell, examine questionable action and
speech, and determine if it's harmful to yourself or another. If it is, avoid that behavior.
Employees with any sort of religious background will recognize this ethic of reciprocity as
familiar. The Bible's Golden Rule is a good example.
3. Strong management of revenue generation and reporting
Corporate temptation to stretch ethical behavior in revenue generation and reporting is universal.
From excessive cost-cutting to expand short-term market-share, to outright lies about revenue to
positively affect stock price, it's easy to see why an otherwise intelligent, educated corporate
officer can end up behind bars for condoning such behavior.
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To overcome these temptations, revenue-related managers must establish and maintain a firm
stance on ethical marketing, advertising, selling and reporting. This requires regular
dissemination and enforcement of codes of conduct.
4. High level of internal trust
The level of trust within a company should reflect the level of trust the company solicits from
customers. If customers are encouraged to put their complete trust in the product or service, then
company teams must do the same with each other. Management must guide this internal process.
An increase in trust is a reduction in risk and uncertainty, which in turn will keep the revenue
generation process flowing smoothly. Another advantage of running a high-trust organization is
improved internal flexibility and creativity. Instead of being constantly monitored, the person to
whom a task is assigned can accomplish it the best way possible. The outcome is never in doubt
because of the trust the team shares.
5. Formal and active compliance program
Ethical profitability is far more than merely operating within the boundaries of the law. Legal
compliance limits unethical behavior, but it does not define ethical behavior. An organizational
ethics doctrine does have legal benefits. Properly written, published and disseminated ethical
codes will reduce corporate risk if an employee creates a criminal or civil problem because of
poor ethical behavior. (Even federal sentencing guidelines recommend lower fines if such
violations occur contrary to the existence and enforcement of compliance codes.) The true test of
ethical profitability is whether or not the company is a positive example to its employees, to its
customers and even to other companies. Such companies practice the truest form of leadership-
by-example. They reach for a higher bar. Success doesn’t always breed success. In fact,
sometimes it results in unethical behavior.
Economic
Your business has an economic impact on society through the wages you pay your employees,
the materials you buy from your suppliers, and the prices you charge your customers. You have a
positive social impact on your employees if you pay them a living wage and benefits to reduce
the stress of unexpected events. You have a positive effect on your suppliers if you pay them
fairly and on time for their supplies. Your effect on customers is positive if you give them good
value for the price they pay for your products and services.
Governance
The social impact of corporate governance contributes to the ethical climate of society. If
businesses offer bribes to secure work or other benefits, engage in accounting fraud, or break
regulatory and legal constraints on their operations, the ethics of society suffer. In addition to a
deteriorating ethical environment, such corruption may raise the price of goods for consumers,
such as happens when companies engage in price fixing.
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Privacy
To process orders and deliver services, companies have to collect personal information on their
customers. Some information may be sensitive, such as when companies deliver medical services
and have medical histories on file. Businesses have a negative impact on society if consumers
find out that companies are not keeping such information secure or are selling it to third parties.
The lack of trust inhibits the free exchange of personal and private information that facilitates
carrying on business efficiently.
Intellectual Property
Respect of patents and copyrights is both a social and ethical issue. Businesses own intellectual
property and they use that of others. They have to operate with a balance that protects their own
interests in a responsible way while avoiding infringing patents and copyrights. If businesses
either act excessively in protecting their intellectual property or actively use that of others
without permission, they risk alienating their customers and hurting their public image.
Environment
A key area of business influence on society is environmental protection. Companies make a

substantial direct contribution to greenhouse gases and the production of waste. Businesses that
implement environmental policies to use energy more efficiently, reduce waste, and in general
lighten their environmental footprint can reduce their internal costs and promote a positive image
of their company. The environmental initiatives of a market leader often force competitors to
take similar action for an increased beneficial effect on the environment
Environmental issues in India
A satellite picture, taken in 2004, shows thick haze and smoke along the Ganges Basin in
northern India. Major sources of aerosols in this area are believed to be smoke from biomass
burning in the northwest part of India, and air pollution from large cities in northern India. Dust
from deserts in Pakistan and the Middle East may also contribute to the mix of aerosols.
examines ethical principles and moral or ethical problems that arise in a business environment.
It applies to all aspects of business conduct and is relevant to the conduct of individuals and
entire organizations.
The profession of business ethics has long needed a highly practical resource that is designed
particularly for leaders and managers -- those people charged to ensure ethical practices in their
organizations. Unfortunately, far too many resources about business ethics end up being
designed primarily for philosophers, academics and social critics. As a result, leaders and
managers struggle to really be able to make use of the resources at all.
Also, far too many resources about business ethics contain sensationalistic stories about
businesses "gone bad" or prolonged preaching to businesses to "do the right thing". These
resources often explore simplistic ethical questions, such as "Should Jane steal from the
company?" The real world of leaders and managers is often much more complex than that.
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This guide is a straightforward and highly practical tool designed to help leaders and managers
implement comprehensive ethics management systems in their workplaces -- systems to deal
with the complex, ethical issues that can occur in the day-to-day realities of leading and
managing an organization.
Leaders and Managers Require More Practical Information About Managing Ethics
Managing ethics in the workplace holds tremendous benefit for leaders and managers, benefits
both moral and practical. This is particularly true today when it is critical to understand and
manage highly diverse values in the workplace.
However, the field of business ethics has traditionally been the domain of philosophers,
academics and social critics. Consequently, much of today's literature about business ethics is not
geared toward the practical needs of leaders and managers -- the people primarily responsible for
managing ethics in the workplace. The most frequent forms of business ethics literature today
typically include: a) philosophical, which requires extensive orientation and analysis; b)
anthologies, which require much time, review and integration; c) case studies, which require
numerous cases, and much time and analyses to synthesize; and d) focus on social responsibility,
which includes many examples of good and bad actions taken by companies.
What's Conspicuously Missing is the "How to" of Managing Ethics in the Workplace
But it isn't from lack of examples that managers aren't better at managing ethics in the workplace
-- they require more practical information about managing ethics. This problem was explained
very well by Stark in his article, "What's the Matter with Business Ethics?" published in the
Harvard Business Review (1993, May/June, pp. 38-48). Brenner (Journal of Business Ethics,
V11, pp. 391:399) notes "while much has been written about individual components of ethics
programs, especially about codes of ethics, the literature is much more limited on ethics
programs." Wong and Beckman (Journal of Business Ethics, V11, pp. 173-178) note that
"researchers are claiming that current literature is filled with strong arguments for more ethical
corporate leadership and incorporation of ethics in business curriculum, but what is
conspicuously missing is the "how to" in actually putting ethical goals and theories into practical
action."
Myths Abound About Business Ethics, e.g., "Ethics is Simply to Do What's Right"
Lack of involvement from leaders and managers in the field of business ethics (again, this is the
fault of no one or of everyone) has spawned a great deal of confusion and misunderstanding
among leaders and managers about business ethics. McDonald and Zepp, in their article "What
Should Be Done? A Practical Approach to Business Ethics" (Management Decision, 28, 1, 1990,
pp. 9-13), note that when someone brings up the topic of business ethics "... it tends to bring up
cynicism, righteousness, paranoia, and laughter." Many leaders and managers believe business
ethics is religion because it seems to contain a great deal of preaching. Or, they believe it to be
superfluous because it seems to merely assert the obvious: "do good!"
Business Ethics Literature is Often Far Too Simplistic -- So Many Leaders and Managers
Think Business Ethics is Irrelevant
Stark notes that "often ethicists advance a kind of moral absolutism that avoids many of the
difficult and most interesting questions." Case studies to explore ethical dilemmas are often far
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too simplistic, presented as if every real-life situation has a right and wrong e.g., "should I lie,
cheat or steal?" Consequently, many managers believe business ethics is irrelevant because too
much business ethics training avoids the real-to-life complexities in leading organizations. (This
document contains samples of real-to-life, complex ethical dilemmas, in a subsection, "Examples
of Real-to-Life Complex Ethical Dilemmas" in the upcoming section "Ethics Tools: Resolving
Ethical Dilemmas.") Bob Dunn, President and CEO of San Francisco-based Business for Social
Responsibility, explains, "Ethical decisions aren't as easy as they used to be. Now, they're the
difference between right -- and right." Preston Townley, in his speech "Business Ethics:
Commitment to Tough Decisions" (Vital Speeches, January 1992, pp. 208-211), states that "... it
ought to be fairly easy to choose between right and wrong by relying on principles, but business
activity often demands that we select from alternatives that are neither wholly right or wholly
wrong."
What is Business Ethics?
Let's Start With "What is ethics?"
Simply put, ethics involves learning what is right or wrong, and then doing the right thing -- but
"the right thing" is not nearly as straightforward as conveyed in a great deal of business ethics
literature. Most ethical dilemmas in the workplace are not simply a matter of "Should Bob steal
from Jack?" or "Should Jack lie to his boss?"
(Many ethicists assert there's always a right thing to do based on moral principle, and others
believe the right thing to do depends on the situation -- ultimately it's up to the individual.) Many
philosophers consider ethics to be the "science of conduct." Twin Cities consultants Doug
Wallace and John Pekel (of the Twin Cities-based Fulcrum Group; 651-714-9033; e-mail at
jonpekel@atti.com) explain that ethics includes the fundamental ground rules by which we live
our lives. Philosophers have been discussing ethics for at least 2500 years, since the time of
Socrates and Plato. Many ethicists consider emerging ethical beliefs to be "state of the art" legal
matters, i.e., what becomes an ethical guideline today is often translated to a law, regulation or
rule tomorrow. Values which guide how we ought to behave are considered moral values, e.g.,
values such as respect, honesty, fairness, responsibility, etc. Statements around how these values
are applied are sometimes called moral or ethical principles.
So What is "Business Ethics"?
The concept has come to mean various things to various people, but generally it's coming to
know what it right or wrong in the workplace and doing what's right -- this is in regard to effects
of products/services and in relationships with stakeholders. Wallace and Pekel explain that
attention to business ethics is critical during times of fundamental change -- times much like
those faced now by businesses, both nonprofit or for-profit. In times of fundamental change,
values that were previously taken for granted are now strongly questioned. Many of these values
are no longer followed. Consequently, there is no clear moral compass to guide leaders through
complex dilemmas about what is right or wrong. Attention to ethics in the workplace sensitizes
leaders and staff to how they should act. Perhaps most important, attention to ethics in the
workplaces helps ensure that when leaders and managers are struggling in times of crises and
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confusion, they retain a strong moral compass. However, attention to business ethics provides
numerous other benefits, as well (these benefits are listed later in this document).
Note that many people react that business ethics, with its continuing attention to "doing the right
thing," only asserts the obvious ("be good," "don't lie," etc.), and so these people don't take
business ethics seriously. For many of us, these principles of the obvious can go right out the
door during times of stress. Consequently, business ethics can be strong preventative medicine.
Anyway, there are many other benefits of managing ethics in the workplace. These benefits are
explained later in this document.
Two Broad Areas of Business Ethics
1. Managerial mischief.Madsen and Shafritz, in their book "Essentials of Business Ethics"

(Penguin Books, 1990) further explain that "managerial mischief" includes "illegal, unethical, or
questionable practices of individual managers or organizations, as well as the causes of such
behaviors and remedies to eradicate them." There has been a great deal written about managerial
mischief, leading many to believe that business ethics is merely a matter of preaching the basics
of what is right and wrong. More often, though, business ethics is a matter of dealing with
dilemmas that have no clear indication of what is right or wrong.
2. Moral mazes. The other broad area of business ethics is "moral mazes of management" and
includes the numerous ethical problems that managers must deal with on a daily basis, such as
potential conflicts of interest, wrongful use of resources, mismanagement of contracts and
agreements, etc.
Business Ethics is Now a Management Discipline
Business ethics has come to be considered a management discipline, especially since the birth of
the social responsibility movement in the 1960s. In that decade, social awareness movements
raised expectations of businesses to use their massive financial and social influence to address
social problems such as poverty, crime, environmental protection, equal rights, public health and
improving education. An increasing number of people asserted that because businesses were
making a profit from using our country's resources, these businesses owed it to our country to
work to improve society. Many researchers, business schools and managers have recognized this
broader constituency, and in their planning and operations have replaced the word "stockholder"
with "stakeholder," meaning to include employees, customers, suppliers and the wider
community.
The emergence of business ethics is similar to other management disciplines. For example,
organizations realized that they needed to manage a more positive image to the public and so the
recent discipline of public relations was born. Organizations realized they needed to better
manage their human resources and so the recent discipline of human resources was born.
10 Myths About Business Ethics
Business ethics in the workplace is about prioritizing moral values for the workplace and
ensuring behaviors are aligned with those values -- it's values management. Yet, myths abound
about business ethics. Some of these myths arise from general confusion about the notion of
ethics. Other myths arise from narrow or simplistic views of ethical dilemmas.
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1. Myth: Business ethics is more a matter of religion than management.
Diane Kirrane, in "Managing Values: A Systematic Approach to Business Ethics," (Training and
Development Journal, November 1990), asserts that "altering people's values or souls isn't the
aim of an organizational ethics program -- managing values and conflict among them is ..."
2. Myth: Our employees are ethical so we don't need attention to business ethics.
Most of the ethical dilemmas faced by managers in the workplace are highly complex. Wallace
explains that one knows when they have a significant ethical conflict when there is presence of a)
significant value conflicts among differing interests, b) real alternatives that are equality
justifiable, and c) significant consequences on "stakeholders" in the situation. Kirrane mentions
that when the topic of business ethics comes up, people are quick to speak of the Golden Rule,
honesty and courtesy. But when presented with complex ethical dilemmas, most people realize
there's a wide "gray area" when trying to apply ethical principles.
3. Myth: Business ethics is a discipline best led by philosophers, academics and theologians.
Lack of involvement of leaders and managers in business ethics literature and discussions has led
many to believe that business ethics is a fad or movement, having little to do with the day-to-day
realities of running an organization. They believe business ethics is primarily a complex
philosophical debate or a religion. However, business ethics is a management discipline with a
programmatic approach that includes several practical tools. Ethics management programs have
practical applications in other areas of management areas, as well. (These applications are listed
later on in this document.)
4. Myth: Business ethics is superfluous -- it only asserts the obvious: "do good!"
Many people react that codes of ethics, or lists of ethical values to which the organization
aspires, are rather superfluous because they represent values to which everyone should naturally
aspire. However, the value of a codes of ethics to an organization is its priority and focus
regarding certain ethical values in that workplace. For example, it’s obvious that all people
should be honest. However, if an organization is struggling around continuing occasions of
deceit in the workplace, a priority on honesty is very timely -- and honesty should be listed in
that organization’s code of ethics. Note that a code of ethics is an organic instrument that
changes with the needs of society and the organization.
5. Myth: Business ethics is a matter of the good guys preaching to the bad guys.
Some writers do seem to claim a moral high ground while lamenting the poor condition of
business and its leaders. However, those people well versed in managing organizations realize
that good people can take bad actions, particularly when stressed or confused. (Stress or
confusion are not excuses for unethical actions -- they are reasons.) Managing ethics in the
workplace includes all of us working together to help each other remain ethical and to work
through confusing and stressful ethical dilemmas.
6. Myth: Business ethics in the new policeperson on the block.
Many believe business ethics is a recent phenomenon because of increased attention to the topic
in popular and management literature. However, business ethics was written about even 2,000
years ago -- at least since Cicero wrote about the topic in his On Duties. Business ethics has
gotten more attention recently because of the social responsibility movement that started in the
1960s.
7. Myth: Ethics can't be managed.
Actually, ethics is always "managed" -- but, too often, indirectly. For example, the behavior of
the organization's founder or current leader is a strong moral influence, or directive if you will,
on behavior or employees in the workplace. Strategic priorities (profit maximization, expanding
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marketshare, cutting costs, etc.) can be very strong influences on morality. Laws, regulations and
rules directly influence behaviors to be more ethical, usually in a manner that improves the
general good and/or minimizes harm to the community. Some are still skeptical about business
ethics, believing you can't manage values in an organization. Donaldson and Davis (Management
Decision, V28, N6) note that management, after all, is a value system. Skeptics might consider
the tremendous influence of several "codes of ethics," such as the "10 Commandments" in
Christian religions or the U.S. Constitution. Codes can be very powerful in smaller
"organizations" as well.
8. Myth: Business ethics and social responsibility are the same thing.
The social responsibility movement is one aspect of the overall discipline of business ethics.
Madsen and Shafritz refine the definition of business ethics to be: 1) an application of ethics to
the corporate community, 2) a way to determine responsibility in business dealings, 3) the
identification of important business and social issues, and 4) a critique of business. Items 3 and 4
are often matters of social responsibility. (There has been a great deal of public discussion and
writing about items 3 and 4. However, there needs to be more written about items 1 and 2, about
how business ethics can be managed.) Writings about social responsibility often do not address
practical matters of managing ethics in the workplace, e.g., developing codes, updating polices
and procedures, approaches to resolving ethical dilemmas, etc.
9. Myth: Our organization is not in trouble with the law, so we're ethical.
One can often be unethical, yet operate within the limits of the law, e.g., withhold information
from superiors, fudge on budgets, constantly complain about others, etc. However, breaking the
law often starts with unethical behavior that has gone unnoticed. The "boil the frog" phenomena
is a useful parable here: If you put a frog in hot water, it immediately jumps out. If you put a frog
in cool water and slowly heat up the water, you can eventually boil the frog. The frog doesn't
seem to notice the adverse change in its environment.
10. Myth: Managing ethics in the workplace has little practical relevance.
Managing ethics in the workplace involves identifying and prioritizing values to guide behaviors
in the organization, and establishing associated policies and procedures to ensure those behaviors
are conducted. One might call this "values management." Values management is also highly
important in other management practices, e.g., managing diversity, Total Quality Management
and strategic planning.
10 Benefits of Managing Ethics in the Workplace
Many people are used to reading or hearing of the moral benefits of attention to business ethics.
However, there are other types of benefits, as well. The following list describes various types of
benefits from managing ethics in the workplace.
1. Attention to business ethics has substantially improved society.
A matter of decades ago, children in our country worked 16-hour days. Workers’ limbs were torn
off and disabled workers were condemned to poverty and often to starvation. Trusts controlled
some markets to the extent that prices were fixed and small businesses choked out. Price fixing
crippled normal market forces. Employees were terminated based on personalities. Influence was
applied through intimidation and harassment. Then society reacted and demanded that businesses
place high value on fairness and equal rights. Anti-trust laws were instituted. Government
agencies were established. Unions were organized. Laws and regulations were established.
2. Ethics programs help maintain a moral course in turbulent times.
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As noted earlier in this document, Wallace and Pekel explain that attention to business ethics is
critical during times of fundamental change -- times much like those faced now by businesses,
both nonprofit or for-profit. During times of change, there is often no clear moral compass to
guide leaders through complex conflicts about what is right or wrong. Continuing attention to
ethics in the workplace sensitizes leaders and staff to how they want to act -- consistently.
3. Ethics programs cultivate strong teamwork and productivity.
Ethics programs align employee behaviors with those top priority ethical values preferred by
leaders of the organization. Usually, an organization finds surprising disparity between its
preferred values and the values actually reflected by behaviors in the workplace. Ongoing
attention and dialogue regarding values in the workplace builds openness, integrity and
community -- critical ingredients of strong teams in the workplace. Employees feel strong
alignment between their values and those of the organization. They react with strong motivation
and performance.
4. Ethics programs support employee growth and meaning.
Attention to ethics in the workplace helps employees face reality, both good and bad -- in the
organization and themselves. Employees feel full confidence they can admit and deal with
whatever comes their way. Bennett, in his article "Unethical Behavior, Stress Appear Linked"
(Wall Street Journal, April 11, 1991, p. B1), explained that a consulting company tested a range
of executives and managers. Their most striking finding: the more emotionally healthy
executives, as measured on a battery of tests, the more likely they were to score high on ethics
tests.
5. Ethics programs are an insurance policy -- they help ensure that policies are legal.
There is an increasing number of lawsuits in regard to personnel matters and to effects of an
organization’s services or products on stakeholders. As mentioned earlier in this document,
ethical principles are often state-of-the-art legal matters. These principles are often applied to
current, major ethical issues to become legislation. Attention to ethics ensures highly ethical
policies and procedures in the workplace. It’s far better to incur the cost of mechanisms to ensure
ethical practices now than to incur costs of litigation later. A major intent of well-designed
personnel policies is to ensure ethical treatment of employees, e.g., in matters of hiring,
evaluating, disciplining, firing, etc. Drake and Drake (California Management Review, V16, pp.
107-123) note that “an employer can be subject to suit for breach of contract for failure to
comply with any promise it made, so the gap between stated corporate culture and actual practice
has significant legal, as well as ethical implications.”
6. Ethics programs help avoid criminal acts “of omission” and can lower fines.
Ethics programs tend to detect ethical issues and violations early on so they can be reported or
addressed. In some cases, when an organization is aware of an actual or potential violation and
does not report it to the appropriate authorities, this can be considered a criminal act, e.g., in
business dealings with certain government agencies, such as the Defense Department. The recent
Federal Sentencing Guidelines specify major penalties for various types of major ethics
violations. However, the guidelines potentially lowers fines if an organization has clearly made
an effort to operate ethically.
7. Ethics programs help manage values associated with quality management, strategic
planning and diversity management -- this benefit needs far more attention.
Ethics programs identify preferred values and ensuring organizational behaviors are aligned with
those values. This effort includes recording the values, developing policies and procedures to
align behaviors with preferred values, and then training all personnel about the policies and
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procedures. This overall effort is very useful for several other programs in the workplace that
require behaviors to be aligned with values, including quality management, strategic planning
and diversity management. Total Quality Management includes high priority on certain operating
values, e.g., trust among stakeholders, performance, reliability, measurement, and feedback.
Eastman and Polaroid use ethics tools in their quality programs to ensure integrity in their
relationships with stakeholders. Ethics management techniques are highly useful for managing
strategic values, e.g., expand marketshare, reduce costs, etc. McDonnell Douglas integrates their
ethics programs into their strategic planning process. Ethics management programs are also
useful in managing diversity. Diversity is much more than the color of people’s skin -- it’s
acknowledging different values and perspectives. Diversity programs require recognizing and
applying diverse values and perspectives -- these activities are the basis of a sound ethics
management program.
8. Ethics programs promote a strong public image.
Attention to ethics is also strong public relations -- admittedly, managing ethics should not be
done primarily for reasons of public relations. But, frankly, the fact that an organization regularly
gives attention to its ethics can portray a strong positive to the public. People see those
organizations as valuing people more than profit, as striving to operate with the utmost of
integrity and honor. Aligning behavior with values is critical to effective marketing and public
relations programs. Consider how Johnson and Johnson handled the Tylenol crisis versus how
Exxon handled the oil spill in Alaska. Bob Dunn, President and CEO of San Francisco-based
Business for Social Responsibility, puts it best: “Ethical values, consistently applied, are the
cornerstones in building a commercially successful and socially responsible business.”
9. Overall benefits of ethics programs:
Donaldson and Davis, in “Business Ethics? Yes, But What Can it Do for the Bottom Line?”
(Management Decision, V28, N6, 1990) explain that managing ethical values in the workplace
legitimizes managerial actions, strengthens the coherence and balance of the organization’s
culture, improves trust in relationships between individuals and groups, supports greater
consistency in standards and qualities of products, and cultivates greater sensitivity to the impact
of the enterprise’s values and messages.
10. Last - and most -- formal attention to ethics in the workplace is the right thing to do.
About Ethics Management Programs Organizations can manage ethics in their workplaces by
establishing an ethics management program. Brian Schrag, Executive Secretary of the
Association for Practical and Professional Ethics, clarifies. "Typically, ethics programs convey
corporate values, often using codes and policies to guide decisions and behavior, and can include
extensive training and evaluating, depending on the organization. They provide guidance in
ethical dilemmas." Rarely are two programs alike.
"All organizations have ethics programs, but most do not know that they do," wrote business
ethics professor Stephen Brenner in the Journal of Business Ethics (1992, V11, pp. 391-399). "A
corporate ethics program is made up of values, policies and activities which impact the propriety
of organization behaviors."
Bob Dunn, President and CEO of San Francisco-based Business for Social Responsibility, adds:
"Balancing competing values and reconciling them is a basic purpose of an ethics management
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program. Business people need more practical tools and information to understand their values
and how to manage them."
Benefits of Managing Ethics as a Program
There are numerous benefits in formally managing ethics as a program, rather than as a one-shot
effort when it appears to be needed. Ethics programs:
8 Guidelines for Managing Ethics in the Workplace
The following guidelines ensure the ethics management program is operated in a meaningful
fashion:
1.Recognize that managing ethics is a process.
Ethics is a matter of values and associated behaviors. Values are discerned through the process of
ongoing reflection. Therefore, ethics programs may seem more process-oriented than most
management practices. Managers tend to be skeptical of process-oriented activities, and instead
prefer processes focused on deliverables with measurements. However, experienced managers
realize that the deliverables of standard management practices (planning, organizing, motivating,
controlling) are only tangible representations of very process-oriented practices. For example,
the process of strategic planning is much more important than the plan produced by the process.
The same is true for ethics management. Ethics programs do produce deliverables, e.g., codes,
policies and procedures, budget items, meeting minutes, authorization forms, newsletters, etc.
However, the most important aspect from an ethics management program is the process of
reflection and dialogue that produces these deliverables.
2. The bottom line of an ethics program is accomplishing preferred behaviors in the
workplace.
As with any management practice, the most important outcome is behaviors preferred by the
organization. The best of ethical values and intentions are relatively meaningless unless they
generate fair and just behaviors in the workplace. That's why practices that generate lists of
ethical values, or codes of ethics, must also generate policies, procedures and training that
translate those values to appropriate behaviors.
3. The best way to handle ethical dilemmas is to avoid their occurrence in the first place.
That's why practices such as developing codes of ethics and codes of conduct are so important.
Their development sensitizes employees to ethical considerations and minimize the chances of
unethical behavior occurring in the first place.
4. Make ethics decisions in groups, and make decisions public, as appropriate.
This usually produces better quality decisions by including diverse interests and perspectives,
and increases the credibility of the decision process and outcome by reducing suspicion of unfair
bias.
5. Integrate ethics management with other management practices.
When developing the values statement during strategic planning, include ethical values preferred
in the workplace. When developing personnel policies, reflect on what ethical values you'd like
to be most prominent in the organization's culture and then design policies to produce these
behaviors.
6. Use cross-functional teams when developing and implementing the ethics management
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program.
It’s vital that the organization’s employees feel a sense of participation and ownership in the
program if they are to adhere to its ethical values. Therefore, include employees in developing
and operating the program.
7. Value forgiveness.
This may sound rather religious or preachy to some, but it’s probably the most important
component of any management practice. An ethics management program may at first actually
increase the number of ethical issues to be dealt with because people are more sensitive to their
occurrence. Consequently, there may be more occasions to address people’s unethical behavior.
The most important ingredient for remaining ethical is trying to be ethical. Therefore, help
people recognize and address their mistakes and then support them to continue to try operate
ethically.
8. Note that trying to operate ethically and making a few mistakes is better than not trying
at all.
Some organizations have become widely known as operating in a highly ethical manner, e.g.,
Ben and Jerrys, Johnson and Johnson, Aveda, Hewlett Packard, etc. Unfortunately, it seems that
when an organization achieves this strong public image, it's placed on a pedestal by some
business ethics writers. All organizations are comprised of people and people are not perfect.
However, when a mistake is made by any of these organizations, the organization has a long way
to fall. In our increasingly critical society, these organizations are accused of being hypocritical
and they are soon pilloried by social critics. Consequently, some leaders may fear sticking their
necks out publicly to announce an ethics management program. This is extremely unfortunate.
It's the trying that counts and brings peace of mind -- not achieving an heroic status in society.
6 Key Roles and Responsibilities in Ethics Management
Depending on the size of the organization, certain roles may prove useful in managing ethics in
the workplace. These can be full-time roles or part-time functions assumed by someone already
in the organization. Small organizations certainly will not have the resources to implement each
the following roles using different people in the organization. However, the following functions
points out responsibilities that should be included somewhere in the organization.
1. The organization's chief executive must fully support the program.
If the chief executive isn't fully behind the program, employees will certainly notice -- and this
apparent hypocrisy may cause such cynicism that the organization may be worse off than having
no formal ethics program at all. Therefore, the chief executive should announce the program, and
champion its development and implementation. Most important, the chief executive should
consistently aspire to lead in an ethical manner. If a mistake is made, admit it.
2. Consider establishing an ethics committee at the board level.
The committee would be charged to oversee development and operation of the ethics
management program.
3. Consider establishing an ethics management committee.
It would be charged with implementing and administrating an ethics management program,
including administrating and training about policies and procedures, and resolving ethical
dilemmas. The committee should be comprised of senior officers.
4. Consider assigning/developing an ethics officer.
This role is becoming more common, particularly in larger and more progressive organizations.
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The ethics officer is usually trained about matters of ethics in the workplace, particularly about
resolving ethical dilemmas.
5. Consider establishing an ombudsperson.
The ombudsperson is responsible to help coordinate development of the policies and procedures
to institutionalize moral values in the workplace. This position usually is directly responsible for
resolving ethical dilemmas by interpreting policies and procedures.
About Codes of Ethics
According to Wallace, "A credo generally describes the highest values to which the company
aspires to operate. It contains the `thou shalts.' A code of ethics specifies the ethical rules of
operation. It's the `thou shalt nots." In the latter 1980s, The Conference Board, a leading business
membership organization, found that 76% of corporations surveyed had codes of ethics. Some
business ethicists disagree that codes have any value. Usually they explain that too much focus is
put on the codes themselves, and that codes themselves are not influential in managing ethics in
the workplace. Many ethicists note that it's the developing and continuing dialogue around the
code's values that is most important. Occasionally, employees react to codes with suspicion,
believing the values are "motherhood and apple pie" and codes are for window dressing. But,
when managing a complex issue, especially in a crisis, having a code is critical. More important,
it's having developed a code. In the mid-70s, Johnson and Johnson updated their credo in a series
of challenge meetings. Bob Kniffin, Vice President of External Affairs, explains, "We pored over
each phrase and word. We asked ourselves, `Do we still believe this?' Our meetings resulted in
some fine tuning, but basically we didn't change the values. The meetings infused the values in
the minds of all of us managers." Many believe this process guided them in their well-known
decision to pull Tylenol bottles off the shelves and repackage them at a $100 million expense.
Kniffin offers some sound, practical advice. "In a crisis, there's no time for moral conclusions.
Get those done beforehand. But also realize there's no substitute for sound crisis management.
For example, have a list of people with fundamental knowledge, such as who transports your
products where and when."
Developing Codes of Ethics
Note that if your organization is quite large, e.g., includes several large programs or departments,
you may want to develop an overall corporate code of ethics and then a separate code to guide
each of your programs or departments.
Also note that codes should not be developed out of the Human Resource or Legal departments
alone, as is too often done. Codes are insufficient if intended only to ensure that policies are
legal. All staff must see the ethics program being driven by top management.
Note that codes of ethics and codes of conduct may be the same in some organizations,
depending on the organization's culture and operations and on the ultimate level of specificity in
the code(s).
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Optional: Also see in the Free Management Library at http://managementhelp.org:
1. Organizational Culture - review to get a basic understanding of "personalities" of
organizations
2. Strategic Planning - specific to developing a Values Statement
3. Valuing Diversity- to consider that there are other values and perspectives
Consider the following guidelines when developing codes of ethics:

1. Review any values need to adhere to relevant laws and regulations;
this ensures your organization is not (or is not near) breaking any of them. (If you are breaking
any of them, you may be far better off to report this violation than to try hide the problem. Often,
a reported violation generates more leniency than outside detection of an unreported violation,
particularly per the new Federal Sentencing Guidelines.) Increase priority on values that will
help your organization operate to avoid breaking these laws and to follow necessary regulations.
2. Review which values produce the top three or four traits of a highly ethical and
successful product or service in your area,
e.g., for accountants: objectivity, confidentiality, accuracy, etc. Identify which values produce
behaviors that exhibit these traits.
3. Identify values needed to address current issues in your workplace.
Appoint one or two key people to interview key staff to collect descriptions of major issues in
the workplace. Collect descriptions of behaviors that produce the issues. Consider which of these
issues is ethical in nature, e.g.., issues in regard to respect, fairness and honesty. Identify the
behaviors needed to resolve these issues. Identify which values would generate those preferred
behaviors. There may be values included here that some people would not deem as moral or
ethical values, e.g., team-building and promptness, but for managers, these practical values may
add more relevance and utility to a code of ethics.
4. Identify any values needed, based on findings during strategic planning.
Review information from your SWOT analysis (identifying the organization's strengths,
weaknesses, opportunities and threats). What behaviors are needed to build on strengths, shore
up weaknesses, take advantage of opportunities and guard against threats?
5. Consider any top ethical values that might be prized by stakeholders.
For example, consider expectations of employees, clients/customers, suppliers, funders, members
of the local community, etc.
6. Collect from the above steps, the top five to ten ethical values which are high priorities in
your organization (see item #7 below for examples).
7. Examples of ethical values might include
(the following list is the "Six Pillars of Character" developed by The Josephson Institute of
Ethics, 310-306-1868):
a) Trustworthiness: honesty, integrity, promise-keeping, loyalty
b) Respect: autonomy, privacy, dignity, courtesy, tolerance, acceptance
c) Responsibility: accountability, pursuit of excellence
d) Caring: compassion, consideration, giving, sharing, kindness, loving
e) Justice and fairness: procedural fairness, impartiality, consistency, equity, equality, due
process
f) Civic virtue and citizenship: law abiding, community service, protection of environment
8. Compose your code of ethics; attempt to associate with each value, two example
behaviors which reflect each value.
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Critics of codes of ethics assert that they seem vacuous because many only list ethical values and
don't clarify these values by associating examples of behaviors.
9. Include wording that indicates all employees are expected to conform to the values stated
in the code of ethics.
Add wording that indicates where employees can go if they have any questions.
10. Obtain review from key members of the organization.
Get input from as many members as possible.
11. Announce and distribute the new code of ethics (unless you are waiting to announce it
along with any new codes of conduct and associated policies and procedures).
Ensure each employee has a copy and post codes throughout the facility.
12. Update the code at least once a year.
As stated several times in this document, the most important aspect of codes is developing them,
not the code itself. Continued dialogue and reflection around ethical values produces ethical
sensitivity and consensus. Therefore, revisit your codes at least once a year -- preferably two or
three times a year.
About Codes of Conduct
"Codes of conduct specify actions in the workplace and codes of ethics are general guides to
decisions about those actions," explains Craig Nordlund, Associate General Counsel and
Secretary at Hewlett Packard. He suggests that codes of conduct contain examples of appropriate
behavior to be meaningful.
The Conference Board found that codes of conduct are increasingly sophisticated and focused at
lower levels in companies. Departments frequently have their own codes. Be careful, though. An
organization could be sued for breach of contract if its practices are not in accord with its
policies. That’s why legal departments should review codes of conduct and other ethics policies.
Also, that’s why it’s critical for organizations to review their policies at least once a year to
ensure they are in accordance with laws and regulations.
Optional: also see in the Free Management Library at http://managementhelp.org:
1. Employee Law - review major issues and topics to discern what behaviors to avoid in the
workplace
2. Policies (Personnel) - review more specifics about what behaviors to avoid
Developing a Code of Conduct
Note that if your organization is quite large, e.g., includes several large programs or departments,
you may want to develop an overall corporate code of conduct, and then a separate code to guide
each of your programs or departments. Consider the following guidelines when developing codes
of conduct:
1. Identify key behaviors needed to adhere to the ethical values proclaimed in your code of
ethics
, including ethical values derived from review of key laws and regulations, ethical behaviors
needed in your product or service area, behaviors to address current issues in your workplace,
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and behaviors needed to reach strategic goals.
2. Include wording that indicates all employees are expected to conform to the behaviors
specified in the code of conduct.
Add wording that indicates where employees can go if they have any questions.
3. Obtain review from key members of the organization.
Be sure your legal department reviews the drafted code of conduct.
4. Announce and distribute the new code of conduct
(unless you are waiting to announce it along with any associated policies and procedures).
Ensure each employee has a copy and post codes in each employee's bay or office.
5. (Note that you cannot include preferred behaviors for every possible ethical dilemma
that might arise.)
6. Examples of topics typically addressed by codes of conduct include:
preferred style of dress, avoiding illegal drugs, following instructions of superiors, being reliable
and prompt, maintaining confidentiality, not accepting personal gifts from stakeholders as a
result of company role, avoiding racial or sexual discrimination, avoiding conflict of interest,
complying with laws and regulations, not using organization's property for personal use, not
discriminating against race or age or sexual orientation, and reporting illegal or questionable
activity. Go beyond these traditional legalistic expectations in your codes -- adhere to what's
ethically sensitive in your organization, as well. (Note that, as with codes of ethics, you may be
better off to generate your own code of conduct from scratch rather than reviewing examples
from other organizations.)
1. Update policies and procedures to produce behaviors preferred from the code of
conduct,
including, e.g., personnel, job descriptions, performance appraisal forms, management-by-
objectives expectations, standard forms, checklists, budget report formats, and other relevant
control instruments to ensure conformance to the code of conduct. In doing so, try to avoid
creating ethical dilemmas such as conflicts-of-interest or infringing on employee's individual
rights.
2. There are numerous examples of how organizations manage values through use of
policies and procedures.
For example, we're most familiar with the value of social responsibility. To produce behavior
aligned with this value, organizations often institute policies such as recycling waste, donating to
local charities, or paying employees to participate in community events. In another example, a
high value on responsiveness to customers might be implemented by instituting policies to return
phone calls or to repair defective equipment within a certain period of time. Consider the role of
job descriptions and performance appraisals. For example, an advanced technology business will
highly value technical knowledge, creativity and systems thinking. They use job descriptions and
performance appraisals to encourage behaviors aligned with these values, such as rewarding
advanced degrees, patents, and analysis and design skills.
3. Include policies and procedures to address ethical dilemmas.
See the next section, "Ethics Tools: Resolving Ethical Dilemmas," to select a method which is
most appropriate to your organization's culture and operations.
4. Include policies and procedures to ensure training of employees about the ethics
management program.
See a following section, "Ethics Tools: Training."
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5. Include policies and procedures to reward ethical behavior and impose consequences for
unethical behavior.
6. Include a grievance policy for employees to use to resolve disagreements with supervisors
and staff.
7. Consider establishing an ethics "hotline."
This function might best be provided by an outside consultant, e.g., lawyer, clergyperson, etc.
Or, provide an anonymous "tip" box in which personnel can report suspected unethical activities,
and do so safely on an anonymous basis.
8. Once a year, review all personnel policies and procedures.
If yours is a small organization, consider including all staff during this review. Take a full day
for all staff to review policies and procedures, and suggest changes.
9. For guidance in establishing personnel policies, see the
Guide to Personnel Management and Policies
Definition of an Ethical Dilemma
Perhaps too often, business ethics is portrayed as a matter of resolving conflicts in which one
option appears to be the clear choice. For example, case studies are often presented in which an
employee is faced with whether or not to lie, steal, cheat, abuse another, break terms of a
contract, etc. However, ethical dilemmas faced by managers are often more real-to-life and
highly complex with no clear guidelines, whether in law or often in religion.
As noted earlier in this document, Doug Wallace, Twin Cities-based consultant, explains that one
knows when they have a significant ethical conflict when there is presence of a) significant value
conflicts among differing interests, b) real alternatives that are equality justifiable, and c)
significant consequences on "stakeholders" in the situation.An ethical dilemma exists when one
is faced with having to make a choice among these alternatives.
Real-to-Life Examples of Complex Ethical Dilemmas
· "A customer (or client) asked for a product (or service) from us today. After telling him our
price, he said he couldn't afford it. I know he could get it cheaper from a competitor. Should I tell
him about the competitor -- or let him go without getting what he needs? What should I do?"
· "Our company prides itself on its merit-based pay system. One of my employees has done a
tremendous job all year, so he deserves strong recognition. However, he's already paid at the top
of the salary range for his job grade and our company has too many people in the grade above
him, so we can't promote him. What should I do?"
· "Our company prides itself on hiring minorities. One Asian candidate fully fits the job
requirements for our open position. However, we're concerned that our customers won't
understand his limited command of the English language. What should I do?"
· "My top software designer suddenly refused to use our e-mail system. He explained to me that,
as a Christian, he could not use a product built by a company that provided benefits to the
partners of homosexual employees. He'd basically cut himself off from our team, creating a
major obstacle to our product development. What should I do?"
· "My boss told me that one of my employees is among several others to be laid off soon, and
that I'm not to tell my employee yet or he might tell the whole organization which would soon be
in an uproar. Meanwhile, I heard from my employee that he plans to buy braces for his daughter
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and a new carpet for his house. What should I do?"
· "My computer operator told me he'd noticed several personal letters printed from a computer
that I was responsible to manage. While we had no specific policies then against personal use of
company facilities, I was concerned. I approached the letter writer to discuss the situation. She
told me she'd written the letters on her own time to practice using our word processor. What
should. do?"
· "A fellow employee told me that he plans to quit the company in two months and start a new
job which has been guaranteed to him. Meanwhile, my boss told me that he wasn't going to give
me a new opportunity in our company because he was going to give it to my fellow employee
now. What should I do?"
CHAPTER 7- METHODS TO RESOLVE ETHICAL DILEMMAS
Methods to Resolve Ethical Dilemmas
Organizations should develop and document a procedure for dealing with ethical dilemmas as
they arise. Ideally, ethical dilemmas should be resolved by a group within the organization, e.g.,
an ethics committee comprised of top leaders/managers and/or members of the board. Consider
having staff members on the committee, as well. The following three methods can be used to
address ethical dilemmas. Methods include an ethical checklist, a ten-step method and a list of
key questions. (Note that The Golden Rule is probably the most common method to resolve
ethical dilemmas. The rule exists in various forms in many of the world religions.)
1. Orient new employees to the organization's ethics program during new-employee

orientation.
2. Review the ethics management program in management training experiences.
3. Involving staff in review of codes is strong ethics training.
4. Involving staff in review of policies (ethics and personnel policies) is strong ethics
training.
5. One of the strongest forms of ethics training is practice in resolving complex ethical
dilemmas. Have staff use any of the three ethical-dilemma-resolution methods in this guidebook
and apply them to any of the real-to-life ethical dilemmas also listed in this guidebook.
6. Include ethical performance as a dimension in performance appraisals.
7. The best ethics trainer: Bill Goodman, Chief Human Resource Officer at Aveda, describes,
"We start our training even in our job ads," then adds, "but the best trainer is the behavior of our
leaders."
8. Give all staff a copy of this free "Complete Guide to Ethics Management."
Concerns about the responsible use of corporate power remain high in the wake of the financial
crisis. Although these concerns have been focused primarily on the financial sector, there is
spillover to corporations in every industry. Tough economic conditions, slow job growth,
political dysfunction and general uncertainties about the future continue to undermine investor
confidence and fuel public distrust (with Occupy Wall Street an example). This in turn
intensifies the scrutiny of corporate actions and board decisions, and may skew the regulatory
environment in which companies compete.
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All corporate governance participants – boards, executive officers, shareholders, proxy advisors,
regulators and politicians – have both an interest and a role to play in rebuilding trust in the
corporations that are the engine of our economy. In our annual reflection, we offer thoughts on
how, without the need for regulatory intervention, boards and shareholders can seize the
opportunity to rebuild trust and, by doing so, help resolve some of the tensions that are stalling
our economic recovery.
Part I – Opportunities for the Board to Rebuild Trust
1. Focus on the long-term. Boards carry out their fiduciary duties in the face of pressures from
the market and short-term traders for immediate results, pressures that too often undermine the
long-term planning and investment required for a sustainable enterprise. While management
must focus on the day to day operations of the company, the board has the ability and
responsibility to look forward and consider what is in the best interests of the corporation and its
shareholders over a time horizon notably longer than the quarter at hand. The board should bring
its objectivity and judgment to issues ranging from dividend policy, strategic direction, risk and
executive compensation to corporate social responsibility and ethical culture. When coupled
with a clearly articulated strategy, the board’s commitment to the long-term should help a
company withstand undue short-term pressures. This requires effective disclosure of board
decisions and policies and concerted efforts at shareholder relations and communications, both
areas where boards often could focus more attention.
2. Redefine board priorities. The part-time nature of director service combined with ever-
expanding expectations about the board’s role and increasing regulatory mandates may lead to
an unfocused and overly long board agenda. Boards should delegate to board committees,
corporate management and advisors those matters that do not require the attention of the full
board so that the board can focus on key priorities. Defining board priorities is the board’s task,
one that should be undertaken in an informed manner with advice from management and counsel
but not be delegated to them. We suggest that boards consider an 80/20 rule: Approximately 80
percent of board time should be spent on those issues that are reserved by law to the board, that
will benefit from the exercise of fiduciary judgment or as to which management has inherent
conflicts, such as corporate strategy and the major risks to that strategy, material transactions,
management performance and succession, and executive compensation. The board should also
reserve “quality time” for matters of its own performance and composition. This is a simplified
list and of course every board will need to work it out based on its own challenges and
characteristics, but the key is to maintain significant time for the significant and difficult issues.
Leading the effort of redefining board priorities and ensuring sufficient agenda time for priority
matters are roles for the board’s independent leader – either a separate independent chair or a
lead director. We note that the number of companies with separate independent chairs is
continuing to rise, and it is now well-accepted that public companies should either have an
independent chair or have a lead director with a role that is defined to include a number of tasks
that would otherwise typically fall to a board chair.
3. Apply objectivity & “backbone” to fiduciary judgments. Directors must decide for
themselves what is in the best interests of the company. Clearly, management has a view that it
will advocate, but the board needs to test the underlying assumptions and come to its own
conclusion. While undue deference to management is not appropriate, neither is abdication of
fiduciary decisions to shareholders. Fiduciary decision-making cannot be abdicated, even if a
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majority of shareholders have a definite preference on an issue. This may pose challenges when
significant shareholders have strongly held views, or when a proxy advisor takes a stance and in
effect serves to coordinate support for that stance among its client shareholders. The bottom line
is that directors need to be willing to do what they believe is right, even if doing so jeopardizes
re-election.
4. Listen to and communicate with (“engage”) shareholders. Success in withstanding
pressures for actions that the board does not believe are in the company’s best interest depends
on the board’s ability to communicate effectively with shareholders. The starting point is
knowing who your significant shareholders are and what concerns them. (It helps to maintain
open channels of communication with the persons who have voting and investing authority, and
these roles are often split in large institutional investors.) Encouraging feedback generates
goodwill and can elicit good ideas. Obtaining a preview of concerns also provides opportunity to
avoid acrimony by working through issues in advance. Directors should listen hard to what
shareholders have to say and consider any disconnects between the views of shareholders and
the board, for example, where a management proposal or a director receives a negative (or not
overwhelmingly positive) vote at the annual meeting. Boards should work with management to
ensure that board decisions are adequately explained to investors, regulators and other users of
corporate information. Disclosure documents should be reviewed with a critical eye towards
enhancing understandability and slashing boilerplate. Communication with shareholders (and
employees) will become even more critical once the SEC adopts new disclosure requirements
relating to internal pay equity and pay-for-performance as required by the Dodd-Frank Act of
2010.
5. Be self-critical. If shareholders are to give boards the time and space to take the long view,
and generally defer to and support their judgments, they need assurance that boards will bring
objectivity and backbone to judgments about the board’s own effectiveness. Re-nomination
decisions need to be based on an active assessment of director performance and whether the
director continues to be a strong fit. All directors need to have skill sets that continue to be not
only relevant but necessary to the evolving direction of the company’s business and be engaged
in board and committee activities at a high level. Board “refreshment” mechanisms such as age
limits and term limits should be carefully considered. While they can help to assure
compositional change, they are imperfect substitutes for active assessment of individual
performance, and they may set an inappropriate expectation of long tenure. Similarly, the annual
self-evaluation of the board and its committees provides an opportunity for reflection about areas
for improvement. This should not be allowed to become a rote exercise. Consider changing up
the methodology from time to time, for example, by every several years taking a deeper dive
through an interview method rather than relying on paper questionnaires. No matter what
method is used to gather viewpoints from directors, every year the evaluation should result in a
focused board discussion of areas for improvement.
6. Pay special attention to “hot button” issues. Boards should make decisions about “hot
button” issues in the best interests of the company and persuasively communicate the reasons for
those decisions. Proactively discuss any anticipated negative feedback from the proxy advisory
firms on relevant issues. The issues requiring special attention will depend on the company, but
for most companies will include strategic direction, risk oversight, executive compensation,
proxy access, board composition, succession, board leadership, political contributions
disclosure, corporate social responsibility and structural defenses.
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Corporate Responsibility. The 2012 presidential election year is likely to bring heightened
attention to issues related to corporate responsibility generally and to corporate political power
in particular. In 2011, both the number of social and environmental proposals brought by
shareholders and the support for these proposals increased. Boards should be prepared for
particular scrutiny of their oversight of corporate political spending and should be sensitive to
that issue. In addition to calls for greater disclosure of board policies and decisions with respect
to political spending, boards should expect calls for greater disclosure regarding corporate
impact on natural resources, with an emphasis on water and air quality and supply chain
sustainability. Boards should ensure that these topics receive appropriate attention on the board
agenda and should keep tabs generally on public sentiment as it relates to the company and
issues of corporate responsibility generally. This is an area where the board may be particularly
well-positioned to assess the general environment and advise management.
Executive Compensation. Say on pay acted as a “release valve” allowing shareholders to let off
steam in 2011, resulting in fewer “withhold” and “against” campaigns targeting individual
directors in elections. It will still be high on the shareholder agenda in 2012. To bolster support
in the coming year, boards and compensation committees should recognize that many
shareholders are looking for them to demonstrate restraint. Expect pay for performance to
continue as the primary factor in obtaining shareholder approval, with shareholder sensitivity to
pay levels relative to peers and pay increases out of proportion to performance trends. Consider
the shareholder perspective on (and public perception of) the company’s executive compensation
program and related disclosures, including, how the program matches up the new ISS guidelines
(given its influence). Don’t just read a final draft of the proxy statement – advocate early that it
explain the company’s compensation philosophy, and the alignment between pay and
performance in clear and understandable terms. Finally, be willing and available to follow-up
with key shareholders to discuss the board’s approach to say on pay. Boards of companies that
failed to receive a majority vote in favor of executive compensation or received a high
proportion of negative votes (even though receiving a majority vote in favor) should identify the
primary shareholder concerns and take a hard look at whether changes are called for, based on
fiduciary judgment.
Majority Voting. Boards should expect a concerted effort from shareholders to extend majority
voting to the remainder of the S&P 500 and beyond to the next tier of companies in 2012.
Boards at companies that have not yet adopted a majority voting standard, or a director
resignation policy in the event a director fails to receive a majority of the votes, should be
prepared to address this issue with shareholders.
Proxy Access. 2012 is the first year in which shareholders may bring proposals seeking bylaw
changes to allow proxy access for shareholder nominations of director candidates in competition
with the board’s own nominees. (Any adopted bylaw changes will not be applicable until the
next year.). While public pension funds and union funds are expected to bring a relatively
focused set of proposals concentrating on high-profile companies that have had significant
governance, compliance or performance issues, individual shareholders involved in the U.S.
Proxy Exchange (USPX) and the Norwegian Pension Fund Global (NPFG) have already
submitted a dozen or more proposals. The non-binding USPX proposals generally ask that the
board adopt a bylaw to permit proxy access for director nominees from shareholders that have
held continuously for two years 1 percent of the company’s eligible securities and/or any party
of 100 shareholders each of whom satisfy the basic SEC Rule 14a-8(b) eligibility standards
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(holding a $2000 stake for one year). The NPFG’s proposals are reportedly binding proposals
and also have a low threshold, requiring that a shareholder hold a minimum of 1% of company
stock for 1 year. Boards should follow developments in this area closely. Maintaining strong
relationships with significant shareholders and understanding and, as appropriate, addressing
their concerns continues to be the best preparation for a potential proxy access proposal.
“Vote No” Campaigns. Boards may see an up-tick in the number of campaigns against directors
up for re-election. ISS has a fairly long list of circumstances that will cause it to recommend
voting against a director in an uncontested election. In addition, “vote no” campaigns may target
compensation committee members at companies where shareholders and proxy advisors deem
the committee and board unresponsive to the 2011 say on pay vote even where the proposal
“passed”. Boards should review ISS’ recently revised policies early to understand where
vulnerabilities may lie so that they can take appropriate action, including, if necessary, targeted
shareholder outreach.
Part II – Opportunities for Shareholders to Rebuild Trust
1. Focus on the long-term. Shareholders should give the board and management freedom to
make decisions over a long-term time horizon. Focusing on the long-term is particularly critical
during a downturn. While plowing resources into R&D and other job creation and growth
strategies may restrain the bottom line in the near-term, such investments are necessary to reap
rewards for the company and its shareholders – and society – later on. Shareholders may need to
evaluate their own decision-making structures and ensure that they are not rewarding high-risk
behaviors, whether through direct investments or through the monies they invest through other
entities.
2. Refine shareholder priorities and reduce “noise.” Boards of public companies are
bombarded with a wide array of viewpoints about corporate governance and social and
environmental issues. Institutional shareholders should identify the two or three issues (in
addition to return on investment) that are most important to them and then clearly and
consistently articulate their views. Laundry lists of concerns should be prioritized to ensure that
the board can hear and focus on the things that are most important to shareholders. These
priorities can also help shareholders to ground their approach to voting analysis (see below).
3. Vote responsibly. With power comes responsibility. Where shareholders do not have the
resources to become informed on an issue on a company-specific basis, it makes sense for them
to generally defer to the board’s recommendations. We note that many may consider this heresy,
but presumably most shareholders have invested in a company because of faith in the direction
that the board and management are taking the company. Alternatively, they are investing
because the company has been included in an index that the shareholder invests in, deferring to
the judgment of others. Deference to board recommendations in most instances would allow
shareholders to focus scarce voting analytic resources on companies where a significant
performance or other red flag issue is apparent. In such instances, shareholders should apply
their resources to becoming well-informed prior to voting.
4. Delegate and/or rely on others responsibly. A corollary of the admonition to “vote
responsibly” is to delegate or rely on others responsibly. When choosing advisors to assist with
voting analysis and recommendations, do so on an informed basis after performing due diligence
as to their capabilities. Consider whether they have the resources to provide informed and
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tailored advice specific to portfolio companies or are unduly reliant on a set of fairly rigid voting
guidelines. The more reliant they are on junior seasonal workers who turn over every year, the
less likely that they are able to provide rigorous, sophisticated and tailored analysis. If you are
having the advisor tailor policies specifically to your specifications, consider using a
performance screen and instructing the advisor that so long as the company is performing well
and there are no significant red flags (and mere failure to adopt a particular governance policy
favored by the advisor shouldn’t count as a red flag), to vote as the board recommends.
5. Speak up, but be willing to listen. Shareholders should share their concerns with boards and
should also provide feedback when requested. Shareholders should also be prepared to listen to
what boards have to say – communication is a two-way street. Communication can take various
forms, from formal meetings conducted in accordance with Regulation FD, to posts on Twitter
or other social media tools. Remember in communicating with a board that other shareholders
may have different – and even conflicting – views. Also recognize that some means of
communicating lack nuance. An example is the up-or-down vote on say on pay resolutions
which provides shareholders with an imperfect forum in which to let the board know how it is
doing on compensation and, indirectly, on performance generally. Follow up with concrete
suggestions and give the board the opportunity to respond. Recognize that it takes time to make
significant modifications to a company’s compensation program. Also, remember that while
shareholder views about appropriate compensation should be considered, executive
compensation is fundamentally the board’s responsibility.
6. Carefully consider private ordering options. Shareholder proposals relating to proxy access
– whether by way of precatory resolution or binding bylaw amendment – should include
meaningful ownership thresholds and other qualifications to ensure that director elections
proceed in an orderly manner and are not hijacked by special interest groups. Proxy access
should be viewed as a last-resort mechanism. Engagement with the company’s nominating
committee on board composition should always be the preferred course.
One answer is increased public regulation. The origins of the Great Recession include bad
business decision-making caused in no small part by excessive and poorly structured corporate
compensation. Not surprisingly, there are now energetic public policy debates about the
governance both of the financial sector (a variety of measures are being considered to ensure
safety and soundness) and of all publicly held corporations (with focus on an enhanced
shareholder role and mandated compensation and risk processes.
Six Essential Tasks
But, regardless of regulatory outcomes, boards of directors and business leaders will still have to
make complex decisions that direct the destiny of corporations. In doing so, they must, in my
view, discharge six essential, interrelated tasks which are the foundation for rebuilding trust in
corporate governance and addressing the ultimate questions of corporate accountability which
underlie the governance debates.
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This is not a “nice to do.” It is profoundly in the self-interest of private sector leadership
energetically to implement the six “must do’s” in order to answer powerfully the legitimate
criticisms of board and senior executive decision-making in recent years.
The six seamless tasks are:
• 1) A redefinition of the mission of the company — and the role of the board of
directors and the CEO to create durable value for shareholders and other stakeholders
through sustained economic performance, sound risk management and high integrity.The
most basic purpose of the corporation is for leaders to find a sound balance between risk-
taking (innovation and creativity) and risk-management (financial and operational
discipline) and to fuse this high performance with high integrity. High integrity means a
commitment to law, ethics and values in order to attain affirmative benefits inside the
company, in the marketplace and in global society, but also to reduce legal, ethical,
reputational, public policy and country risk. The emphasis on short-term maximization of
shareholder value should be reduced significantly.
• 2) A revamped internal leadership training process. Such a process should be built on
these integrated essentials of performance, risk and integrity — and on a culture in which
all are honored and exemplified. Corporate education and training for potential leaders
must be broadened and transformed; growth assignments must include diverse roles
involving risk and integrity issues, not just making the numbers in different
environments.
• 3) A refocused CEO selection process. This most important board function should flow
from a revised leadership development process and seek a broader set of skills
appropriate to a redefined mission. The board of directors should explicitly articulate a
redefined role when seeking a new CEO.
• 4) A restatement of fundamental but operational measurements for performance, risk
and integrity. These metrics should expresses the near, medium and long-term corporate
goals across all three dimensions in both financial and non-financial terms — with
primary focus on clear steps that create of sustainable value for shareholders and other
stakeholders, such as employees and customers, essential to the company’s well-being.
These performance, risk and integrity operational goals not only should guide internal
actions but should be articulated annually in a public and transparent way so that external
constituencies can assess accountability against clear standards.
• 5) A revision of compensation for the CEO and other senior executives. Such a revision
for top business leaders — and for other employees with significant impact on the
corporation — must be based on real actions measured against those restated operational
performance, risk and integrity objectives. Although top business leadership will receive
substantial annual cash compensation, a significant proportion of compensation in any
particular year will be variable cash and variable equity which will be paid out or held
back over time as objectives are met, exceeded or missed.
• 6) A re-alignment of the board’s fundamental oversight function. Boards often
complain of two much complexity in their jobs. They should cut through the clutter and
focus primarily on those high priority performance, risk and integrity operational
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objectives which are central to attainment of corporate mission and to assessing the
fundamental actions on which executive compensation, over time, is based.
Corporations’ current statements of purpose may make reference to these six fundamental tasks.
But, the tasks may either be lost amidst many other corporate goals or may not be matched by
robust practice. The harsh reality is that business organizations must be designed to check short-
termism, greed and corruption and to channel capitalism’s innovation and “animal spirits” into
sustained, durable creation of real economic value. It is the job of boards at a conceptual level
and business leaders at both a conceptual and operational level to do so within a framework of
financial discipline, law, ethics and values.
A relentless focus on these six fundamental tasks will drive creation of sustainable shareholder
and stakeholder value — will provide an “actionable” framework for publicly held companies.
Moreover, the development of appropriate executive compensation — the governance topic
generating the most public heat today — can only flow from definition of corporate mission and
articulation of related operational goals and measurements.
Directors in particular should put highest priority on these six tasks in defining a “right-sized”
board role going forward. This will require focused intensity. But, the CEO and other senior
company executives must also make these tasks the core of their leadership and management
efforts as they “govern” the company on a day-to-day basis. If boards do their most fundamental
tasks – define the mission of the corporation to include risk and integrity and choose the right
CEO and senior executives according to that mission – then directors should be able to act as
constructive critics with business leaders and forge a powerful board/executive partnership to
direct the destiny of publicly held corporations.
Obstacles
Directors and business leaders must candidly confront difficult, real-world issues which can
undermine a corporation’s will and ability to discharge the six, seamless tasks in a meaningful
way. These problems include:
• competitors in the labor market for top executive and other business talent which can
defeat structured compensation schemes by throwing money at valued individuals;
• differing regulatory standards in the overlapping U.S. jurisdictions and across the world
– and the risk of regulatory arbitrage;
• the limitations of many current compensation consultants who may not understand the
underlying reality of specific companies well enough to help design the operational
performance, risk and integrity objectives upon which compensation should be based.
• the increasing short-termism of many institutional investors – who do not act as owners
of individual companies or care about company fundamentals but instead respond to
“fund manager” incentives to beat aggregate benchmarks (like the S&P).
• the dangers of gaming any system of measurements, including new ones advocated here.
Accountability
Finally, boards and senior executives must strive to carry out these tasks in good faith in order to
address the fundamental issue of corporate accountability.
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The pricing signals from the stock market, an enhanced shareholder role in governance and
increased government regulation all may have a role in accountability. But all have
imperfections, and all are the subject of strenuous debate. For example, given the enormous
diversity in objectives, strategies and fund manager incentives, are shareholders part of the
problem or part of the solution? If the efficient market theory must be modified by actual
bubbles and irrationality – and by critiques from other schools of economics – what is the role of
shareholder value, and at what point in time, in assessing corporations’ performance and holding
them accountable?
The most direct accountability mechanism is sound stewardship by the CEO and senior
executives under the direction and oversight of hard-working, independent-minded boards of
directors who are best positioned to balance the many competing interests at play in all
significant corporate decisions. However, critics argue, with some force in some instances, that
this accountability mechanism is weak because boards can be passive, complacent and inward
looking, incapable of asking CEOs hard questions and ignoring important shareholder or other
stakeholder concerns.
But the other accountability mechanisms – regulation, the market, enhanced shareholder role –
are, in many respects, all aimed at the fundamental goal of my argument: strong, energized
boards and business leadership dedicated to the discharge, in good faith, of the six essential
functions in order to create durable long-term value through sustained economic performance,
sound risk management and high integrity – and through meaningful consultation with
shareholders and other important stakeholders.
In many policy papers, the cry goes up for “better leadership” to address difficult problems, with
deep structural roots. Too often that plea goes unanswered — or the problems are too intractable.
But today, with business facing a crisis in confidence about governance, it is in the demonstrable
interest of corporations and of capitalism itself for boards of directors and business leaders truly
to address the governance problems of the era and provide a clear, credible and powerful private
sector response.
What rationalization does a company make to justify a corporate culture where ethics are
ignored? In recent years, greed, fraud, and a lack of ethical conduct have led to the collapse of
many organizations. A variety of internal and external pressures can lead companies down the
wrong path. And once the first misstep is taken, it’s a slippery slope to hurting stakeholders, the
community, and your reputation.
This turmoil and damage could have been avoided if organizations had chosen to maintain an
ethical corporate environment, exercising integrity-rich behavior and ensuring the tone at the top
was above reproach. This issue of Tone at the Top presents suggestions for creating and
promoting an ethical corporate climate and the role internal auditors can play in helping ensure
the environment supports ethical decisions and behavior.
Code of Ethics
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It’s important to note that internal auditors adhere to their own Code of Ethics, which is included
in The IIA’s International Professional Practices Framework (IPPF). The Code of Ethics
mandates that internal auditors behave and practice with:
• Integrity
• Objectivity
• Confidentiality
• Competency
It also delineates rules of conduct under each of the principles. A code of ethics is necessary and
appropriate for the profession of internal auditing, founded as it is on the trust placed in its
objective assurance about governance, risk management, and control.
Ethical Values
According to the Institute for Global Ethics (IGE), five ethical values exist in any human culture,
regardless of age, religious affiliation, gender, or nationality. Those values — which play a role
in all dealings, transactions, relationships, and situations — comprise being:
• Honest and truthful.

• Responsible and accountable.
• Fair and equitable.
• Respectful and mindful.
• Compassionate and caring.
Just imagine how choices might be altered if every organization made a conscious decision to
embrace and foster these five values, and if everyone, individually and collectively, made a
concerted effort to incorporate them in all of their encounters and actions.
The IGE works to “explore the global common ground of values, elevate awareness of ethics,
provide practical tools for making ethical decisions, and encourage moral actions based on those
decisions.” The institute provides case studies — such as the one included here — of a broad
range of dilemmas that can be used to explore how individuals and groups might react when
faced with making a decision that challenges their ethical code.
Ten key ways that board directors, senior management, and compliance and risk management
executives can work together or support each other in helping to assess the current state of an
organization’s tone at the top are presented below. In addition, each can contribute to an overall
program that turns policy into sustainable action:
1. Extent and nature of wrongdoing—Benchmarking against other companies the number

and nature of known incidents of wrongdoing may highlight the extent to which
management’s tone has led to compliance with the entity’s policies. If management
dismisses minor violations as unimportant, for example, it may indicate a culture of
noncompliance that could heighten risks.
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2. Anonymous incident reporting—If the entity has a significantly higher than average
proportion of whistleblower reports made anonymously, it may suggest that employees
are afraid to report wrongdoing or that protection of previous whistleblowers has been
inadequate.
3. Social media reputation assessment—Monitoring comments and criticism in social
media and other online venues can help identify whether views of the entity’s culture
suggest an inadequate ethical tone.
4. Employee surveys—This type of research gathers information on employee engagement
with the enterprise and monitors trends. Questions can help in understanding employees’
perspectives on ethical matters. Scores can be compared between units, benchmarked
against those of similar entities and compared from year to year to monitor changes.
5. Tone of management communications—Reading communications from management
to employees for tone, in addition to content, may provide insight. Notice boards,
broadcast emails, and intranet sites may communicate a tone at the top quite different
from the one on display in the boardroom. Consistency is essential to effective and
lasting communications.
6. Group discussion—It is important to invite audit committee members, risk management,
and compliance executives to share observations and perspectives regarding management
activities, communications, and style with regard to tone at the top. The discussion can
lead to new insights and help build consensus on effectiveness of efforts and whether
remedial action is needed.
7. Facility visits—Moving board, compliance and risk management meetings around to
various locations can help to gain perspective on an entity’s full scope of operations and
enable cooperation with local managers.
8. Exit interviews—Some departing employees, concerned about burning bridges, may be
unwilling to mention ethics and integrity issues that may have contributed to their
departure. Others may welcome the opportunity to discuss their experiences, but may
provide information only if asked. Exit interviews can provide a vehicle for their
comments.
9. Interviews and focus groups—Interviews can be effective in assessing the tone at the
top when they employ a structured approach and when people are comfortable stating
their views openly. When employees are reluctant to talk or when employee surveys
identify potentially significant but nonspecific concerns, focus groups led by an
independent third party may help uncover underlying issues. Anonymous messaging and
voting devices, together with an experienced facilitator, can help draw out information.
10. Customer complaints—Monitoring trends in customer feedback may provide insight
into the entity’s culture. The swift and open handling of grievances may indicate an entity
dedicated to compliance and ethics, while a pattern of a company’s inadequate responses
to customer grievances could suggest characteristics among management that research
has associated with antisocial activities such as fraud.
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CHAPTER 8-Compliance and Ethics in Risk Management
• 1. Ethics is fundamental to the securities laws, and I believe ethical culture objectives
should be central to an effective regulatory compliance program.
• 2. Leading standards have recognized the centrality of ethics and have explicitly
integrated ethics into the elements of effective compliance and enterprise risk
management.
• 3. Organizations are making meaningful changes to embraced this trend and implement
leading practices to make their regulatory compliance and risk management programs
more effective.
The Relationship Between Ethics and Enterprise Management.
Ethics is not important merely because the federal securities laws are grounded on ethical
principles. Good ethics is also good business. Treating customers fairly and honestly helps build
a firm’s reputation and brand, while attracting the best employees and business partners.
Conversely, creating the impression that ethical behavior is not important to a firm is incredibly
damaging to its reputation and business prospects. This, of course, holds true equally for
individuals, and there are plenty of enforcement cases that tell the story of highly talented and
successful individuals who were punished because they violated their ethical and compliance
responsibilities.
Another way of saying this is that a corporate culture that reinforces ethical behavior is a key
component of effectively managing risk across the enterprise. As the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”) put it, in articulating its well-established
standards of Internal Control and Enterprise Risk Management:
An entity’s strategy and objectives and the way they are implemented are based on preferences,
value judgments, and management styles. Management’s integrity and commitment to ethical
values influence these preferences and judgments, which are translated into standards of
behavior. Because an entity’s good reputation is so valuable, the standards of behavior must go
beyond mere compliance with the law. Managers of well-run enterprises increasingly have
accepted the view that ethics pays and ethical behavior is good business. In the wake of the
financial crisis, enterprise risk management is a rapidly evolving discipline that places ethical
values at the heart of good governance, enterprise risk management and compliance. For
example, organizations such as COSO, the Ethics Resource Center (ERC), the Open Compliance
and Ethics Guidelines (OCEG) and the Ethics & Compliance Officer Association (ECOA) have
developed detailed guidance, from the board room to business units and key risk, control and
compliance departments, on implementation of effective enterprise risk management systems.
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Industry and sector specific guidance has flowed from these general standards. As COS notes,
integrity and ethical values are the pillars of an effective compliance culture.
The effectiveness of enterprise risk management cannot rise above the integrity and ethical
values of the people who create, administer, and monitor entity activities. Integrity and ethical
values are essential elements of an entity’s internal environment, affecting the design,
administration, and monitoring of other enterprise risk management components. Nowhere
should this be more true than in financial services firms today, which depend for their existence
on public trust and confidence to a unique degree. Expectations are rising around the world for a
stronger culture of ethical behavior at financial services firms of all types and sizes. As the Basle
Committee on Banking Supervision recently stated:
A demonstrated corporate culture that supports and provides appropriate norms and incentives
for professional and responsible behaviour is an essential foundation of good governance. In this
regard, the board should take the lead in establishing the “tone at the top” and in setting
professional standards and corporate values that promote integrity for itself, senior management
and other employees. As the standards for ethical behavior continue to evolve, your firms’ key
stakeholders – shareholders, clients and employees will increasingly expect you to meet or
exceed those standards.
In my first speech here at the SEC I outlined ten elements I believe make an effective
compliance and ethics program. These elements reflect the compliance, ethics and risk
management standards and guidance noted above. They also reflect the U.S. Federal Sentencing
Guidelines (FSG), which were revised in 2004 to explicitly integrate ethics into the elements of
an effective compliance and ethics program that would be considered as mitigating factors in
determining criminal sentences for corporations. These elements include:
• Governance. This includes the board of directors and senior management setting a tone
at the top and providing compliance and ethics programs with the necessary resources,
independence, standing, and authority to be effective. NEP staff have begun meeting
with directors, CEOs, and senior management teams to better understand risk and assess
the tone at the top that is shaping the culture of compliance, ethics and risk management.
• Culture and values. This includes leadership promoting integrity and ethical values in
decision-making across the organization and requiring accountability.
• Incentives and rewards. This includes incorporating integrity and ethical values into
performance management systems and compensation so the right behaviors are
encouraged and rewarded, while inappropriate behaviors are firmly addressed.
• Risk management. This includes ensuring effective processes to identify, assess, mitigate
and manage compliance and ethics risk across the organization.
• Policies and procedures. This includes establishing, maintaining and updating policies
and procedures that are tailored to your business, your risks, your regulatory
requirements and the conflicts of interest in your business model.
• Communication and training. This includes training that is tailored to your specific
business, risk and regulatory requirements, and which is roles-based so that each critical
partner in the compliance process understands their roles and responsibilities.
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• Monitoring and reporting. This includes monitoring, testing and surveillance functions
that assess the health of the system and report critical issues to management and the
board.
• Escalation, investigation and discipline. This includes ensuring there are processes
where employees can raise concerns confidentially and anonymously, without fear of
retaliation, and that matters are effectively investigated and resolved with fair and
consistent discipline.
• Issues management. This includes ensuring that root cause analysis is done with respect
to issues that are identified so effective remediation can occur in a timely manner.
• An on-going improvement process. This includes ensuring the organization is proactively
keeping pace with developments and leading practices as part of a commitment to a
culture of ongoing improvement.
In addition to the effective practices above, the NEP has also seen firms that have focused on
enhancing regulatory compliance programs through effective integration of ethics principles and
practices. These include renaming the function and titles to incorporate ethics explicitly;
elevating the dialogue with senior management and the board; implementing core values and
business principles to guide ethical decision-making; integrating ethics into key leadership
communications; and introducing surveys and other mechanisms to monitor the health of the
culture and identify emerging risks and issues.
Relationship of Compliance Ethics Vs Enterprise Risk Management.
We can expand the discussion above beyond compliance and ethics to address enterprise risk
management and risk governance more broadly. These same program elements, and ethics
considerations, are equally critical, but the scope of risks expands beyond regulatory risk to also
include market, credit and operational risk, among others. The roles and responsibilities also
expand to include risk management, finance, internal audit and other key risk and control
functions. Whether we’re talking about compliance and ethics or we’re talking about ERM, it is
important to clarify fundamental roles and responsibilities across the organization.
• 1. The business is the first line of defense responsible for taking, managing and
supervising risk effectively and in accordance with the risk appetite and tolerances set by
the board and senior management of the whole organization.
• 2. Key support functions, such as compliance and ethics or risk management, are the
second line of defense. They need to have adequate resources, independence, standing
and authority to implement effective programs and objectively monitor and escalate risk
issues.
• 3. Internal Audit is the third line of defense and is responsible for providing independent
verification and assurance that controls are in place and operating effectively.
• 4. Senior management is responsible for reinforcing the tone at the top, driving a culture
of compliance and ethics and ensuring effective implementation of enterprise risk
management in key business processes, including strategic planning, capital allocation,
performance management and compensation incentives.
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• 5. The board of directors (if one exists in the organization) is responsible for setting the
tone at the top, overseeing management and ensuring risk management, regulatory,
compliance and ethics obligations are met.
While compliance and ethics officers play a key role in supporting effective ERM, risk managers
in areas such as investment risk, market risk, credit risk, operational risk, funding risk and
liquidity risk also play an important role. As noted above, the board, senior management, other
risk and control functions, the business units and internal audit also play a critical role in ERM.
As ERM matures as a discipline, it is critical that these key functions work together in an
integrated coordinated manner that supports more effective ERM. Understanding and managing
the inter-relationship between various risks is a central tenet of effective ERM. One needs only
reflect on the financial crisis to understand how the aggregation and inter-relationship of risks
across various risk categories and market participants created the perfect storm. ERM provides a
more systemic risk analysis framework to proactively identify, assess and manage risk in today’s
market environment.
OCIE Considerations
As I discussed earlier, there is an ethical component to many of the federal securities laws. When
NEP staff examines, for example, an investment adviser’s adherence to its fiduciary obligations,
or a broker-dealer’s effective development, maintenance and testing of its compliance program,
our examiners are looking at how well firms are meeting both the letter and spirit of these
obligations. In addition, our examiners certainly examine specific requirements for ethical
processes, such as business conduct standards.
There is another way in which the ethical environment within a firm matters to us. As you know,
our examination program has greatly increased its emphasis on risk-based examinations. How
we perceive a registrant’s culture of compliance and ethics informs our view of the risks posed
by particular entities. In this regard we have begun meeting boards of directors, CEOs and senior
management to share perspectives on the key risks facing the firm, how those risks are being
managed and the effectiveness of key risk management, compliance, ethics and control
functions. It provides us an opportunity to emphasize the critical importance of compliance,
ethics, risk management and other key control functions, and our expectation that these functions
have sufficient resources, independence, standing and authority to be effective in their roles.
These dialogues also provide us an opportunity to assess the tone at the top that is shaping the
culture of compliance, ethics and risk management in the firm. If we believe that a firm tolerates
a nonchalant attitude toward compliance, ethics and risk management, we will factor that into
our analysis of which registrants to examine, what issues to focus on, and how deep to go in
executing our examinations.
Finally, I would end by sharing with you that we are also embracing these leading practices. We
recently created our own program around compliance and ethics. For the first time, we have a
dedicated team focused on strengthening and monitoring how effectively we adhere to our own
examination standards. We are in the process of finalizing our first Exam Manual, which we set
forth all of our key policies and standards in one manual. We have also established a senior
management committee with oversight responsibility for compliance, ethics and internal control.
On the risk management front, we are also making good progress. We have recruited individuals
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with expertise and established a senior management oversight committee here as well. In short,
we are also committing ourselves to a culture of ongoing improvement and leading practices.
An organization’s ethics policy is the cornerstone of its commitment to being a “good corporate
citizen.” Although ethical conduct is a worthwhile goal for purely altruistic reasons, there are
important statutory, regulatory disclosure, governmental enforcement and prudent business
considerations as well.
More than ever, ethics policies are carefully scrutinized for substance and organizational
commitment. There are a wide variety of interested parties that are relying on representations
regarding an organization’s ethics policy. They need to know the commitment to the ethics
policy is sincere, which includes the careful setting of ethical goals and standards and a
continuing assessment (audit) of same in order to meet constantly changing circumstance.
Lack of an organization’s commitment to its ethics policy reduces the ethics policy to mere
“window dressing,” which can have disastrous consequences. The three motivations for auditing
an organization’s ethics policy set forth here are public disclosures, maintaining internal controls
and mitigating enforcement actions.
Public Disclosures
In the wake of the Enron and other corporate scandals Congress passed the Sarbanes-Oxley Act
of 2002 (SOX) in an effort to combat fraud among publicly traded companies.Section 406 of
SOX directed the U.S. Securities and Exchange Commission (SEC) to require “issuers” (under
the Securities Exchange Act of 1934) to disclose the details of its ethics policies in annual and
other certain reports filed with the SEC. SOX defines “code of ethics” to mean standards
reasonably necessary to promote honest and ethical conduct, accurate and timely disclosure in
periodic reports and compliance with applicable governmental rules and regulations.Compliance
by its very nature involves an audit function or assessment whereby performance is verified
against established standards. SOX requires compliance with government rules and regulations
that are obviously in a constant state of flux.SOX mandated the SEC to implement a reporting
regimen that subjects an organization’s ethics policy to intense public scrutiny. Along with these
reporting requirements goes the potential for civil fines and/or penalties for any false or
misleading statements.It is very likely that an organization’s commitment to its ethics policy will
be challenged. It is imperative that an organization can defend its ethics policy and demonstrate
it is being followed. In order for the organization to defend its ethics policy it must be certain it is
effective and being followed within the organization. The determination that the ethics policy is
“effective” and accurately reported in public filings requires the performance information
obtained through an audit process.
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CHAPTER-9- ETHICAL DILEMMA
An ethical dilemma is a complex situation that often involves an apparent mental conflict
between moral imperatives, in which to obey one would result in transgressing another.
An ethical dilemma is a complex situation that often involves an apparent mental conflict
between moral imperatives, in which to obey one would result in transgressing another.
Sometimes called ethical paradoxes in moral philosophy, ethical dilemmas are often invoked in
an attempt to refute an ethical system or moral code, or to improve it so as to resolve the
paradox. These arguments can be refuted in various ways, for example by showing that the
claimed ethical dilemma is only apparent and does not really exist (thus is not a paradox
logically), or that the solution to the ethical dilemma involves choosing the greater good and
lesser evil (as discussed in value theory), or that the whole framing of the problem omits creative
alternatives (such as peacemaking), or (more recently) that situational ethics or situated ethics
must apply because the case cannot be removed from context and still be understood. Perhaps the
most commonly cited ethical conflict is that between an imperative or injunction not to steal and
one to care for a family that you cannot afford to feed without stolen money. Debates on this
often revolve around the availability of alternate means of income or support such as a social
safety net, charity, etc. The debate is in its starkest form when framed as stealing food. Under an
ethical system in which stealing is always wrong and letting one's family die from starvation is
always wrong, a person in such a situation would be forced to commit one wrong to avoid
committing another, and be in constant conflict with those whose view of the acts varied.
However, there are no legitimate ethical systems in which stealing is more wrong than letting
one's family die. Ethical systems do in fact allow for, and sometimes outline, tradeoffs or
priorities in decisions. Some have suggested that international law requires this kind of
mechanism to resolve whether World Trade Organization (WTO) or Kyoto Protocol takes
precedence in deciding whether a WTO notification is valid. That is, whether nations may use
trade mechanisms to complain about climate change measures. As there are few economies that
can operate smoothly in a chaotic climate, the dilemma would seem to be easy to resolve, but
since fallacious justifications for restricting trade are easily imagined, just as fallacious
justifications for theft are easily imagined at the family level, the seemingly obvious resolution
becomes clouded by the suspicion of an illegitimate motive. Resolving ethical dilemmas is rarely
simple or clearcut and very often involves revisiting similar dilemmas that recur within societies:
According to some philosophers and sociologists, e.g. Karl Marx, it is the different life
experience of people and the different exposure of them and their families in these roles (the rich
constantly robbing the poor, the poor in a position of constant begging and subordination) that
creates social class differences. In other words, ethical dilemmas can become political and
economic factions that engage in long term recurring struggles. See conflict theory and left-wing
politics versus right-wing politics. Design of a voting system, other electoral reform, a criminal
justice system, or other high-stakes adversarial process for dispute resolution will almost always
reflect the deep persistent struggles involved. However, no amount of good intent and hard work
can undo a bad role structure:
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Roles within structures
Where a structural conflict is involved, dilemmas will very often recur. A trivial example is
working with a bad operating system whose error messages do not match the problems the user
perceives. Each such error presents the user with a dilemma: reboot the machine and continue
working at one's employment or spend time trying to reproduce the problem for the benefit of the
developer of the operating system. So role structure sabotages feedback and results in sub-
optimal results since provision has been made to actually reward people for reporting these errors
and problems.
Legal ethics
Legal ethics encompasses an ethical code governing the conduct of persons engaged in the
practice of law and persons more generally in the legal sector.
In the United States
Mr Yoosuf Nazeer who lives in Sri Lanka said that "Legal ethics" in the United States is
generally understood to primarily apply to lawyers, while codes of professional responsibility
also apply in a derivative sense (directly) to non-lawyers who work with lawyers, such as
paralegals or private investigators. In the United States, the practice of law is regulated by the
governments of the individual states and territories. As a whole, federal law does not control
legal ethics.Each state or territory has a code of professional conduct dictating rules of ethics.
These may be adopted by the respective state legislatures and/or judicial systems. The American
Bar Association has promulgated the Model Rules of Professional Conduct which, while
formally only a recommendation by a private body, have been influential in many jurisdictions.
The Model Rules address many topics which are found in state ethics rules, including the client-
lawyer relationship, duties of a lawyer as advocate in adversary proceedings, dealings with
persons other than clients, law firms and associations, public service, advertising, and
maintaining the integrity of the profession. Respect of client confidences, candor toward the
tribunal, truthfulness in statements to others, and professional independence are some of the
defining features of legal ethics.Some U.S. states, including New York, require applicants
seeking to become attorneys to have taken a course in professional responsibility during law
school.[1]
Enforcement
Every state in the United States has a regulatory body (usually called a state bar association) that
polices lawyer conduct. When lawyers are licensed to practice in a state, those lawyers subject
themselves to this authority. Overall responsibility often lies with the highest court in a state
(such as state supreme court). The state bar associations, often in consultation with the court,
adopt a set of rules that set forth the applicable ethical duties. As of 2013, 48 states have adopted
a version of the American Bar Association's model rules. California and Maine are the only
states that have not adopted either—instead these states have written their own rules from
scratch. There is some debate over whether state ethical rules apply to federal prosecutors. The
Department of Justice has held differing opinions through different administrations, with the
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Thornburgh Memo suggesting these rules do not apply, and the Reno Rules asserting that they do
apply.Lawyers who fail to comply with local rules of ethics may be subjected to discipline
ranging from private (non-public) reprimand to disbarment.
India
In India, under the Advocates Act of 1961, the Bar Council of India is responsible for creating
rules for registering advocates, regulation of legal ethics, and for administering disciplinary
action.
Australia
In New South Wales, reforms commencing from July 1 2015 brought a uniform regulatory
system to the legal profession regarding billing arrangements, discipline procedures and
complaints handling processing.[3] An inter jurisdictional Legal Services Council was established
in order to regulate the legal profession and its delivery of legal services.[4] This resulted in the
creation of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015[5] and
the Legal Profession Uniform Conduct Barristers' Rules 2015. [6]
The States and Territories of Australia are regulated through co-regulation, self-regulation and
independent regulation.
• New South Wales is co-regulated by the Law Society of NSW, the NSW Bar Association
and the Legal Services Commissioner.
• Queensland is co-regulated by the Law Society of Queensland, Bar Association of
Queensland and the Legal Services Commissioner.
• Tasmania is self-regulated through the Law Society of Tasmania.
• Victoria is co-regulated in collaboration with the Legal Services Board and
Commissioner, the Law Institute of Victoria and the Victorian Bar Council.
• South Australia is independently regulated by the Legal Practitioners Conduct Board.
• Western Australia is independently regulated through the Legal Practice Board and the
Legal Profession Complaints Committee.
• The Northern Territory is self-regulated by the Law Society of the Northern Territory.
• The Australian Capital Territory is self-regulated by the Law Society of the ACT, the
ACT Bar Association and the Complaints Investigating Committee.
Ethical code
Ethical codes are adopted by organizations to assist members in understanding the difference
between 'right' and 'wrong' and in applying that understanding to their decisions. An ethical code
generally implies documents at three levels: codes of business ethics, codes of conduct for
employees, and codes of professional practice.
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Code of ethics or a code of conduct
Many companies use the phrases 'ethical code' and 'code of conduct' interchangeably but it may
be useful to make a distinction. A code of ethics will start by setting out the values that underpin
the code and will describe a company's obligation to its stakeholders. The code is publicly
available and addressed to anyone with an interest in the company's activities and the way it does
business. It will include details of how the company plans to implement its values and vision, as
well as guidance to staff on ethical standards and how to achieve them. However, a code of
conduct is generally addressed to and intended for employees alone. It usually sets out
restrictions on behavior, and will be far more compliance or rules focused than value or principle
focused. Also this code is good for the Non Governmental Organization.
Code of practice (professional ethics
A code of practice is adopted by a profession or by a governmental or non-governmental

organization to regulate that profession. A code of practice may be styled as a code of
professional responsibility, which will discuss difficult issues, difficult decisions that will often
need to be made, and provide a clear account of what behavior is considered "ethical" or
"correct" or "right" in the circumstances. In a membership context, failure to comply with a code
of practice can result in expulsion from the professional organization. In its 2007 International
Good Practice Guidance, Defining and Developing an Effective Code of Conduct for
Organizations, the International Federation of Accountants[1] provided the following working
definition: "Principles, values, standards, or rules of behavior that guide the decisions,
procedures and systems of an organization in a way that (a) contributes to the welfare of its key
stakeholders, and (b) respects the rights of all constituents affected by its operations." Listed
below are a few examples of professional codes from the Society of Professional Journalists
(SPJ), and Public Relations Society of America (PRSA).
• Minimize Harm (Honesty) - Public Relations Society of America Code of Ethics – It is

possible to get the truth out without having to put someone’s life and reputation in
jeopardy.
• Proper Conduct (Patience) - Public Relations Society of America Code of Ethics – Being
able to work under individuals and get the job done despite differences will help you
move forward in the long run with your career. Being patient and being able to listen and
make the right decisions make a better PR.
• Enhancing Professional Relationships (kindness) - public relations society of America
Code of Ethics – being able to get along with your clients, gain their trust and them being
able to confide in you and get the best possible results from your services always starts
with kindness. Being able to get along with the individual is beneficial to both yourself
and the client.
• Show Loyalty (Faithfulness) - Public Relations Society of America Code of Ethics - be
faithful to those we represent, while honoring our obligation to serve the public interest.
• Act Fairly (Fairness) - Public Relations Society of America Code of Ethics - deal fairly
with clients, employers, competitors, peers, vendors, the media, and the general public.
Respect all opinions and support the right of free expression.
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• Act Independently (Courage) - Society of Professional Journalists Code of Ethics – being
independent and taking on your own ventures and missions to get the story takes courage.
This means that you take risks to get the job done.
• Minimize Harm (Honesty) - Society of Professional Journalists Code of Ethics - Balance
the public’s need for information against potential harm or discomfort. Pursuit of the
news is not a license for arrogance or undue intrusiveness. Balance a suspect’s right to a
fair trial with the public’s right to know. Consider the implications of identifying criminal
suspects before they face legal charges.
• Act Independently (Independency) - Society of Professional Journalist Code of Ethics -
Avoid conflicts of interest, real or perceived. Disclose unavoidable conflicts.
Related disciplines
Because political economy is not a unified discipline, there are studies using the term that
overlap in subject matter, but have radically different perspectives:
• Sociology studies the effects of persons' involvement in society as members of groups,

and how that changes their ability to function. Many sociologists start from a perspective
of production-determining relation from Karl Marx. Marx's theories on the subject of
political economy are contained in his book Das Kapital.
• Anthropology studies political economy by investigating regimes of political and
economic value that condition tacit aspects of sociocultural practices (e.g., the pejorative
use of pseudo-Spanish expressions in the US entertainment media) by means of broader
historical, political, and sociological processes. Analyses of structural features of
transnational processes focus on the interactions between the world capitalist system and
local cultures.
• Archaeology attempts to reconstruct past political economies by examining the material
evidence for administrative strategies to control and mobilize resources.[41] This evidence
may include architecture, animal remains, evidence for craft workshops, evidence for
feasting and ritual, evidence for the import or export of prestige goods, or evidence for
food storage.
• Psychology is the fulcrum on which political economy exerts its force in studying
decision making (not only in prices), but as the field of study whose assumptions model
political economy.
• History documents change, often using it to argue political economy; some historical
works take political economy as the narrative's frame.
• Human geography at times draws on theories of politico-economic processes. Typically
under the moniker of political ecology, political ecology has been used by geographers to
understand human systems and their relationship with the environment, broadly
defined.[42]
• Ecology deals with political economy, because human activity has the greatest effect
upon the environment, its central concern being the environment's suitability for human
activity. The ecological effects of economic activity spur research upon changing market
economy incentives.
• Cultural studies examines social class, production, labor, race, gender, and sex.
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• Communications examines the institutional aspects of media and telecommuncation
systems. As the area of study focusing on aspects of human communication, it pays
particular attention to the relationships between owners, labor, consumers, advertisers,
structures of production, and the state, and the power relationships embedded in these
relationships.
Legal culture
Legal cultures are described as being temporary outcomes of interactions and occur pursuant to
a challenge and response paradigm. Analyses of core legal paradigms shape the characteristics of
individual and distinctive legal cultures. “Comparative legal cultures are examined by a field of
scholarship, which is situated at the line bordering comparative law and historical
jurisprudence.” Legal cultures can be examined by reference to fundamentally different legal
systems. However, such cultures can also be differentiated between systems with a shared
history and basis which are now otherwise influenced by factors that encourage cultural change.
Students learn about legal culture in order to better understand how the law works in society.
This can be seen as the study of Law and Society. These studies are available at schools such as
Drake University in Des Moines, Iowa.
Western legal culture vs non-Western legal culture
Western legal culture is unified in the systematic reliance on legal constructs. Such constructs
include corporations, contracts, estates, rights and powers. These concepts are not only
nonexistent in primitive or traditional legal systems but they can also be predominately incapable
of expression in those language systems which form the basis of such legal cultures. As a general
proposition, the concept of legal culture depends on language and symbols and any attempt to
analyze non-western legal systems in terms of categories of modern western law can result in
distortion attributable to differences in language.[2] So while legal constructs are unique to
classical Roman, modern civil and common law cultures, legal concepts or primitive and archaic
law get their meaning from sensed experience based on facts as opposed to theory or abstract.
Legal culture therefore in the former group is influenced by academics, learned members of the
profession and historically, philosophers. The latter group’s culture is harnessed by beliefs,
values and religion at a foundational level.Traditional law in Africa is based on natural justice
and lacks abstract concepts. This is characteristic of cultures that have an absence of written
language which is necessary to elaborate concepts into theory.[3] The doctrines of traditional
African law are based on social considerations whereby parties to disputes seek not declarations
of right or wrong but rather they seek restitution of social relationships. The trier of fact and law
adjudicates between closely related people from communities as opposed to strangers in
commerce. Judgments stress the importance of living together in generous, loving kindness,
mutual helpfulness and reciprocity. Evidence suggests that ‘African law demonstrates that all
men, because they live in society, have some theory of rules of justice which they believe arise
from reason itself; [and Gluckman’s evidence] suggests that Africans may well have formulated,
in embryonic form at least, a theory of natural justice coming from human kindness itself.’ The
Islamic legal system exemplifies law as part of a larger culture where the concepts of knowledge,
right and human nature play a central role. A case study by Lawrence Rosen explains the
anthropological, procedural and judicial discretion aspects of bringing a case to court in Sefrou,
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Morocco.[4] The case study makes explicit those fundamentals in Islamic society that shape
Islamic legal culture and differentiate this from western legal cultures.Rigid procedural rules and
strict court room decorum or etiquette which is entrenched in western legal cultures clears the
way for a more natural process of dispute resolution.[4] In Morocco, close attention is paid to
social origins, connections and identity where these concepts influence a qadi’s (judge) judicial
interrogation and discretion. While the systems of law found in the western world consist of
conceptualisation and implementation that mimic the extrajudicial world only slightly, in the
Islamic courts of Morocco, the culture of law being propounded reflects the overall culture of its
people.[4] This is attributable to the goals of law in Islamic society, which is not to hold state or
religious power as supreme or to develop an exacting body of legal doctrine, but to restore
relationships and then facilitate the resolution of disputes independently of rigid precedent.
Western comparisons
The traditional focus between common law culture and civil law culture has been highlighted by
court room procedure, whereby the former nurtures an adversarial environment and the latter an
inquisitorial one. Indeed no system of court procedure can ever be purely adversarial or purely
inquisitorial.In fact France, which subscribes to a civil legal system, historically gave the judge a
passive role and left the parties to engage in an accusatorial manner.[5] Nonetheless the common
law culture predominately consists of oral arguments where legal representors steer the case in
search of justice and reinforcement of rights.The use of a Jury in the common law as a judge of
fact is unique when compared to civil law systems. The Jury are triers of fact in both civil and
criminal cases and this reflects a particular culture of law; namely the direct involvement of
society in the legal framework. In France a judge’s role as trier of law and fact is merely as an
administrator without creating binding legal principle. Hence the civil law culture is more
rational, orderly, authoritative and paternalistic.Common law has a culture of judicial
inventiveness and even flexibility. Enunciation of principle is not forever paramount but indeed a
continuing flow of cases and statutes add to the ebb and flow of the law, whereby ‘case law
represented the modern man’s realisation of his own limitations.’ [6] Further differences include
where a civilian lawyer speaks in terms of the law of nature while the common lawyer speaks to
reason. It follows that the culture of these legal systems has been moulded by perceptions of
justice and the means available to attain it.
Common law comparisons
Legal culture can differ between countries despite their conformity to a similar if not identical
legal system. Both the United States and England possess common law systems of law and yet
each country embodies a distinctive legal culture. This has been attributable by contrasting both
the institutions within the legal system and characteristics of the profession (judges, barristers
and solicitors). According to Posner during 1996 there was about 15 times more American
judges than English judges but only about 10 times more American lawyers than English
lawyers. Posner suggests that English judges have more prestige than American judges and a
related point is that the ratio of judges to lawyers is lower in England than the United States.[7]
The consequence of this is that the English common law system, as opposed to the American
legal system, displays a legal culture of greater prestige and elitism not only in the judiciary but
also those who are candidates for the judiciary.In England, and other Commonwealth
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jurisdictions, barristers are apt candidates for judicial nomination. The reasons for this stem from
the common law systems which have a culture to encourage, harness and capture high quality
intellect and experience within a concentrated portion of non-judicial officers of the legal
profession known as barristers (which includes and accounts for their subsequent appointments
to higher ranking queens counsel and senior counsel).Barristers are engaged upon a solicitor's
brief instead of direct engagement with the client. This insulation avoids lay persons being taken
advantage of by unscrupulous lawyers which is evidently "a big problem in the United States,
where incompetent lawyers, and known to be such both by judges and by other lawyers, often
wow naïve clients." The cost of pursuing litigation influences the culture of each legal system in
terms of what society perceives as the net benefit gained from the court and the profession. To
litigate similar cases in England and the United States would cost approximately the same;
however English courts are not as generous as their American counterparts in awarding damages,
especially punitive damages.[7] Therefore the net expected benefit of litigation being greater in
the United States encourages a legal culture that is more litigious in nature than England.
National character is inherent in the legal institutions of the courts and parliament, their
formation and their output in terms of legislation or judgments. For example it has been said that
many factors have contributed to the litigiousness of the United States, including: the rights
afforded to the people, a written constitution, immigrant origins of its population, racial and
ethnic heterogeneity and the wealth and spoils of its population.[7] To this end national character
and history influence current legal culture.
Chinese legal culture
The legal culture of China, as well as its social and economic culture, continues to undergo
dramatic change since the People’s Republic of China's reforms of 1978. Transformation has
occurred by legal modernisation whereby a rule of law has been suggested to replace the rule of
man. The latter is a characteristic of the traditional rural Chinese society where unwritten rules,
personal relationships and trust govern citizens' legal relationships; analogous to gemeinschaft.
In the modern society of China, institutional, customary and legal reform (a rule of law that
embodies universal rules uniformly enforced by a centralised and bureaucratic state) is necessary
to govern legal relations; analogous to gesellschaft.Direct transplants of western legal systems or
culture may not provide an adequate rule of law where the life of ordinary Chinese may be
marginalised in favour of legal elite who use legal instruments for self-promotion. Furthermore,
implanting western legal norms disregards the local culture and relations; thus potentially
destroying significant cultural bonds and relationships in the rural community. The traditional
rural Chinese legal culture which is premised on personal and informal relations faces erosion
unless legal pluralism is promoted. A top down approach in analysing the legal culture of China
suggests that both under Deng Xiaoping and Jiang Zemin, China is "a country under rule by law,
not rule of law." Evidence comes from post Mao-China, where law is seen as necessary for
institutionalising and generalising ad hoc policies for economic reform and as maintaining party
leadership. Further problems with the Chinese legal culture include a piecemeal approach to law
making with an imbalance between law and policy; denials of private law; neglect towards
human rights and individual liberties; and poor enforcement of laws. According to Chen, the
consensus in China among scholars is that the lack of democracy and rule of law are
interdependent concepts whereby "the rule of law is legitimate only if it is the product of
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democratic government." What is evident with the China experience is that legal culture is
susceptible to change in pursuance to socio-economic and political forces. While such a change
could be beneficial for portions of the society and international relations, traditional and
established cultural methods face extinction.
Provisions of the Indian Constitution that are applicable to the business are summarized
below:
The Constitution is a comprehensive one consisting of various provisions that affect every
citizen of India.
• Certain provisions of the Indian Constitution are applicable to the business which ware
summarised under the following headings:
I. Preamble of Constitution and Business:

• The Indian Constitution starts with a preamble, which outlines the main objectives of the
Constitution. It may be noted that though the preamble is not a part of the Constitution
and is not justifiable, yet its significance cannot be denied.
• It serves as a key to the Constitution. Whenever the judiciary is in doubt about any
particular provision of the Constitution it refers to the preamble to find out the real
intentions of the framers of the Constitution. The preamble reads:
• “We, The People of India, have solemnly resolved to constitute India into a Sovereign,
Socialist, and Secular Democratic Republic and to secure to all its citizens:
• Justice, Social, economic and political; Liberty of thought, expression, belief, faith and
worship;
• Equality of status and of opportunity; and to promote among them all Fraternity assuring
the dignity of the individual and the unity and integrity of the nation;
• In our Constituent Assembly this Twenty-Sixth day of November 1949, we do hereby
Adopt, Enact and Give to ourselves this Constitution.”
• A perusal of the preamble shows that it intends India to be a Sovereign, Socialist,
Secular, and Democratic Republic. It means that like other states India is a sovereign
state and is free to conduct its internal as well as external relations as it deems desirable.
• The terms ‘Socialist’ and ‘Secular’ were added by the Forty Second Amendment and
assert that the government must adopt socialistic policies to ensure decent life for all
Indian citizens. The inclusion of word ‘Secular’ likewise emphasises that the state must
abstain from giving preferential treatment to any religion.
• Democratic government implies the Government is to be carried on by the elected
representatives of the people, and the Government stays in office as long as it enjoys the
confidence of their elected representatives. Republic implies that the highest executive
authority in India shall vest in a person directly elected by the people. In other words,
there is no place for monarchical or feudal system in India.
Economic Importance:
• The preamble of the Indian Constitution guarantees to its every citizen:
• (i) Economic Justice:
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• The Indian Constitution laid down social, economic and political justice to every citizen
in the country. It is, therefore, the duly of the business organisations to provide social,
economic and political justice to every citizen.
• (ii) Liberty of Thought, Expression, Belief, Faith and Worship:
• This has been accepted in our constitution that every citizen has liberty of thought,
expression, belief, faith and worship. According to this concept every business,
organisation should have liberty of thought, expression etc., with everyone.
• (iii) Equality of Status and of Opportunity:
• According to this concept every businessman should believe and give equal opportunity
to others. This can be achieved through eradication of poverty. This does not mean
winning gap between the poor and rich.
•
II. Fundamental Rights and Business:

• The Indian Constitution incorporates a list of Fundamental Rights and guarantees their
inviolability by executive and legislative authorities. Part III (Articles 12-35) deals with
the Fundamental Rights granted to individuals. These rights were finalised by the
committee of the Constituent Assembly headed by Sardar Vallabhbhai Patel.
• The fundamental rights are superior to ordinary laws; they can be altered only through
constitutional amendments. Originally, the fundamental Rights were seven but in 1978,
through the 44th amendment of the constitution, the right to property was removed from
the list of fundamental rights.
• The six types of fundamental rights of the constitution are as follows:
• (1) Right to Equality (Articles 14 to 18):
• Articles 14 to 18 deal with right to equality. The Constitution clearly provides that the
state shall not deny to any person equality before law or the equal protection of law
within the territory of India. It cannot discriminate against any citizen on grounds of
religion, race, caste, sex, and place of birth or any of them.
• It means that every citizen has access to shops, public restaurants, hotels, places of public
entertainment etc., and is free to use wells, tanks, roads and places of public resort
maintained at state funds.
• In the employment aspects, the appointment to offices under the state also equal
opportunity shall be provided to all the citizens, and no person shall be denied
employment on grounds of religion, race, caste, sex, descent, and place of birth, residence
or any of them.
• Again, to make the right to equality a reality; untouchability has been abolished and its
practice in any form has been made an offence punishable in accordance with law.
According to this articles the business should provide equality before law, social equality
and economic equality.
• (2) Right to Freedom (Articles 19 to 22):
• Articles 19 to 22 enumerates certain positive rights conferred by the Constitution in order
to promote the ideal of liberty promised in the preamble. Six fundamental rights in the
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nature of ‘freedom’ are guaranteed to the citizens in the article (originally there were
seven, but now right to property is deleted).
• The six Freedoms are as follows:
• (i) Freedom of speech and expression.
• (ii) Freedom of peaceful assembly without arms.
• (iii) Freedom of association.
• (iv) Freedom of movement throughout the territory of India.
• (v) Freedom to reside or settle any part of the territory.
• (vi) Freedom to practise any profession, or to carry on any occupation, trade or business.
• The right to freedom is also applied equally in business. The businessmen can express
their problems freely to the government and can get a solution to it. Similarly, every
citizen has the right to choose any business or profession and can form unions, and
conduct meetings.
• (3) Right against Exploitation (Articles 23 to 24):
• Articles 23 to 24 deal with the right against exploitation and seek to prevent exploitation
of weaker sections of society by unscrupulous persons as well as the state. Article 23
prohibits traffic in human beings, involuntary work without payment and other forms of
forced labour. Article 24 prohibits the employment of children below 14 years of age in
factories and hazardous occupations, employing women employees in night shifts in
factories etc.
• Economic Importance:
• The economic importance of right against exploitation is
• (i) The government takes necessary steps to remove bonded labour.
• (ii) The Factories Act help to prevent exploitation of women and children employees.
• (iii) The owner of the factories are guided to make provision for safety and welfare of the
workers ad they compulsorily appoint a labour welfare officer, it in the factory 500 01
more workers are employed.
• (4) Right to Freedom of Religion (Articles 25 to 28):
• Articles 25 to 28 deal with the right to freedom of religion. Subject to public order,
morality, health etc., the citizens enjoy freedom of conscience and are free to profess,
practise and propagate any religion.
• However, the state can regulate or restrict the economic, financial, political or other
secular activities associated with religious practices. No citizen can be compelled to pay
any taxes the proceeds of which are to be spent for the promotion or maintenance of any
particular religion or religious domination.
• The Economic importance of the right to freedom of religion is
• (i) The government cannot spend tax money for the development of any religion.
• (ii) Nobody can be compelled to pay tax for the welfare of any specific religion.
• (iii) No one shall be forced to transfer of property or any agreement of a business nature
in the name of a particular religion.
• (5) Cultural and Educational Rights (Articles 29 to 30):
• Article 29 stipulates that the State shall not impose upon it any culture other than the
community s own culture. A minority community has the right to preserve its culture and
religious interests. Article 30 confers upon a minority community the right to establish
and administer educational institutions of its choice.
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• A notable feature of the educational and cultural right is that unlike other fundamental
rights, it is not subject to any restriction, except that the State can make special provisions
for the advancement of any socially and educationally backward classes of citizens.
• The economic importances of cultural and educational rights are:
• (i) The state does not discriminate to give economic assistance to the minority
institutions.
• (ii) The aided institution cannot refuse admission to any of the citizens on the ground that
he belongs to a particular caste, religion, language or region.
• (6) Right to Constitutional Remedies (Article 32):
• This right has been described by Dr. Ambedkar as the ‘heart and soul of the Constitution.
In tact the mere declaration of fundamental rights is useless unless effective remedies are
available for their enforcement. This has been ensured under Article 32 which grants the
right to move the Supreme Court by appropriate proceedings for the enforcement of the
rights conferred by the Constitution.
• Clause (2) of Article 32 confers power on the supreme court to issue appropriate
directions or orders to writs, including writs in the name of habeas corpus, mandamas,
prohibition, quo-warrant and certiorari for the enforcement of any of the rights conferred
by Part III of the constitution.
• Thus, the fundamental rights enumerated in the constitution guarantee a number of
economic and social lights to the citizens. At the same time the state has the power to
impose reasonable restrictions on such rights in the interest of the people.
• III. Directive Principles of State Policy:
• The Directive Principles of State Policy which have been enshrined in Part IV of the
Constitution aim at realizing the high ideals of justice, liberty, equality and fraternity as
outlined in the preamble to the constitution. There are ideas which are to inspire the state
to work for the common good of the people and establish social and economic democracy
in the country.
• The phrase ‘Directive Principles of State Policy’ means the principles which the states
should keep in mind while framing the laws and formulating policy. Articles 39 to 51
contain the various directive principles. These principles are amalgamation of socialistic,
Gandhian and liberal principles.
• The economic importance of Directive Principles of State Policy is:
• (i) To provide adequate means of livelihood for all the citizens.
• (ii) To secure equal pay for work to both men and women.
• (iii) To protect the workers, especially children.
• (iv) To regulate the economic system of the country that it does not lead to concentration
of wealth and means of production.
• (v) To make provision for securing right to work, to education and to public assistance in
cases of unemployment, old age, sickness and similar other cases.
• (vi) To ensure a decent standard of living and facilities of leisure for all workers.
• The main objective of the above noted directive principles is to enable the individual to
lead a good and satisfying life. All the provisions of directive principles of state policy
guide the government policies towards the business and other economic and social
activities.
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• The government also so far enacted a number of acts and laws, policies and rules keeping
in view the directive principles, which are directly related with the business operations.
The various Acts like FERA, Factories Act. MRTP Act, Minimum Wages Act, Industrial
(Development and Regulation) Act, Industrial policy, etc., are based on the Directive
Principles of the Constitution.
• The government, through these acts and regulations, protects the interests of working
men, women and children, prevents concentration of economic power, and promotes and
protects the interest of small and cottage industries.
• IV. Constitutional Provisions Regarding Trade, Commerce and Intercourse within
the Territory of India:
• Articles 301 to 307 of Constitution of India deals with the constitutional provisions
regarding Trade and Commerce. The framers of the Indian Constitution were fully
conscious of the importance of maintaining the economic unity of the Union of India.
• Free movement and exchange of goods throughout the territory of India was essential for
the Economic Unity of the country which alone could sustain the progress of the country.
• Prior to the integration of India and enforcement the new constitution there were in
existence a large number of Indian states which in exercise of their sovereign powers, had
created customs barriers between themselves and the rest of India, thus hindering at
several points which constituted the boundaries of those Indian states, the free flow of
commerce.
• Thus the main object of Article 301 was obviously to encouraging the free-flow of stream
of trade and commerce throughout the territory of India. The word ‘trade’ means ‘buying’
or ‘selling’ of goods while the term ‘commerce includes all forms of transportation such
as by land, air or water.
• The term ‘intercourse’ means movement of goods from one place to another. Thus, the
words ‘trade commerce and intercourse’ covers all kinds of activities which are likely to
come under the nature of commerce.
• Article 302 of Indian Constitution explains the power of parliament to impose restrictions
on trade, commerce and intercourse. The Parliament may by law impose it. Such
restrictions on the freedom of trade, commerce or intercourse between one state and
another or within any part of the territory of India, as may be required in the public
interest.
• Article 303 deals with the restrictions on the legislative powers of the Union and of the
states with regard to trade and commerce. It provides that parliament shall not have
power to make any law giving any preference to any one state over another by virtue of
any entry relating to trade and commerce in any one of the list in the VIIth Schedule.
• But under Clause (2) of this article the parliament may however, discriminate among
states. If it is declared by a law that it is necessary to do so for the purpose of dealing
with the situation arising from scarcity of goods in any part of the Territory of India. The
question whether there is a scarcity of goods in any part of India is for the parliament to
decide.
• Article 304 explains State’s power to regulate trade and commerce. The details, (a)
impose on goods imported from other states (or the Union Territories) any tax to which
similar goods manufactured or produced in that state are subject. So, however as not to
discriminate between goods so imported and goods so manufactured or produced; and (b)
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impose such reasonable restrictions on the freedom of trade, commerce or Intercourse
with or within that state as my be required in the public interest.
• Article 305 saves existing laws and laws providing for state monopolies insofar as the
president may by order otherwise direct. Article 307 empowers parliament to appoint
such authority as it considers appropriate for carrying out purposes of Articles 301, 302,
303 and 304. It can confer on such authorities such powers and duties as it thinks
necessary.
2.2 Political and Legal Factors That Impact International Trade
Why should businesses care about the different political and legal systems around the world? To
begin with, despite the globalization of business, firms must abide by the local rules and
regulations of the countries in which they operate. In the case study in Chapter 1 "Introduction",
you discovered how US-based Google had to deal with the Chinese government’s restrictions on
the freedom of speech in order to do business in China. China’s different set of political and legal
guidelines made Google choose to discontinue its mainland Chinese version of its site and direct
mainland Chinese users to a Hong Kong version.
Until recently, governments were able to directly enforce the rules and regulations based on their
political and legal philosophies. The Internet has started to change this, as sellers and buyers
have easier access to each other. Nevertheless, countries still have the ability to regulate or
strong-arm companies into abiding by their rules and regulations. As a result, global businesses
monitor and evaluate the political and legal climate in countries in which they currently operate
or hope to operate in the future.
Before we can evaluate the impact on business, let’s first look at the different political and legal
systems.
What Are the Different Political Systems?
The study of political systems is extensive and complex. A political system is basically the
system of politics and government in a country. It governs a complete set of rules, regulations,
institutions, and attitudes. A main differentiator of political systems is each system’s philosophy
on the rights of the individual and the group as well as the role of government. Each political
system’s philosophy impacts the policies that govern the local economy and business
environment.
There are more than thirteen major types of government, each of which consists of multiple
variations. Let’s focus on the overarching modern political philosophies. At one end of the
extremes of political philosophies, or ideologies, is anarchism, which contends that individuals
should control political activities and public government is both unnecessary and unwanted. At
the other extreme is totalitarianism, which contends that every aspect of an individual’s life
should be controlled and dictated by a strong central government. In reality, neither extreme
exists in its purest form. Instead, most countries have a combination of both, the balance of
which is often a reflection of the country’s history, culture, and religion. This combination is
called pluralism, which asserts that both public and private groups are important in a well-
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functioning political system. Although most countries are pluralistic politically, they may lean
more to one extreme than the other.
In some countries, the government controls more aspects of daily life than in others. While the
common usage treats totalitarian and authoritarian as synonyms, there is a distinct difference. For
the purpose of this discussion, the main relevant difference is in ideology. Authoritarian
governments centralize all control in the hands of one strong leader or a small group of leaders,
who have full authority. These leaders are not democratically elected and are not politically,
economically, or socially accountable to the people in the country. Totalitarianism, a more
extreme form of authoritarianism, occurs when an authoritarian leadership is motivated by a
distinct ideology, such as communism. In totalitarianism, the ideology influences or controls the
people, not just a person or party. Authoritarian leaders tend not to have a guiding philosophy
and use more fear and corruption to maintain control.
Democracy is the most common form of government around the world today. Democratic
governments derive their power from the people of the country, either by direct referendum
(called a direct democracy) or by means of elected representatives of the people (a representative
democracy). Democracy has a number of variations, both in theory and practice, some of which
provide better representation and more freedoms for their citizens than others.
What businesses must focus on is how a country’s political system impacts the economy as well
as the particular firm and industry. Firms need to assess the balance to determine how local
policies, rules, and regulations will affect their business. Depending on how long a company
expects to operate in a country and how easy it is for it to enter and exit, a firm may also assess
the country’s political risk and stability. A company may ask several questions regarding a
prospective country’s government to assess possible risks:
1. How stable is the government?

2. Is it a democracy or a dictatorship?
3. If a new party comes into power, will the rules of business change dramatically?
4. Is power concentrated in the hands of a few, or is it clearly outlined in a constitution or
similar national legal document?
5. How involved is the government in the private sector?
6. Is there a well-established legal environment both to enforce policies and rules as well as
to challenge them?
7. How transparent is the government’s political, legal, and economic decision-making
process?
While any country can, in theory, pose a risk in all of these factors, some countries offer a more
stable business environment than others. In fact, political stability is a key part of government
efforts to attract foreign investment to their country. Businesses need to assess if a country
believes in free markets, government control, or heavy intervention (often to the benefit of a few)
in industry. The country’s view on capitalism is also a factor for business consideration. In the
broadest sense, capitalism is an economic system in which the means of production are owned
and controlled privately. In contrast, a planned economy is one in which the government or state
directs and controls the economy, including the means and decision making for production.
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Historically, democratic governments have supported capitalism and authoritarian regimes have
tended to utilize a state-controlled approach to managing the economy.
As you might expect, established democracies, such as those found in the United States, Canada,
Western Europe, Japan, and Australia, offer a high level of political stability. While many
countries in Asia and Latin America also are functioning democracies, their stage of
development impacts the stability of their economic and trade policy, which can fluctuate with
government changes. provides more details about developed and developing countries and
emerging markets.
Within reason, in democracies, businesses understand that most rules survive changes in
government. Any changes are usually a reflection of a changing economic environment, like the
world economic crisis of 2008, and not a change in the government players.
This contrasts with more authoritarian governments, where democracy is either not in effect or
simply a token process. China is one of the more visible examples, with its strong government
and limited individual rights. However, in the past two decades, China has pursued a new
balance of how much the state plans and manages the national economy. While the government
still remains the dominant force by controlling more than a third of the economy, more private
businesses have emerged. China has successfully combined state intervention with private
investment to develop a robust, market-driven economy—all within a communist form of
government. This system is commonly referred to as “a socialist market economy with Chinese
characteristics.” The Chinese are eager to portray their version of combining an authoritarian
form of government with a market-oriented economy as a better alternative model for fledging
economies, such as those in Africa. This new combination has also posed more questions for
businesses that are encountering new issues—such as privacy, individual rights, and intellectual
rights protections—as they try to do business with China, now the second-largest economy in the
world behind the United States. The Chinese model of an authoritarian government and a
market-oriented economy has, at times, tilted favor toward companies, usually Chinese, who
understand how to navigate the nuances of this new system. Chinese government control on the
Internet, for example, has helped propel homegrown, Baidu, a Chinese search engine, which
earns more than 73 percent of the Chinese search-engine revenues. Baidu self-censors and, as a
result, has seen its revenues soar after Google limited its operations in the country.Rolfe
Winkler, “Internet Plus China Equals Screaming Baidu,” Wall Street Journal, November 9,
2010, accessed December 21, 2010, It might seem straightforward to assume that businesses
prefer to operate only in democratic, capitalist countries where there is little or no government
involvement or intervention. However, history demonstrates that, for some industries, global
firms have chosen to do business with countries whose governments control that industry.
Businesses in industries, such as commodities and oil, have found more authoritarian
governments to be predictable partners for long-term access and investment for these
commodities. The complexity of trade in these situations increases, as throughout history,
governments have come to the aid and protection of their nation’s largest business interests in
markets around the world. The history of the oil industry shows how various governments have,
on occasion, protected their national companies’ access to oil through political force. In current
times, the Chinese government has been using a combination of government loans and
investment in Africa to obtain access for Chinese companies to utilize local resources and
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commodities. Many business analysts mention these issues in discussions of global business
ethics and the role and responsibility of companies in different political environments.
What Are the Different Legal Systems?
Let’s focus briefly on how the political and economic ideologies that define countries impact
their legal systems. In essence, there are three main kinds of legal systems—common law, civil
law, and religious or theocratic law. Most countries actually have a combination of these
systems, creating hybrid legal systems. Civil law is based on a detailed set of laws that constitute
a code and focus on how the law is applied to the facts. It’s the most widespread legal system in
the world. Common law is based on traditions and precedence. In common law systems, judges
interpret the law and judicial rulings can set precedent. Religious law is also known as theocratic
law and is based on religious guidelines. The most commonly known example of religious law is
Islamic law, also known as Sharia. Islamic law governs a number of Islamic nations and
communities around the world and is the most widely accepted religious law system. Two
additional religious law systems are the Jewish Halacha and the Christian Canon system, neither
of which is practiced at the national level in a country. The Christian Canon system is observed
in the Vatican City.
The most direct impact on business can be observed in Islamic law—which is a moral, rather
than a commercial, legal system. Sharia has clear guidelines for aspects of life. For example, in
Islamic law, business is directly impacted by the concept of interest. According to Islamic law,
banks cannot charge or benefit from interest. This provision has generated an entire set of
financial products and strategies to simulate interest—or a gain—for an Islamic bank, while not
technically being classified as interest. Some banks will charge a large up-front fee. Many are
permitted to engage in sale-buyback or leaseback of an asset. For example, if a company wants
to borrow money from an Islamic bank, it would sell its assets or product to the bank for a fixed
price. At the same time, an agreement would be signed for the bank to sell back the assets to the
company at a later date and at a higher price. The difference between the sale and buyback price
functions as the interest. In the Persian Gulf region alone, there are twenty-two Sharia-compliant,
Islamic banks, which in 2008 had approximately $300 billion in assets.Tala Malik, “Gulf Islamic
Bank Assets to Hit $300bn,” Arabian Business, February 20, 2008, accessed December 21, 2010,
Clearly, many global businesses and investment banks are finding creative ways to do business
with these Islamic banks so that they can comply with Islamic law while earning a profit.
Government—Business Trade Relations: The Impact of Political and Legal Factors on

International Trade
How do political and legal realities impact international trade, and what do businesses need to
think about as they develop their global strategy? Governments have long intervened in
international trade through a variety of mechanisms. First, let’s briefly discuss some of the
reasons behind these interventions.
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Why Do Governments Intervene in Trade?
Governments intervene in trade for a combination of political, economic, social, and cultural
reasons. Politically, a country’s government may seek to protect jobs or specific industries. Some
industries may be considered essential for national security purposes, such as defense,
telecommunications, and infrastructure—for example, a government may be concerned about
who owns the ports within its country. National security issues can impact both the import and
exports of a country, as some governments may not want advanced technological information to
be sold to unfriendly foreign interests. Some governments use trade as a retaliatory measure if
another country is politically or economically unfair. On the other hand, governments may
influence trade to reward a country for political support on global matters. Governments are also
motivated by economic factors to intervene in trade. They may want to protect young industries
or to preserve access to local consumer markets for domestic firms.Cultural and social factors
might also impact a government’s intervention in trade. For example, some countries’
governments have tried to limit the influence of American culture on local markets by limiting or
denying the entry of American companies operating in the media, food, and music industries.
How Do Governments Intervene in Trade?
While the past century has seen a major shift toward free trade, many governments continue to
intervene in trade. Governments have several key policy areas that can be used to create rules
and regulations to control and manage trade.
• Tariffs. Tariffs are taxes imposed on imports. Two kinds of tariffs exist—specific tariffs,
which are levied as a fixed charge, and ad valorem tariffs, which are calculated as a
percentage of the value. Many governments still charge ad valorem tariffs as a way to
regulate imports and raise revenues for their coffers.
• Subsidies. A subsidy is a form of government payment to a producer. Types of subsidies
include tax breaks or low-interest loans; both of which are common. Subsidies can also
be cash grants and government-equity participation, which are less common because they
require a direct use of government resources.
• Import quotas and VER. Import quotas and voluntary export restraints (VER) are two
strategies to limit the amount of imports into a country. The importing government
directs import quotas, while VER are imposed at the discretion of the exporting nation in
conjunction with the importing one.
• Currency controls. Governments may limit the convertibility of one currency (usually
its own) into others, usually in an effort to limit imports. Additionally, some governments
will manage the exchange rate at a high level to create an import disincentive.
• Local content requirements. Many countries continue to require that a certain
percentage of a product or an item be manufactured or “assembled” locally. Some
countries specify that a local firm must be used as the domestic partner to conduct
business.
• Antidumping rules. Dumping occurs when a company sells product below market price
often in order to win market share and weaken a competitor.
• Export financing. Governments provide financing to domestic companies to promote
exports.
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• Free-trade zone. Many countries designate certain geographic areas as free-trade zones.
These areas enjoy reduced tariffs, taxes, customs, procedures, or restrictions in an effort
to promote trade with other countries.
• Administrative policies. These are the bureaucratic policies and procedures governments
may use to deter imports by making entry or operations more difficult and time
consuming.
POLITICAL ENVIRONMENT
INTRODUCTION
• A political system has been defined by Dahl (1976) as a "persistent pattern of human
relationship that involves, to a significant extent, control, influence, power, or authority."
(p. 4).
• Political environments may range from a democratic system to communism with other
variations between these ideological extremes. In international construction, like in
international business, one has to deal with governments as they are presently structured
with all their diversity, and even regressiveness.
THE POLITICAL SPECTRUM
A country's political structure is one of the key issues considered by a company or an individual
entering a foreign environment for conducting business. Political constructs are integrated bodies
of ideas (ranging from simple to very complex) that constitute sociopolitical platforms for
different societies. A variety of political ideologies may exist in the same society. It may,
therefore, be a good idea to identify the key features of some prevalent political ideologies:
Democracy
• Involves wide participation by citizens in the decision-making process

• Freedom of expression
• Voting rights for selection of representatives
• Independence of judiciary
• Nonpolitical and nonpartisan bureaucracy and defense infrastructure
• Limited terms of elected officials
• Empowerment of the citizens
• Assurance of political rights of citizens as indicated by:
o Fair and competitive elections
o Power for elected representatives
o Safeguards on rights of minorities
• Assurance of civil liberties as indicated by:

o Freedom of press
o Equal rights of everyone under the law
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o Personal social freedom
o The degree of freedom from governmental indifference or corruption
Democracy in its purest form hardly exists. Various forms of representative government exist in
which citizens vote for individuals to represent them and make collective decisions. The major
forms include:
• Parliamentary: Party with a majority of elected representatives forms a government. The

leader of the majority party becomes the prime minister and selects a cabinet.
• Presidential: Direct election of a president who is in power for a limited period of time.
Democratic system can range from being radical to reactionary. Those with liberal to radical
approach tend to advocate political reforms to include a large number of social programs among
other things and support more federal control. Democrats with shades ranging from conservative
to reactionary ideologies advocate a return to past conditions and are more orthodox.
Totalitarianism
Totalitarianism is the other side of the political spectrum. Major features include:
• An individual, a single party, or a select group of individuals monopolizes political power

• Non-recognition of any opposition
• Decision making is restricted to an individual or a select group of individuals
• All societal resources are monopolized by the state
It typically falls on one of the two following categories:
• Theocratic: Political control is vested on religious leaders.

• Secular: Secularism is based on the principle that affairs of this world should be the most
important concerns for ethics and human life. Secular totalitarianism, therefore, is based
on worldly rather than religious concepts.
Totalitarianism ranges from communism to fascism. Features of communism include:
• Complete integration of political and economic systems

• Political revolution is preceded by social revolution
• Long-term transformation of the society based largely on removal of economic
inequalities
• Social revolution guided by the working class
• Dictatorship by the proletariat during the transformation stage
Features of fascism include:
• Subordination of the individual to a "totalitarian" state that controls all aspects of national
life
• Elimination of class struggle through nationalism and the corporate state
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• Political control rests mostly with military oligarchy
Figure 1. The Political Spectrum
INTERNATIONAL POLITICAL SYSTEM
The international political system is not a rigidly definable system in the sense of well-regulated
operations among different nation-states. Tepstra (1991) defines it as a relationship of
"accommodation, negotiation, capitulation, deterrence, and threat." (p. 192). The sovereign
nation states are not the only members of the system; it also includes international governmental
(NGO) as well as non-governmental organizations (INGO). Large labor unions and multinational
enterprises also affect global politics. The IGOs (e.g. The World Bank) usually play a more
dominant role than the INGOs (e.g. The International Federation of Free Trade Unions) in global
politics because of the obvious reason that they derive their importance from the character of
their associations with states.
POLITICAL RISK
A major concern for any company or an individual before venturing on an international project is
whether the political situation in the host country will change in such way that the operating
position will deteriorate. It is very a much subjective business-specific event. Haendel (1979)
defines it as the occurrence of events that may change the projections for profitability of a global
business venture of a given investment. The political actions that may affect the business or
construction operations may include governmental takeover of properties (with or without
compensation), changes in import or export regulations, or even political insurrections leading to
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other drastic changes. Failure to analyze and fully understand these risk exposures may seriously
affect one's objectives for profit, market share, and long-term relations. "In the broad context of
international business, political risk is defined as the risk or probability of occurrence of some
political events that will change the prospects for the profitability of a given investment. Macro-
political risk events include sociopolitical disorder, power group transfer, and political corruption
as well as government interference. Other major concerns also relate to the change of
government policies toward foreign construction firms and the power group’s involvement or
interference in the operation of a project. Foreign companies are extremely vulnerable to the risk
associated with changes in government policies, laws, or regulations that could directly impact
their right to operate and ability to realize the full expected value of their project returns. The
involvement and interference of power groups in a project may take the form of more frequent
administrative checks and political corruption. The latter is regarded by many foreign companies
as an unavoidable fact of life on projects in certain developing countries, especially in China and
Vietnam. There is the associated risk either of spending too much money on corrupt officials or
spending it at the wrong place or time—all at the risk of having a government agency
subsequently turn against the firm and the project for reasons other than cost or technical
considerations."
Measuring Political Risk
• Instability: The probability of encountering political risk in a host country is considered

to be directly related to the relative stability the country's political system. This instability
may have its roots in different economic, political, and social factors. Some specific
causal factors may include communal unrest, strained international relations with
neighboring countries, social unrest, newly-acquired independence, vested interests of
home country industrial groups, proximity to armed conflict, etc. The political instability
can thus be measured as qualitative or quantitative accounting of these correlates. An
index of political instability is often produced using these factors and marketed as
political risk analysis (Ashley & Bonner, 1987). This approach of measuring political
risk, however, may not be ideal for all situations. Political instability may not always
effect all international businesses in a country. In some situations, political instability
may lead to changes that may not be at all critical to most construction ventures. Rather
than political stability, the direction in changes in government may be more important in
certain situations.
• Past patterns: Past patterns of political behavior is at times analyzed to determine political
risk involved. However, predicting political risk on the basis of historical records has its
own drawbacks. Political situations under which risks were encountered by companies or
individuals in the past might have changed altogether; the changed circumstances may
provide a better environment for foreign investment (e.g. Vietnam).
• Opinion analysis: Political risk may also be measured qualitatively by examining the
views of people engaged in governmental decision making and people who may
influence future political events affecting business. It involves the analysis of statements
of such people to determine their views on business in general, foreign capital
investment, the means of effecting economic changes, and their feeling toward the host
country in question. Such statements, however, should be analyzed to determine their
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"inner meanings." (Sometimes statements are made for making emotional appeals
or merely to appease a particular interest group or social class.)
Political Risk Management (Ashley & Bonner, 1987)
• Avoidance: Selecting only safe environments for business and rejecting regions that are
perceived to have greater than average degree of political risk.
• Premium for risk: Increasing the ROI (return on investment) or requiring shorter period
of payback.
• Adaptation: Responding to the particular political environment of the host country and
structuring the international operations accordingly (e.g. adapting to the local methods,
utilization of host country professional expertise, joint venture, etc.).
• Transfer: Sharing of risks with other individuals or companies or reducing the risks
through transfer to other agencies.
In international affairs, analysis of good governance can look at any of the following
relationships: between governments and markets,
• between governments and citizens,

• between governments and the private or voluntary sector,
• between elected officials and appointed officials,
The varying types of comparisons comprising the analysis of governance in scholastic and
practical discussion can cause the meaning of "good governance" to vary greatly from
practitioner to practitioner. Good Governance in Corporate Sectors
In corporate affairs, good governance can be observed in any of the following relationships:
· between governance and corporate management
· between governance and employee standards
· between governance and corruption in the workplace
The meaning of good governance in regards to corporate sectors varies between actors.
Legislation has been enacted in an attempt to influence good governance in corporate affairs.
The Sarbanes-Oxley Act (2002) set up requirements for businesses to follow. Whistleblowing
has also been widely used by corporations to expose corruption and fraudulent activity.[6]
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Good Governance in Local Governments
Good Governance is argued to be the most important in local governments. It tries to promote
more relationships between government and
· Neighborhood councils
· Community councils
Good Governance with local government aims to increase civil engagement with more members
of the community in order to get the best options that serves the people.
Good Governance in Scientific Exploration
Before there can be scientific experimentation, organizations must be compliant with good
governance, meaning that testing must be moral and practical. Many research organizations such
as SPICE (Stratospheric Particle Injection for Climate Engineering) a geoengineering research
project that was formed in the U.K. was required to go through stages of evaluation before
testing could be conducted if they were to be funded by stakeholders. In 2011 SPICE made plans
to experiment with solar radiation. The method for this experiment included injecting
stratospheric sulfur aerosols into the Earths atmosphere.The criteria or “stage-gate” that they
must pass before performing their experiment included the following; identify safe and principle
risks, test must be compliant with relevant regulations, future applications and impacts, and
mechanisms put in place to review these in the light of new information, and that the
stakeholders must be regarded and taken into account. Before research can be conducted in the
field of geoengineering it must be scrutinized using good governance to ensure testing isn’t
harmful to the environment and to detail all the possible risks that may occur.
The Worldwide Governance Indicators is a program funded by the World Bank to measure the
quality of governance of over 200 countries. It uses six dimensions of governance for their
measurements, Voice & Accountability, Political Stability and Lack of Violence, Government
Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption. They have been
studying countries since 1996.
Effects
Good governance defines an ideal which is difficult to achieve in full, though it is something
development supporters consider donating to causes. Major donors and international financial
institutions, like the International Monetary Fund (IMF) or World Bank, are basing their aid and
loans on the condition that the recipient undertake reforms ensuring good governance. This is
mostly due to the close link between poor governance and corruption.
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Democratization
Because concepts such as civil society, decentralisation, peaceful conflict management and
accountability are often used when defining the concept of good governance, the definition of
good governance promotes many ideas that closely align with effective democratic
governance.[9] Not surprisingly, emphasis on good governance can sometimes be equated with
promoting democratic government. However, a 2011 literature review analyzing the link
between democracy and development by Alina Rocha Menocal of the Overseas Development
Institute stresses the inconclusiveness of evidence on this relationship. A good example of this
close association, for some actors, between western democratic governance and the concept of
good governance is the following statement made by U.S. Secretary of State Hillary Clinton in
Nigeria on August 12, 2009: Again, to refer to President Obama’s speech, what Africa needs is
not more strong men, it needs more strong democratic institutions that will stand the test of time.
(Applause.) Without good governance, no amount of oil or no amount of aid, no amount of effort
can guarantee Nigeria’s success. But with good governance, nothing can stop Nigeria. It’s the
same message that I have carried in all of my meetings, including my meeting this afternoon
with your president. The United States supports the seven-point agenda for reform that was
outlined by President Yar'Adua. We believe that delivering on roads and on electricity and on
education and all the other points of that agenda will demonstrate the kind of concrete progress
that the people of Nigeria are waiting for.
Role of political parties
Researchers at the Overseas Development Institute have criticised past studies of good
governance to place too little importance on developing political parties, their capacity and their
ties to their grassroots supporters. While political parties play a key role in well-functioning
democracies, elsewhere political parties are disconnected from voters and dominated by elites,
with few incentives or capabilities to increase the representation of other voters. Political parties
can play a key role in pivotal moments of a state's development, either negatively (e.g.
organising and instigating violence) or positively (e.g. by leading dialogue in a fractured
society). While differences in the electoral system play their role in defining the number of
parties and their influence once in power (proportional, first past the post, etc.), the funding and
expertise available to parties also plays an important role not only in their existence, but their
ability to connect to a broad base of support. While the United Nations Development Program
and the European Commission have been providing funding to political parties since the 1990s,
there are still calls to increase the support for capacity development activities including the
development of party manifestos, party constitutions and campaigning skills.
Foreign Exchange Regulation Act
The Foreign Exchange Regulation Act (FERA) was legislation passed in 1973[1] that imposed
strict regulations on certain kinds of payments, the dealings in foreign exchange and securities
and the transactions which had an indirect impact on the foreign exchange and the import and
export of currency.[2] The bill was formulated with the aim of regulating payments and foreign
exchange.
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History
FERA was passed by the Indian Parliament in 1973 by the government of Indira Gandhi and
came into force with effect from January 1, 1974. FERA was introduced at a time when foreign
exchange (Forex) reserves of the country were low, Forex being a scarce commodity. FERA
therefore proceeded on the presumption that all foreign exchange earned by Indian residents
rightfully belonged to the Government of India and had to be collected and surrendered to the
Reserve Bank of India (RBI). FERA primarily prohibited all transactions not permitted by RBI.
The objective of FERA was to regulate certain payments, dealings in foreign exchange and
securities, transactions indirectly affecting foreign exchange, the import and export of currency
and to conserve precious foreign exchange and to optimize the proper utilization of foreign
exchange so as to promote the economic development of the country.Coca-Cola was India's
leading soft drink until 1977 when it left India after a new government ordered the company to
turn over its secret formula for Coca-Cola and dilute its stake in its Indian unit as required by the
Foreign Exchange Regulation Act (FERA). In 1993, the company (along with PepsiCo) returned
after the introduction of India's Liberalization policy. FERA was repealed in 1998 by the
government of Atal Bihari Vajpayee and replaced by the Foreign Exchange Management Act,
which liberalised foreign exchange controls and restrictions on foreign investment.[8][9]
Foreign exchange controls
Four exchange control stamps in a South African passport from the mid-1980s allowing the
passport holder to take a particular amount of currency out of the country. Exchange controls
such as these were imposed by the apartheid-era South African government to restrict the
outflow of capital from the country.
Foreign exchange controls are various forms of controls imposed by a government on the
purchase/sale of foreign currencies by residents or on the purchase/sale of local currency by
nonresidents.
Common foreign exchange controls include:
• Banning the use of foreign currency within the country

• Banning locals from possessing foreign currency
• Restricting currency exchange to government-approved exchangers
• Fixed exchange rates
• Restrictions on the amount of currency that may be imported or exported
Countries with foreign exchange controls are also known as "Article 14 countries," after the
provision in the International Monetary Fund agreement allowing exchange controls for
transitional economies. Such controls used to be common in most countries, particularly poorer
ones, until the 1990s when free trade and globalization started a trend towards economic
liberalization. Today, countries which still impose exchange controls are the exception rather
than the rule.
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Often, foreign exchange controls can result in the creation of black markets to exchange the
weaker currency for stronger currencies. This leads to a situation where the exchange rate for the
foreign currency is much higher than the rate set by the government, and therefore creates a
shadow currency exchange market. As such, it is unclear whether governments have the ability
to enact effective exchange controls.[1]
Current countries with foreign exchange controls
Foreign Exchange Management ActThe Foreign Exchange Management Act, 1999 (FEMA)
is an Act of the Parliament of India "to consolidate and amend the law relating to foreign
exchange with the objective of facilitating external trade and payments and for promoting the
orderly development and maintenance of foreign exchange market in India".[1] It was passed in
the winter session of Parliament in 1999, replacing the Foreign Exchange Regulation Act
(FERA). This act makes offences related to foreign exchange civil offenses. It extends to the
whole of India.,[2] replacing FERA, which had become incompatible with the pro-liberalisation
policies of the Government of India. It enabled a new foreign exchange management regime
consistent with the emerging framework of the World Trade Organisation (WTO). It also paved
the way for the introduction of the Prevention of Money Laundering Act, 2002, which came into
effect from 1 July 2005.
Switch from FERA
FERA, in place since 1974, did not succeed in restricting activities such as the expansion
of(TNCs). The concessions made to FERA in 1991-1993 showed that FERA was on the verge of
becoming redundant.After the amendment of FERA in 1993, it was decided that the act would
become the FEMA. This was done in order to relax the controls on foreign exchange in India, as
a result of.FEMA served to make transactions for external trade and easier – transactions
involving current account for external trade no longer required RBI’s permission. The deals in
Foreign Exchange were to be ‘managed’ instead of ‘regulated’. The switch to FEMA shows the
change on the part of the government in terms of for the capital. The buying and selling of
foreign currency and other debt instruments by businesses, individuals and governments happens
in the foreign exchange market. Apart from being very competitive, this market is also the
largest and most liquid market in the world as well as in India.It constantly undergoes changes
and innovations, which can either be beneficial to a country or expose them to greater risks. The
management of foreign exchange market becomes necessary in order to mitigate and avoid the
risks.Central banks would work towards an orderly functioning of the transactions which can
also develop their foreign exchange market.Foreign Exchange Market Whether under FERA or
FEMA’s control, the need for the management of foreign exchange is important. It is necessary
to keep adequate amount of foreign exchange from Import Substitution to Export Promotion.
Main Features
Activities such as payments made to any person outside India or receipts from them, along with
the deals in foreign exchange and foreign security is restricted. It is FEMA that gives the central
government the power to impose the restrictions.
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• Without general or specific permission of the MA restricts the transactions involving
foreign exchange or foreign security and payments from outside the country to India – the
transactions should be made only through an authorised person.
• Deals in foreign exchange under the current account by an authorised person can be
restricted by the Central Government, based on public interest generally.
• Although selling or drawing of foreign exchange is done through an authorized person,
the RBI is empowered by this Act to subject the capital account transactions to a number
of restrictions.
• Residents of India will be permitted to carry out transactions in foreign exchange, foreign
security or to own or hold immovable property abroad if the currency, security or
property was owned or acquired when he/she was living outside India, or when it was
inherited by him/her from someone living outside India.
Regulations/Rules under FEMA
Foreign Exchange Management (Current Account Transactions) Rule, 2000
• Foreign Exchange Management (Permissible Capital Account Transactions) Regulations,

2000
• Foreign Exchange Management (Transfer or Issue of any Foreign Security) regulations,
2004
• Foreign Exchange Management (Foreign currency accounts by a person resident in
India)Regulations, 2000
• Foreign Exchange Management (Acquisition and transfer of immovable property in
India) regulations, 2000
• Foreign Exchange Management (Establishment in India of branch or office or other place
of business) regulations, 2000
• Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000
• Foreign Exchange Management (Export of Goods and Services) regulations, 2000
• Foreign Exchange Management (Realisation, repatriation and surrender of Foreign
Exchange)regulations, 2000
• Foreign Exchange Management (Possession and Retention of Foreign Currency)
Regulations, 2000
• Foreign Exchange (g proceedings) rules, 2000
Social Environment
The social environment consists of the sum total of a society's beliefs, customs, practices and
behaviors. It is, to a large extent, an artificial construct that can be contrasted with the natural
environment in which we live. Every society constructs its own social environment. Some of the
customs, beliefs, practices and behaviors are similar across cultures, and some are not. For
example, an American traveling to Britain will find many familiar practices but not so much if
traveling to China. This social environment created by a society-at-large in which a business
functions can be referred to as its external social environment. If a business operates in a
multicultural society, then the social external social environment is even more complicated
because the environment will consist of diverse sub-populations with their own unique values,
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beliefs and customs. A business also has its own social environment. We can refer to this as its
internal social environment, which is simply the customs, beliefs, practices and behaviors
within the confines of the business. A business has much more control over its internal social
environment than it does with its external social environment.
Effects of External Social Environment
A business must utilize and adapt to its external social environment, or it will not survive. A
business must be keenly aware of the society's social preferences regarding its needs and wants.
These preferences and needs and wants will be influenced by a population's values, beliefs and
practices. Let's look at some examples. A change in beliefs and values towards energy
conservation and global climate change may create a change in consumer preference away from
gas guzzling SUVs to hybrid sedans. Some cultures treat the meal as a long social event, and fast
food just won't cut it. Social preferences relating to fashion are constantly changing. Skirt lengths
go up and down depending upon the years, as do the preference for single-breasted and double-
breasted suits. If a business refuses to adapt to changing social preferences, its sales will drop,
and it will fail. Of course, sometimes the change in social preferences may be so large that a
business simply can't adapt. For example, a social movement led to the outlawing of alcohol in
the early 20th century, which was known as Prohibition. During Prohibition, it was illegal to sell
alcohol. Distilleries were put out of business until Prohibition was repealed.
While there are risks with social change, there are also opportunities. Businesses often try to
influence social values through the use of marketing, advertising and targeted public relations
strategies. Marketing campaigns are used in an attempt to create trends. The fashion industry is a
prime example. Public relation campaigns are often used to build up or repair a business' image.
For example, BP launched a massive public relations campaign to improve its image after a
massive oil leak in the Gulf of Mexico caused by offshore drilling. Fast food restaurants may
include healthier choices on their menus and sponsor health-related activities. Broader social
values will also affect the success of a business. A society that values higher education will
provide a better workforce that will lead to more productivity and innovation. Likewise, a society
that supports investment in public infrastructure will have access to good transportation and
communication systems. And if the social values of a community include a hard work ethic, a
business will have access to productive workers and a population that has money to spend on
goods and services.
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CHAPTER 10 -INTERNAL SOCIAL ENVIRONMENT
Internal Social Environment
A business also creates a social environment consisting of its own organizational values, norms,
customs and practices. Many of these values, norms and beliefs will mirror the external social
environment, but some will be unique to the organization. Businesses need to operate as a
cohesive unit, so it's important that they build a strong and productive organizational culture. It's
also important to ensure that the culture is stable and positive. Thus, a business should carefully
monitor the relations between its members to detect any hostility or other dysfunction that needs
to be corrected.
Diversity and Groupthink
The internal social environment of a business is also affected by current changes in the
contemporary workforce. The contemporary workforce has a higher percentage of women,
minority racial groups and elderly in it than it did just ten years ago. Each of these subgroups
bring in their own sets of values and beliefs with them to the workplace. A business will be able
to integrate some of this diversity to make it strong.
Introduction:
The inherent fundamental changes in thinking, practice and delivery of health

care required by the NHS Plan (2000) have led managers and professionals to
recognise the importance and links between problem solving and decision-making
skills. In particular, assessing the impact of political, economic,
socio-cultural, environmental and other external influences upon health care
policy, proposals and organisational programmes is becoming a recognisable stageof health
service strategic development and planning mechanisms. Undertaking
this form of strategic analysis therefore is to diagnose the key issues that the
organization needs to address.
This form of analysis can be undertaken by reviewing the organizational

(external) environment using the PEST-analysis (sometimes known as
STEP-analysis), extended to the PESTELI checklist described below. PESTELI
Analysis is a useful tool for understanding the “big picture” of the
environment in which you are operating, and the opportunities and threats that
lie within it. By understanding your environment, you can take advantage of the
opportunities and minimize the threats.
What is PEST(ELI)?
The term PEST has been used regularly in the last 10 years and its
true history is difficult to establish. The earliest known reference to tools
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and techniques for ‘scanning the business environment’ is by Francis J.
Aguilarwho discusses ‘ETPS’ - a mnemonic for the four sectors of
his taxonomy of the environment: Economic, Technical, Political,
and Social. Over the years this has become known as PEST with the
additional letters are: Ecological factors, Legislative
requirements, and Industry analysis. PESTELI is known as a ‘trends
analysis’. The external environment of an organisation, partnership, community
etc. can be assessed by breaking it down into what is happening at Political,
Economic, Social, Technological, Environmental, Legal and Industry
levels. The same checklist can also be applied inside an organisation.
Political factors - both big and small 'p' political forces and influences that may affect the
performance of, or the options open to the organisation
Economic influences - the nature of the competition faced by the organisation or its services,
and financial resources available within the economy
Sociological trends - demographic changes, trends in the way people live, work, and think
Technological innovations - new approaches to doing new and old things, and tackling new and
old problems; these do not necessarily involve technical equipment - they can be novel ways of
thinking or of organising.
The expanded PESTELI, also includes:
Ecological factors - definition of the wider ecological system of

which the organisation is a part and consideration of how the organisation
interacts with it
Legislative requirements - originally included under 'political',

relevant legislation now requires a heading of its own
Industry analysis - a review of the attractiveness of the industry of

which the organisation forms a part.
To be useful as an analysis tool, these environmental factors have to be

linked to the organization's mission: which are helpful or which make it more
difficult to accomplish that mission.
Why undertake a PEST(ELI) Analysis?
To be effective a PEST(ELI) needs to be undertaken on a regular basis.

Organisations that do analyses regularly and systematically often spot trends
before others thus providing competitive advantage.
Advantages and disadvantages of using a PEST(ELI) analysis
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Advantages
• Simple framework.
• Facilitates an understanding of the wider business environment.
• Encourages the development of external and strategic thinking.
• Can enable an organisation to anticipate future business threats and take
action to avoid or minimise their impact.
• Can enable an organisation to spot business opportunities and exploit them
fully
• By taking advantage of change, you are much more likely to be successful
than if your activities oppose it;
• Avoids taking action that is doomed to failure from the outset, for
reasons beyond your control
Disadvantages
• Some users over simplify the amount of data used for decisions – it is
easy to use scant data.
• To be effective this process needs to be undertaken on a regular basis.
• The best reviews require different people being involved each having a
different perspective.
• Access to quality external data sources, this can be time consuming and
costly.
• The pace of change makes it increasingly difficult to anticipate
developments that may affect an organisation in the future.
• The risk of capturing too much data is that it may make it difficult to
see the wood for the trees and lead to ‘paralysis by analysis’.
• The data used in the analysis may be based on assumptions that
subsequently prove to be unfounded (good and bad).
Who should undertake the analysis?
Decision-making is more natural to certain personalities, so these people

should focus more on improving the quality of their decisions. People that
are less natural decision-makers are often able to make quality assessments, but
then they need to be more decisive in acting upon the assessments made. PESTELI
is almost entirely based on external factors, so ensure at least some members of
each team have knowledge of, or are able to consider, the PESTELI factors if you
intend using this exercise. PESTELI is a good exercise for marketing people, and
is good for encouraging a business development, market orientated outlook among
all staff. If you want to use PESTELI with staff who are not naturally
externally focused you can have them do some research and preparation in advance
of the exercise.
Completing a PESTELI analysis can be a simple or complex process. It

all depends how thorough you need to be. It is a good subject for workshop
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sessions, as undertaking this activity with only one perspective (i.e. only one
persons view) can be time consuming and miss critical factors.
What areas of PESTELI are best to use?
For most situations the original w:st='on'>

PEST analysis model arguably covers all of the 'additional' factors within the
original four main sections. For example Ecological or Environmental factors can
be positioned under any or all of the four main
PESTheadings, depending on their effect. Legislative factors would normally be
covered under the Political heading since they will generally be politically
motivated. Demographics usually are an aspect of the larger Social issue.
Industry Analysis is effectively covered under the Economic heading. Ethical
considerations would typically be included in the Social and/or Political areas,
depending on the perspective and the effect. Thus we can often see these
'additional' factors as 'sub-items' or perspectives within the four main
sections. Examples of these have been added to Table 1.
Keeping to four fundamental perspectives also imposes a discipline of

considering strategic context and effect. Many of these potential 'additional'
factors (ethical, legislative, environmental for example) will commonly be
contributory causes which act on one or some of the main four headings, rather
than be big strategic factors in their own right.
How to undertake a PEST(ELI) analysis?
It is important to clearly identify the subject of a PEST(ELI) analysis,

because a PEST(ELI) analysis is four-way perspective in relation to a particular
policy, proposal or business plan- if you blur the focus you will produce a
blurred picture.The shape and simplicity of a four-part model is also somehow morestrategically
appealing and easier to manipulate and convey.
The PEST(ELI) template below (Table 1) includes sample prompts, whose answers
can be inserted into the relevant section of the PEST(ELI) Grid (Table 2). The
prompts are examples of discussion points, and obviously can be altered
depending on the subject of the PEST(ELI) analysis, and how you want to use it.
Make up your own PEST(ELI) questions and prompts to suit the issue being
analyzed and the situation (i.e. the people doing the work and the expectations
of them).
The following factors may help as a starting point for brainstorming (but
make sure you include other factors that may be appropriate to your situation):
• Decide how the information is to be collected and by whom (often a team

approach is much more powerful than one person’s view).
• Identify appropriate sources of information.
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• Gather the information - it is useful to use a template as the basis for
exploring the factors and recording the information.
Political Economic
• Government type and stability • Stage of business cycle

• Freedom of press, rule of law and levels of • Current and project economic growth,
bureaucracy and inflation and interest rates
corruption • Unemployment and labour supply
• Regulation and de-regulation trends • Labour costs
• Social and employment legislation • Levels of disposable income and income
• Tax policy, and trade and tariff controls distribution
• Environmental and consumer-protection • Impact of globalization
legislation • Likely impact of technological or other
• Likely changes in the political environment change on the economy
• Likely changes in the economic environment
Socio-cultural Technological
• Population growth rate and age profile • Impact of emerging technologies

• Population health, education and social • Impact of Internet, reduction in
mobility, and attitudes to communications costs and
these increased remote working
• Population employment patterns, job market • Research and Development activity
freedom and attitudes • Impact of technology transfer
to work
• Press attitudes, public opinion, social attitudes
and social
taboos
• Lifestyle choices and attitudes to these
• Socio-Cultural changes
Examples:
Ecological factors – Air quality, transportation, parking,
pollution discharge, water quality, waste management, land use, coastal
resources etc.
Legislative requirements – Primary and secondary legislation
in relation to Health Bills e.g. employment laws, contracts over rights
of staff, rights of patients, direct payments etc.
Industry analysis – Demand, liaison and selection for
services, products and/or component parts on the basis of price,
quality, delivery times and services support; market knowledge,
forecasting, purchasing strategies, liaising with users, business
efficiency;
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• Analyse the findings.
• Identify the most important issues.
• Identify strategic options.
• Write a report.
• Disseminate the findings.
• Decide which trends should be monitored on an ongoing basis.
In reviewing the data drawn from undertaking a PESTELI analysis it will be

important to assess whether there are any disproportionate impacts on particular groups of
people, especially those who are vulnerable. Proposals, oragnisal missions and policy
development should not widen inequalities, but actively seek to reduce them. Part of the
decision-making that follows the analysis will be to consider what could be done to
counterbalance the negative impacts for groups which may get less health benefit from positive
proposals or may be adversely affected by proposals with a negative impact on health.
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CHAPTER 11- BUSINESS CULTURAL ETHICS
Doing Business in India: 20 Cultural Norms You Need to Know
When doing business with Indians, Westerners sometimes have a hard time understanding their
customs. This can lead to miscommunication and misunderstandings. However, growth can
flourish if an effort is made to understand Indians' ethnic values. It pays to follow the adage:
"When in Rome, do as the Romans do." Read on for a primer on the formal and informal
customs and conventions of India today.
1. A perspective on time: Indians are not particularly renowned for their punctuality; they are
perceived as laid back people who only watch the clock when it's close to quitting time. While
that may be true for a small percentage of the population, such as government servants, the vast
majority follow a different strategy. For most of the world, time is precious; for the Indian, it's
auspicious. One look at the Indian calendar should give you a clue-it's never complete without
the list of auspicious and inauspicious times and dates. Be it weddings, christenings, new
ventures, C-section births, or just stepping out of the house for the first day on a new job-the
average Indian allows auspicious times to dictate his activities. Don't dismiss this belief as
superstitious nonsense. Remember that the West has its own superstitions: Friday the 13th, black
cats and stepping on sidewalk cracks.
2. Addressing issues of respect: When compared to the numerous vernacular languages spoken
in India, English is much less polite. Indian languages, unlike English, differentiate between
peers and those who are older and command respect. That's why the average Indian tends to
address people as "Sir" or "Ma'am," or affix the title "Mr." "Ms." or "Mrs." before their names:
they don't want to come across as disrespectful. English, on the other hand, is more informal:
Americans generally prefer the use of first names. Remember that while most younger Indians
will welcome the informality of first names, older ones may consider it an affront, especially if
the speaker is much younger.
3. Comfort zone: A casual hug, peck on the cheek, or an arm thrown around a shoulder may not
seem out of place in the West. However, in India, even shaking hands with a member of the
opposite sex is only in the process of being accepted. The exception to this rule is a handful of
metropolitan cities. With the younger crowd drifting to the cities in search of jobs with
multinational IT companies and call centers, they're adapting fast to the casual touch. However,
their mates and spouses are often uncomfortable with this personal contact. Be mindful that your
idea of touch may be too close for Eastern comfort.
4. Strikes-even when the iron's not hot: There are times in India when all activity comes to a
screeching halt: shops down shutters, people remain closeted in their houses, public transport is
shut down, and private conveyances are stoned or pelted if they dare make an appearance. This
strange phenomenon, termed a "bandh," is a source of bewilderment for the foreign business
houses in the country. They're not sure if they should declare a holiday: if they do, their offshore
work suffers, clients back home are furious, and precious time and money go down the drain; if
they don't, they risk being the target of angry, irrational mobs. With political clout usually behind
these bandhs, it's best to go with the flow.
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5. The creaky wheels of bureaucracy: One of the downsides of the great Indian adventure is
the political parties that wield a huge amount of power. Industrial ventures are not easy to set up.
At times, you'll need to grease their palms. And just when you think you've won them over with
your powers of persuasion and financial might, the next election rolls around and another party is
lodged in the seat of power. No matter what progress you've made with their predecessor, it's
back to square one for you. It's extremely frustrating, but that's the lay of the land.
6. Festivals: The flavor of sub-continental life: India has its fair share of religions, each of
them with festivals. A few are short and sweet, but the rest are long, drawn-out affairs. Reasons
for celebration range from the long ago slaying of mythical demons to the bountiful harvest that
is reaped in the present. National holidays are declared for a few festivals that are celebrated by
the majority, but there are others that often go unobserved. Overseas companies should anticipate
and accept employees asking for vacation time around these days. It will be more appreciated at
this time than around Western-centric Thanksgiving, Christmas and the New Year.
7. Marriages are made in India: An Indian wedding, especially one that goes on for days, is
one of those things that you have to see to believe. In India, marriages are occasions for large
get-togethers. They include not only the immediate family, but also the extended cousins, aunts,
uncles, grandmas, grandpas and new additions to the family. Keep in mind that it's not just the
groom or bride who'll be asking for time off: even a distant third cousin will deem it imperative
that he or she attend and enjoy this three or four-day affair.
8. Familial fraternization: The joint family system, prevalent in India for ages, is being nudged
out by the nuclear family, a new discovery for the modern Indian. Even so, there are many who
still have aged parents and infirm relatives living with them. A good Indian son's duties include
taking care of the elderly in the family. Understandably, a broken bone or heart attack will
require the son's, and often daughter's, attention. Employers must be compassionate during these
times of family crisis.
9. Sometimes the office is taken home: Invitations to the home for business discussions are not
uncommon. Don't be anxious if you're asked to lunch or dinner. Indians are very hospitable; the
woman of the house will go to great lengths to prepare something she knows you'll enjoy. On
your part, you'll earn brownie points if you treat your host's family with courtesy and respect. A
small gift is greatly appreciated when you're visiting a business partner's home.
10. Small talk is big: If you are hosting the business meetings, remember that Indians are not as
direct as their American counterparts. They generally start with small talk and relatively
unimportant topics before migrating to the main issue. They also place importance on
refreshments during the course of the meeting, either at the beginning, or in the middle during a
break, depending on the time of day.
11. Going by the book: While Americans are generally more results-oriented, caring more about
the end result than the path taken to get there, Indians are sticklers for policy. They are used to
following preset steps to arrive at a solution, usually because they do not want to get into trouble
with someone above them in the hierarchy. Most of them are afraid of stepping out of line, but if
encouraged to try new methods, they will be happy to do so.
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12. Don't toe the line: The word "queue" has no significant meaning to the average Indian. The
country has developed in leaps and bounds, but a few of its citizens still think that leaps and
bounds are the way to go when asked to queue up at a public facility. Even the most civilized
person can be reduced to fighting for his rightful place when others form a mass of people all
jockeying to be first.
13. Call them more than cards: Indians place a lot of importance on business cards, handing
them out even for casual occasions. A stranger will offer you his card if you so much as ask him
his name while you're traveling on the same train. He's not being pushy: it's just his way of
packing his name, profession, and other details onto just one card.
14. Transport traditions and travails: If you spend some time in India, you may be forced to
test its public modes of transportation at some time or another. You'll find that your fellow
passengers will be more than happy to help when you find yourself unfamiliar with the local
lingo or have difficulty deciding where to get off. On the other hand, local auto rickshaw and taxi
drivers may try to fleece you when they see you're not a native. Familiarize yourself with the
local currency and the approximate transportation costs before you venture out on your own.
15. Is that English? It's the same language, but it's spoken with a distinctly different flavor in
each part of the world. Every country adds to the language or takes words from it for its own
tongue. In India, the English language is spoken with an Indian accent, although it is not as
pronounced as some other countries. You'll find unusual expressions being used: "cousin
brother/sister" (cousin), "co-brother/sister" (brother or sister-in-law), and "What's your good
name?" (What's your name?). Most Indians are familiar with the Western accent, but it helps to
speak slowly. If you don't understand what they've said, don't worry-they don't mind repeating
themselves.
16. Not too good with paperwork: Indians are not very big on documentation; they generally
have to be taught to maintain proper records. Official correspondence is usually long-winded
with pompous language that the ordinary person does not understand. E-mail has become a
replacement for hand-written or printed documents, but there's a general ignorance of email
etiquette. However, once shown the right way, Indians are adept at picking up any new
technique.
17. The tower of Babel? India has a potpourri of local languages, with most Indians fluent in
more than just their mother tongue. If you come across a group conversing in the local lingo,
don't take it as an affront-they aren't talking secretively about you. It's just their way of
connecting to people who remind them of home.
18. Herd mentality rules: Most Indians are not very confident speaking in public. If you ask a
group of Indians to raise pertinent questions during a meeting, you'll find that all the queries are
posed once the meeting has broken up, by a small crowd that draws support from each of its
members, and when the speaker is alone.
19. They mind their Ps and Qs, but differently: "Please" and "Thank You" are matter-of-fact
for the polite Westerner, but an Indian may not feel the need to mention them. It does not mean
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that he's rude or impolite. Indians express their pleasure in a different manner: with a smile or a
nod of the head.
20. Pecking orders matter: Most Indian businesses have an order of hierarchy that's very
important to those in the chain. When communicating with Indians, it pays to address the more
important members first. There's an Indian adage that says, "It takes two hands to generate
applause." That's especially true when two cultures meet. Both should be willing to accept the
idiosyncrasies of the other and work together to reach a common point of agreement. Keep these
tips in mind when working with Indian people. Today, it is more than possible to operate a
remote contact center that provides top-notch customer service. The benefits of a remote contact
center are numerous. As compared to an on-premises call center, remote contact centers are less
expensive to operate. Business phone systems in 2016 are more powerful, more useful, and more
accessible than ever before. Even small and medium-sized businesses can now take advantage of
features that were once the sole province of large enterprises. A business phone system guided
by unified communications considers e-mail, text messaging, and other methods of
communication. Discover how a cloud fax solution that not only securely receives, signs, stores
and sends faxes conveniently via e-mail, but improves your unified communications. Perhaps
more than any other business software solution, there is a huge degree of variability within the
ERP category. Much like a child’s bicycle and a Ferrari are both transportation vehicles, the
umbrella of ERP software is a wide one, with tens of thousands of options available on the
market.
"For companies with any kind of global interest, the writing is on the wall that they need to have
a strategy for India," said Singh. But Singh said that for Western companies rushing to enter the
Indian marketplace, it needs to be recognized that the country is a very different proposition --
both in terms of business practices and consumer preferences -- and must be treated accordingly.
"One of the common pitfalls in addressing the Indian marketplace is simply dusting off
something you might offer in your home market," he said. "Indian consumers are very different -
- enormously value conscious and very, very finicky."Holding to too high a price point could be
fatal for foreign businesses, as Indian consumers have less capacity to pay than Western
consumers. But by making their products affordable to the mass market, businesses put them
within reach of hundreds of millions of potential consumers.The companies that fare best in the
Indian market are those that customize their products to the particular preferences of Indian
consumers, according to Singh. A case in point was the success of Korean auto manufacturers,
he said.
"In the West, it's almost unheard of to have a driver, " said Singh. "But in India, labor markets
being what they are, you can get a full time driver for a relatively modest wage, and even with a
small car, you may want a chauffeur. This will clearly have ramifications for the design of the
car -- the customer wants more space in the back." Business practices are also different in India,
and many foreign businesses underestimate the bureaucratic hurdles they will encounter,
according to Pawan Budhwar, associate Dean of Research at Aston Business School and co-
author of "Doing Business in India: Building Research-Based Practice." The secret, he said, was
to factor in a realistic amount of time for delays.
"If the website of the ministry says it will take 13 weeks to get the required certificate, it's not
realistic it will take 13 weeks," he said.
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Budhwar said that often the reason for the bottlenecks was bureaucrats expecting a pay off.
"That's why they're delaying things, although no one will say this out loud," he said. "If you have
a local player, they can perhaps better handle local dynamics like this."Budhwar said that within
"modern sectors" such as IT, software and pharmaceuticals, and developed business enclaves
such as those in Gurgaon, Pune and Hyderabad, levels of professionalism were often in line with
international business expectations. "People will stick to meeting times, deadlines, promises;
they will mean business," he said. But he added that dealing with the public sector and trade
unions could be a different story.Singh said another area where foreign executives could
encounter turbulence was in failing to appreciate the relationship-based focus of Indian business.
"The U.S. is a much more transaction-oriented society, " he said. "When you're doing business,
you're there to talk about a particular transaction, and you either do it or you don't. But Indian
business is still very much relationship-based. Sometimes being too transaction-oriented can be
not a smart way to go."Singh's advice? "Do a lot of homework and figure out who might be the
right people to deal with. There's a very tight network at the top of Indian business, and you need
to get access to that network in order to succeed. Finding the right partners can be key, but you
need to be diligent."
Budhwar said the key to succeeding in India was to be prepared by tapping into the networks and
resources that can provide information on the subject, thereby going in with realistic
expectations."Have persistence, and don't give up," he said. "The mileage to get into India is
great. Don't expect it to be a smooth ride, expect it to be irritating. But once you're there, you'll
enjoy it -- and you'll make a lot of money as well."
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CHAPTER 12- ENVIRONMENTAL ETHICS
Environmental ethics
Environmental ethics is the part of environmental philosophy which considers extending the
traditional boundaries of ethics from solely including humans to including the non-human world.
It exerts influence on a large range of disciplines including environmental law, environmental
sociology, ecotheology, ecological economics, ecology and environmental geography.
There are many ethical decisions that human beings make with respect to the environment. For
example:
• Should humans continue to clear cut forests for the sake of human consumption?
• Why should humans continue to propagate its species, and life itself? Should humans
continue to make gasoline powered vehicles?
• What environmental obligations do humans need to keep for future generations? Is it
right for humans to knowingly cause the extinction of a species for the convenience of
humanity?
• How should humans best use and conserve the space environment to secure and expand
life? [4]
The academic field of environmental ethics grew up in response to the work of scientists such as
Rachel Carson and events such as the first Earth Day in 1970, when environmentalists started
urging philosophers to consider the philosophical aspects of environmental problems. Two
papers published in Science had a crucial impact: Lynn White's "The Historical Roots of our
Ecologic Crisis" (March 1967)[5] and Garrett Hardin's "The Tragedy of the Commons"
(December 1968).[6] Also influential was Garett Hardin's later essay called "Exploring New
Ethics for Survival", as well as an essay by Aldo Leopold in his A Sand County Almanac, called
"The Land Ethic," in which Leopold explicitly claimed that the roots of the ecological crisis were
philosophical (1949).
The first international academic journals in this field emerged from North America in the late
1970s and early 1980s – the US-based journal Environmental Ethics in 1979 and the Canadian-
based journal The Trumpeter: Journal of Ecosophy in 1983. The first British based journal of this
kind, Environmental Values, was launched in 1992.
Marshall's categories of environmental ethics
Some scholars have tried to categorise the various ways the natural environment is valued. Alan
Marshall and Michael Smith are two examples of this, as cited by Peter Vardy in "The Puzzle of
Ethics".According to Marshall, three general ethical approaches have emerged over the last 40
years: Libertarian Extension, the Ecologic Extension and Conservation Ethics.
Libertarian extension
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Marshall’s Libertarian extension echoes a civil liberty approach (i.e. a commitment to extend
equal rights to all members of a community). In environmentalism, though, the community is
generally thought to consist of non-humans as well as humans. Andrew Brennan was an
advocate of ecologic humanism (eco-humanism), the argument that all ontological entities,
animate and in-animate, can be given ethical worth purely on the basis that they exist. The work
of Arne Næss and his collaborator Sessions also falls under the libertarian extension, although
they preferred the term "deep ecology". Deep ecology is the argument for the intrinsic value or
inherent worth of the environment – the view that it is valuable in itself. Their argument,
incidentally, falls under both the libertarian extension and the ecologic extension.
Peter Singer's work can be categorized under Marshall's 'libertarian extension'. He reasoned that
the "expanding circle of moral worth" should be redrawn to include the rights of non-human
animals, and to not do so would be guilty of speciesism. Singer found it difficult to accept the
argument from intrinsic worth of a-biotic or "non-sentient" (non-conscious) entities, and
concluded in his first edition of "Practical Ethics" that they should not be included in the
expanding circle of moral worth. This approach is essentially then, bio-centric. However, in a
later edition of "Practical Ethics" after the work of and Sessions, Singer admits that, although
unconvinced by deep ecology, the argument from intrinsic value of non-sentient entities is
plausible, but at best problematic. Singer advocated a humanist ethics.
Ecologic Extension
Alan Marshall's category of ecologic extension places emphasis not on human rights but on the
recognition of the fundamental interdependence of all biological (and some abiological) entities
and their essential diversity. Whereas Libertarian Extension can be thought of as flowing from a
political reflection of the natural world, Ecologic Extension is best thought of as a scientific
reflection of the natural world. Ecological Extension is roughly the same classification of
Smith’s eco-holism, and it argues for the intrinsic value inherent in collective ecological entities
like ecosystems or the global environment as a whole entity. Holmes Rolston, among others, has
taken this approach.This category might include James Lovelock's Gaia hypothesis; the theory
that the planet earth alters its geo-physiological structure over time in order to ensure the
continuation of an equilibrium of evolving organic and inorganic matter. The planet is
characterized as a unified, holistic entity with ethical worth of which the human race is of no
particular significance in the long run.
Conservation ethics
Marshall's category of 'conservation ethics' is an extension of use-value into the non-human

biological world. It focuses only on the worth of the environment in terms of its utility or
usefulness to humans. It contrasts the intrinsic value ideas of 'deep ecology', hence is often
referred to as 'shallow ecology', and generally argues for the preservation of the environment on
the basis that it has extrinsic value – instrumental to the welfare of human beings. Conservation
is therefore a means to an end and purely concerned with mankind and inter-generational
considerations. It could be argued that it is this ethic that formed the underlying arguments
proposed by Governments at the Kyoto summit in 1997 and three agreements reached in Rio in
1992.
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Humanist theories
Following the bio-centric and eco-holist theory distinctions, Michael Smith further classifies
Humanist theories as those that require a set of criteria for moral status and ethical worth, such as
sentience.[citation needed] This applies to the work of Peter Singer who advocated a hierarchy of
value similar to the one devised by Aristotle which relies on the ability to reason. This was
Singer's solution to the problem that arises when attempting to determine the interests of a non-
sentient entity such as a garden weed. Singer also advocated the preservation of "world heritage
sites," unspoilt parts of the world that acquire a "scarcity value" as they diminish over time. Their
preservation is a bequest for future generations as they have been inherited from human's
ancestors and should be passed down to future generations so they can have the opportunity to
decide whether to enjoy unspoilt countryside or an entirely urban landscape. A good example of
a world heritage site would be the tropical rainforest, a very specialist ecosystem that has taken
centuries to evolve. Clearing the rainforest for farmland often fails due to soil conditions, and
once disturbed, can take thousands of years to regenerate.
Applied theology
Pope Francis’s environmental encyclical Laudato si' has been welcomed by many environmental
organisations of different faiths - Interfaith march in Rome to call for climate actionThe
Christian world view sees the universe as created by God, and humankind accountable to God
for the use of the resources entrusted to humankind. Ultimate values are seen in the light of being
valuable to God. This applies both in breadth of scope - caring for people (Matthew 25) and
environmental issues, e.g. environmental health (Deuteronomy 22.8; 23.12-14) - and dynamic
motivation, the love of Christ controlling (2 Corinthians 5.14f) and dealing with the underlying
spiritual disease of sin, which shows itself in selfishness and thoughtlessness. In many countries
this relationship of accountability is symbolised at harvest thanksgiving. (B.T. Adeney : Global
Ethics in New Dictionary of Christian Ethics and Pastoral Theology 1995 Leicester)Abrahamic
religious scholars have used theology to motivate the public. John L. O'Sullivan, who coined the
term Manifest destiny, and other influential people like him used Abrahamic ideologies to
encourage action. These religious scholars, columnists and politicians historically have used
these ideas and continue to do so to justify the consumptive tendencies of a young America
around the time of the Industrial Revolution. In order to solidify the understanding that God had
intended for humankind to use earths natural resources, environmental writers and religious
scholars alike proclaimed that humans are separate from nature, on a higher order. Those that
may critique this point of view may ask the same question that John Muir asks ironically in a
section of his novel A Thousand Mile Walk to the Gulf, why are there so many dangers in the
natural world in the form of poisonous plants, animals and natural disasters, The answer is that
those creatures are a result of Adam and Eve's sins in the garden of Eden.
Since the turn of the 20th century, the application of theology in environmentalism diverged into
two schools of thought. The first system of understanding holds religion as the basis of
environmental stewardship. The second sees the use of theology as a means to rationalize the
unmanaged consumptions of natural resources. Lynn White and Calvin DeWitt represent each
side of this dichotomy.John Muir personified nature as an inviting place away from the loudness
of urban centers. "For Muir and the growing number of Americans who shared his views, Satan’s
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home had become God’s Own Temple." The use of Abrahamic religious allusions assisted Muir
and the Sierra Club to create support for some of the first public nature preserves.Authors like
Terry Tempest Williams as well as John Muir build on the idea that "...God can be found
wherever you are, especially outside. Family worship was not just relegated to Sunday in a
chapel.” References like these assist the general public to make a connection between paintings
done at the Hudson River School, Ansel Adam's photographs, along with other types of media,
and their religion or spirituality. Placing intrinsic value upon nature through theology is a
fundamental idea of Deep Ecology.
Anthropocentrism
Anthropocentrism is the position that humans are the most important or critical element in any
given situation; that the human race must always be its own primary concern. Detractors of
anthropocentrism argue that the Western tradition biases homo sapiens when considering the
environmental ethics of a situation and that humans evaluate they environment or other
organisms in terms of the utility for them(see speciesism). Many argue that all environmental
studies should include an assessment of the intrinsic value of non-human beings. In fact, based
on this very assumption, a philosophical article has explored recently the possibility of humans'
willing extinction as a gesture toward other beings.] The authors refer to the idea as a thought
experiment that should not be understood as a call for action. What anthropocentric theories do
not allow for is the fact that a system of ethics formulated from a human perspective may not be
entirely accurate; humans are not necessarily the centre of reality. The philosopher Baruch
Spinoza argued that humans tend to assess things wrongly in terms of their usefulness to us.]
Spinoza reasoned that if humans were to look at things objectively, they would discover that
everything in the universe has a unique value. Likewise, it is possible that a human-centred or
anthropocentric/androcentric ethic is not an accurate depiction of reality, and there is a bigger
picture that humans may or may not be able to understand from a human perspective.Peter Vardy
distinguished between two types of anthropocentrism. A strong anthropocentric ethic argues that
humans are at the center of reality and it is right for them to be so. Weak anthropocentrism,
however, argues that reality can only be interpreted from a human point of view, thus humans
have to be at the centre of reality as they see it.Another point of view has been developed by
Bryan Norton, who has become one of the essential actors of environmental ethics by launching
environmental pragmatism, now one of its leading trends. Environmental pragmatism refuses to
take a stance in disputes between defenders of anthropocentrist and non-anthropocentrist ethics.
Instead, Norton distinguishes between strong anthropocentrism and weak-or-extended-
anthropocentrism and argues that the former must underestimate the diversity of instrumental
values humans may derive from the natural world. A recent view relates anthropocentrism to the
future of life. Biotic ethics are based on the human identity as part of gene/protein organic life
whose effective purpose is self-propagation. This implies a human purpose to secure and
propagate life. Humans are central because only they can secure life beyond the duration of the
Sun, possibly for trillions of eons. Biotic ethics values life itself, as embodied in biological
structures and processes. Humans are special because they can secure the future of life on
cosmological scales. In particular, humans can continue sentient life that enjoys its existence,
adding further motivation to propagate life. Humans can secure the future of life, and this future
can give human existence a cosmic purpose.
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Status of the field
Only after 1990 did the field gain institutional recognition at programs such as Colorado State
University, the University of Montana, Bowling Green State University, and the University of
North Texas. In 1991, Schumacher College of Dartington, England, was founded and now
provides an MSc in Holistic Science. These programs began to offer a master's degree with a
specialty in environmental ethics/philosophy. Beginning in 2005 the Department of Philosophy
and Religion Studies at the University of North Texas offered a PhD program with a
concentration in environmental ethics/philosophy.In Germany, the University of Greifswald has
recently established an international program in Landscape Ecology & Nature Conservation with
a strong focus on environmental ethics. In 2009, the University of Munich and Deutsches
Museum founded the Rachel Carson Center for Environment and Society, an international,
interdisciplinary center for research and education in the environmental humanities.
Environmental philosophy
Environmental philosophy is a branch of philosophy that is concerned with the natural

environment and humans' place within it.[1] It asks crucial questions about human environmental
relations such as "What do we mean when we talk about nature?" "What is the value of the
natural that is non-human environment to us, or in itself?" "How should we respond to
environmental challenges such as environmental degradation, pollution and climate change?"
"How can we best understand the relationship between the natural world and human technology
and development?" and "What is our place in the natural world?" As such, it uniquely positions
itself as a field set to deal with the challenges of the 21st Century. Environmental philosophy
includes environmental ethics, environmental aesthetics, ecofeminism, environmental
hermeneutics, and environmental theology. Some of the main areas of interest for environmental
philosophers are:
Marco Casagrande Sandworm, Beaufort04 Triennial of Contemporary Art, Wenduine, Belgium

2012
• Defining environment and nature

• How to value the environment
• Moral status of animals and plants
• Endangered species
• Environmentalism and Deep Ecology
• Aesthetic value of nature
• Restoration of nature
• Consideration of future generations
Contemporary issues
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Modern issues within environmental philosophy include but are not restricted to the concerns of
environmental activism as well as the questions raised by environmental science and technology.
These include issues related to the depletion of finite resources and other harmful and permanent
effects brought on to the environment by humans, as well as the ethical and practical problems
raised by philosophies and practices of environmental conservation, restoration, and policy in
general. At the same time environmental philosophy deals with the value human beings attach to
different kinds of environmental experience, particularly how experiences in or close to non-
human environments contrast with urban or industrialized experiences, and how this varies
across cultures.
Modern history
Environmental Philosophy re-emerged as a major social movement in the 1970s. The movement
was an attempt to connect with humanity's sense of alienation from nature in a continuing
fashion throughout history. This was very closely related to the development at the same time of
ecofeminism, an intersecting discipline. Since then its areas of concern have expanded
significantly. The field is today characterized by a notable diversity of stylistic, philosophical
and cultural approaches to human environmental relationships, from personal and poetic
reflections on environmental experience and arguments for panpsychism to Malthusian
applications of game theory or the question of how to put an economic value on nature's services.
A major debate arose in the 1970s and 80s was that of whether nature has intrinsic value in itself
independent of human values or whether its value is merely instrumental, with ecocentric or deep
ecology approaches emerging on the one hand versus consequentialist or pragmatist
anthropocentric approaches on the other. Another debate that arose at this time was the debate
over whether there really is such a thing as wilderness or not, or whether it is merely a cultural
construct with colonialist implications. Since then, readings of environmental history and
discourse have become more critical and refined. In this ongoing debate, a diversity of dissenting
voices have emerged from different cultures across the globe questioning the dominance of
Western assumptions, helping to transform the field. In recent decades, there has been a
significant challenge to deep ecology and the concepts of nature that underlie it, some arguing
that there is not really such a thing as nature at all beyond some self-contradictory and even
politically dubious constructions of an ideal other that ignore the real human-environmental
interactions that shape our world and lives.[7] This has been alternately dubbed the postmodern,
constructivist, and most recently post-naturalistic turn in environmental philosophy.
Environmental aesthetics, design and restoration have emerged as important intersecting
disciplines that keep shifting the boundaries of environmental thought, as have the science of
climate change and biodiversity and the ethical, political and epistemological questions they
raise. Today, environmental philosophy is a burgeoning and increasingly relevant field.
Deep ecology movement
In 1984, George Sessions and Arne Naess articulated the principles of the new Deep Ecology
Movement. These basic principles are:
• The well-being and flourishing of human and non-human life have value.
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• Richness and diversity of life forms contribute to the realization of these values and are
also values in themselves.
• Humans have no right to reduce this richness and diversity except to satisfy vital needs.
• The flourishing of human life and cultures is compatible with a substantial decrease in the
human population.
• Present human interference with the nonhuman world is excessive, and the situation is
rapidly worsening.
• Policies must therefore be changed. These policies affect basic economic, technological,
and ideological structures. The resulting state of affairs will be deeply different from the
present.
• The ideological change is mainly that of appreciating life quality (dwelling in situations
of inherent value), rather than adhering to an increasingly higher standard of living. There
will be a profound awareness of the difference between big and great.
• Those who subscribe to the foregoing points have an obligation directly or indirectly to
try to implement the necessary changes.
Environmental law
Environmental law - or "environmental and natural resources law" - is a collective term

describing the network of treaties, statutes, regulations, and common and customary laws
addressing the effects of human activity on the natural environment.
Regulatory subjects
The broad category of "environmental law" may be broken down into a number of more specific
regulatory subjects. While there is no single agreed-upon taxonomy, the core environmental law
regimes address environmental pollution. A related but distinct set of regulatory regimes, now
strongly influenced by environmental legal principles, focus on the management of specific
natural resources, such as forests, minerals, or fisheries. Other areas, such as environmental
impact assessment, may not fit neatly into either category, but are nonetheless important
components of environmental law.
Impact assessment
Environmental impact assessment (EA) is the term used for the assessment of the environmental
consequences (positive and negative) of a plan, policy, program, or project prior to the decision
to move forward with the proposed action. In this context, the term 'environmental impact
assessment' (EIA) is usually used when applied to concrete projects and the term 'strategic
environmental assessment' applies to policies, plans and programmes (Fischer, 2016).
Environmental assessments may be governed by rules of administrative procedure regarding
public participation and documentation of decision making, and may be subject to judicial
review.
Air quality
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Air quality laws govern the emission of air pollutants into the atmosphere. A specialized subset
of air quality laws regulate the quality of air inside buildings. Air quality laws are often designed
specifically to protect human health by limiting or eliminating airborne pollutant concentrations.
Other initiatives are designed to address broader ecological problems, such as limitations on
chemicals that affect the ozone layer, and emissions trading programs to address acid rain or
climate change. Regulatory efforts include identifying and categorizing air pollutants, setting
limits on acceptable emissions levels, and dictating necessary or appropriate mitigation
technologies.
Water quality
Water quality laws govern the release of pollutants into water resources, including surface water,
ground water, and stored drinking water. Some water quality laws, such as drinking water
regulations, may be designed solely with reference to human health. Many others, including
restrictions on the alteration of the chemical, physical, radiological, and biological characteristics
of water resources, may also reflect efforts to protect aquatic ecosystems more broadly.
Regulatory efforts may include identifying and categorizing water pollutants, dictating
acceptable pollutant concentrations in water resources, and limiting pollutant discharges from
effluent sources. Regulatory areas include sewage treatment and disposal, industrial and
agricultural waste water management, and control of surface runoff from construction sites and
urban environments.
Waste management
Waste management laws govern the transport, treatment, storage, and disposal of all manner of
waste, including municipal solid waste, hazardous waste, and nuclear waste, among many other
types. Waste laws are generally designed to minimize or eliminate the uncontrolled dispersal of
waste materials into the environment in a manner that may cause ecological or biological harm,
and include laws designed to reduce the generation of waste and promote or mandate waste
recycling. Regulatory efforts include identifying and categorizing waste types and mandating
transport, treatment, storage, and disposal practices.
Contaminant cleanup
Environmental cleanup laws govern the removal of pollution or contaminants from

environmental media such as soil, sediment, surface water, or ground water. Unlike pollution
control laws, cleanup laws are designed to respond after-the-fact to environmental
contamination, and consequently must often define not only the necessary response actions, but
also the parties who may be responsible for undertaking (or paying for) such actions. Regulatory
requirements may include rules for emergency response, liability allocation, site assessment,
remedial investigation, feasibility studies, remedial action, post-remedial monitoring, and site
reuse.
Chemical safety
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Chemical safety laws govern the use of chemicals in human activities, particularly man-made
chemicals in modern industrial applications. As contrasted with media-oriented environmental
laws (e.g., air or water quality laws), chemical control laws seek to manage the (potential)
pollutants themselves. Regulatory efforts include banning specific chemical constituents in
consumer products (e.g., Bisphenol A in plastic bottles), and regulating pesticides.
Water resources
An irrigation ditch, operated in accordance with water resources law. Water resources laws
govern the ownership and use of water resources, including surface water and ground water.
Regulatory areas may include water conservation, use restrictions, and ownership regimes.
Mineral resources
Mineral resource laws cover several basic topics, including the ownership of the mineral
resource and who can work them. Mining is also affected by various regulations regarding the
health and safety of miners, as well as the environmental impact of mining.
Forest resources
Forestry laws govern activities in designated forest lands, most commonly with respect to forest
management and timber harvesting. Ancillary laws may regulate forest land acquisition and
prescribed burn practices. Forest management laws generally adopt management policies, such
as multiple use and sustained yield, by which public forest resources are to be managed.
Governmental agencies are generally responsible for planning and implementing forestry laws
on public forest lands, and may be involved in forest inventory, planning, and conservation, and
oversight of timber sales. Broader initiatives may seek to slow or reverse deforestation.
Wildlife and plants
Wildlife laws govern the potential impact of human activity on wild animals, whether directly on
individuals or populations, or indirectly via habitat degradation. Similar laws may operate to
protect plant species. Such laws may be enacted entirely to protect biodiversity, or as a means for
protecting species deemed important for other reasons. Regulatory efforts may including the
creation of special conservation statuses, prohibitions on killing, harming, or disturbing protected
species, efforts to induce and support species recovery, establishment of wildlife refuges to
support conservation, and prohibitions on trafficking in species or animal parts to combat
poaching.
Fish and game
Fish and game laws regulate the right to pursue and take or kill certain kinds of fish and wild
animal (game). Such laws may restrict the days to harvest fish or game, the number of animals
caught per person, the species harvested, or the weapons or fishing gear used. Such laws may
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seek to balance dueling needs for preservation and harvest and to manage both environment and
populations of fish and game. Game laws can provide a legal structure to collect license fees and
other money which is used to fund conservation efforts as well as to obtain harvest information
used in wildlife management practice.
Important principles
Environmental law has developed in response to emerging awareness of and concern over issues
impacting the entire world. While laws have developed piecemeal and for a variety of reasons,
some effort has gone into identifying key concepts and guiding principles common to
environmental law as a whole.[1] The principles discussed below are not an exhaustive list and
are not universally recognized or accepted. Nonetheless, they represent important principles for
the understanding of environmental law around the world.
Sustainable Development
Defined by the United Nations Environment Programme as "development that meets the needs of
the present without compromising the ability of future generations to meet their own needs,"
sustainable development may be considered together with the concepts of "integration"
(development cannot be considered in isolation from sustainability) and "interdependence"
(social and economic development, and environmental protection, are interdependent).[2] Laws
mandating environmental impact assessment and requiring or encouraging development to
minimize environmental impacts may be assessed against this principle.The modern concept of
sustainable development was a topic of discussion at the 1972 United Nations Conference on the
Human Environment (Stockholm Conference), and the driving force behind the 1983 World
Commission on Environment and Development (WCED, or Bruntland Commission). In 1992,
the first UN Earth Summit resulted in the Rio Declaration, Principle 3 of which reads: "The right
to development must be fulfilled so as to equitably meet developmental and environmental needs
of present and future generations." Sustainable development has been a core concept of
international environmental discussion ever since, including at the World Summit on Sustainable
Development (Earth Summit 2002), and the United Nations Conference on Sustainable
Development (Earth Summit 2012, or Rio+20).
Equity
Defined by UNEP to include intergenerational equity - "the right of future generations to enjoy a
fair level of the common patrimony" - and intragenerational equity - "the right of all people
within the current generation to fair access to the current generation's entitlement to the Earth's
natural resources" - environmental equity considers the present generation under an obligation to
account for long-term impacts of activities, and to act to sustain the global environment and
resource base for future generations.[3] Pollution control and resource management laws may be
assessed against this principle.
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Transboundary responsibility
Defined in the international law context as an obligation to protect one's own environment, and
to prevent damage to neighboring environments, UNEP considers transboundary responsibility at
the international level as a potential limitation on the rights of the sovereign state.[4] Laws that
act to limit externalities imposed upon human health and the environment may be assessed
against this principle.
Public participation and transparency
Identified as essential conditions for "accountable governments . . ., industrial concerns," and

organizations generally, public participation and transparency are presented by UNEP as
requiring "effective protection of the human right to hold and express opinions and to seek,
receive and impart ideas," "a right of access to appropriate, comprehensible and timely
information held by governments and industrial concerns on economic and social policies
regarding the sustainable use of natural resources and the protection of the environment, without
imposing undue financial burdens upon the applicants and with adequate protection of privacy
and business confidentiality," and "effective judicial and administrative proceedings." These
principles are present in environmental impact assessment, laws requiring publication and access
to relevant environmental data, and administrative procedure.
Precautionary principle
One of the most commonly encountered and controversial principles of environmental law, the
Rio Declaration formulated the precautionary principle as follows:In order to protect the
environment, the precautionary approach shall be widely applied by States according to their
capabilities. Where there are threats of serious or irreversible damage, lack of full scientific
certainty shall not be used as a reason for postponing cost-effective measures to prevent
environmental degradation. The principle may play a role in any debate over the need for
environmental regulation.
Prevention
The concept of prevention . . . can perhaps better be considered an overarching aim that
gives rise to a multitude of legal mechanisms, including prior assessment of
environmental harm, licensing or authorization that set out the conditions for operation
and the consequences for violation of the conditions, as well as the adoption of strategies
and policies. Emission limits and other product or process standards, the use of best
available techniques and similar techniques can all be seen as applications of the concept
of prevention.[5]
Polluter pays principle
The polluter pays principle stands for the idea that "the environmental costs of economic
activities, including the cost of preventing potential harm, should be internalized rather than
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imposed upon society at large." All issues related to responsibility for cost for environmental
remediation and compliance with pollution control regulations involve this principle.
History
Early examples of legal enactments designed to consciously preserve the environment, for its
own sake or human enjoyment, are found throughout history. In the common law, the primary
protection was found in the law of nuisance, but this only allowed for private actions for
damages or injunctions if there was harm to land. Thus smells emanating from pig stys, strict
liability against dumping rubbish, or damage from exploding dams. Private enforcement,
however, was limited and found to be woefully inadequate to deal with major environmental
threats, particularly threats to common resources. During the "Great Stink" of 1858, the dumping
of sewerage into the River Thames began to smell so ghastly in the summer heat that Parliament
had to be evacuated. Ironically, the Metropolitan Commission of Sewers Act 1848 had allowed
the Metropolitan Commission for Sewers to close cesspits around the city in an attempt to "clean
up" but this simply led people to pollute the river. In 19 days, Parliament passed a further Act to
build the London sewerage system. London also suffered from terrible air pollution, and this
culminated in the "Great Smog" of 1952, which in turn triggered its on legislative response: the
Clean Air Act 1956. The basic regulatory structure was to set limits on emissions for households
and business (particularly burning coal) while an inspectorate would enforce
compliance.Notwithstanding early analogues, the concept of "environmental law" as a separate
and distinct body of law is a twentieth-century development. The recognition that the natural
environment was fragile and in need of special legal protections, the translation of that
recognition into legal structures, the development of those structures into a larger body of
"environmental law," and the strong influence of environmental law on natural resource laws, did
not occur until about the 1960s. At that time, numerous influences - including a growing
awareness of the unity and fragility of the biosphere; increased public concern over the impact of
industrial activity on natural resources and human health; the increasing strength of the
regulatory state; and more broadly the advent and success of environmentalism as a political
movement - coalesced to produce a huge new body of law in a relatively short period of time.
While the modern history of environmental law is one of continuing controversy, by the end of
the twentieth century environmental law had been established as a component of the legal
landscape in all developed nations of the world, many developing ones, and the larger project of
international law.
Controversy
Environmental law is a continuing source of controversy. Debates over the necessity, fairness,
and cost of environmental regulation are ongoing, as well as regarding the appropriateness of
regulations vs. market solutions to achieve even agreed-upon ends.Allegations of scientific
uncertainty fuel the ongoing debate over greenhouse gas regulation, and are a major factor in
debates over whether to ban particular pesticides. In cases where the science is well-settled, it is
not unusual to find that corporations intentionally hide or distort the facts, or sow confusion. It is
very common for regulated industry to argue against environmental regulation on the basis of
cost. Difficulties arise in performing cost-benefit analysis of environmental issues. It is difficult
to quantify the value of an environmental value such as a healthy ecosystem, clean air, or species
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diversity. Many environmentalists' response to pitting economy vs. ecology is summed up by
former Senator and founder of Earth Day Gaylord Nelson, "The economy is a wholly owned
subsidiary of the environment, not the other way around." Furthermore, environmental issues are
seen by many as having an ethical or moral dimension, which would transcend financial cost.
Even so, there are some efforts underway to systemically recognize environmental costs and
assets, and account for them properly in economic terms.While affected industries spark
controversy in fighting regulation, there are also many environmentalists and public interest
groups who believe that current regulations are inadequate, and advocate for stronger protection.
Environmental law conferences - such as the annual Public Interest Environmental Law
Conference in Eugene, Oregon - typically have this focus, also connecting environmental law
with class, race, and other issues.
International law
Global and regional environmental issues are increasingly the subject of international law.
Debates over environmental concerns implicate core principles of international law and have
been the subject of numerous international agreements and declarations. Customary international
law is an important source of international environmental law. These are the norms and rules that
countries follow as a matter of custom and they are so prevalent that they bind all states in the
world. When a principle becomes customary law is not clear cut and many arguments are put
forward by states not wishing to be bound. Examples of customary international law relevant to
the environment include the duty to warn other states promptly about icons of an environmental
nature and environmental damages to which another state or states may be exposed, and
Principle 21 of the Stockholm Declaration ('good neighbourliness' or sic utere).Numerous legally
binding international agreements encompass a wide variety of issue-areas, from terrestrial,
marine and atmospheric pollution through to wildlife and biodiversity protection. International
environmental agreements are generally multilateral (or sometimes bilateral) treaties (a.k.a.
convention, agreement, protocol, etc.). Protocols are subsidiary agreements built from a primary
treaty. They exist in many areas of international law but are especially useful in the
environmental field, where they may be used to regularly incorporate recent scientific
knowledge. They also permit countries to reach agreement on a framework that would be
contentious if every detail were to be agreed upon in advance. The most widely known protocol
in international environmental law is the Kyoto Protocol, which followed from the United
Nations Framework Convention on Climate Change.While the bodies that proposed, argued,
agreed upon and ultimately adopted existing international agreements vary according to each
agreement, certain conferences, including 1972's United Nations Conference on the Human
Environment, 1983's World Commission on Environment and Development, 1992's United
Nations Conference on Environment and Development and 2002's World Summit on Sustainable
Development have been particularly important. Multilateral environmental agreements
sometimes create an International Organization, Institution or Body responsible for
implementing the agreement. Major examples are the Convention on International Trade in
Endangered Species of Wild Fauna and Flora (CITES) and the International Union for
Conservation of Nature (IUCN).International environmental law also includes the opinions of
international courts and tribunals. While there are few and they have limited authority, the
decisions carry much weight with legal commentators and are quite influential on the
development of international environmental law. One of the biggest challenges in international
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decisions is to determine an adequate compensation for environmental damages. The courts
include the International Court of Justice (ICJ); the international Tribunal for the Law of the Sea
(ITLOS); the European Court of Justice; European Court of Human Rights and other regional
treaty tribunals.
Africa
According to the International Network for Environmental Compliance and Enforcement

(INECE), the major environmental issues in Africa are “drought and flooding, air pollution,
deforestation, loss of biodiversity, freshwater availability, degradation of soil and vegetation, and
widespread poverty. The U.S. Environmental Protection Agency (EPA) is focused on the
“growing urban and industrial pollution, water quality, electronic waste and indoor air from
cookstoves.” They hope to provide enough aid on concerns regarding pollution before their
impacts contaminate the African environment as well as the global environment. By doing so,
they intend to “protect human health, particularly vulnerable populations such as children and the
poor In order to accomplish these goals in Africa, EPA programs are focused on strengthening
the ability to enforce environmental laws as well as public compliance to them. Other programs
work on developing stronger environmental laws, regulations, and standards.
Asia
The Asian Environmental Compliance and Enforcement Network (AECEN) is an agreement

between 16 Asian countries dedicated to improving cooperation with environmental laws in
Asia. These countries include Cambodia, China, Indonesia, India, Maldives, Japan, Korea,
Malaysia, Nepal, Philippines, Pakistan, Singapore, Sri Lanka, Thailand, Vietnam, and Lao PDR.
European Union
The European Union issues secondary legislation on environmental issues that are valid
throughout the EU (so called regulations) and many directives that must be implemented into
national legislation from the 28 member states (national states). Examples are the Regulation
(EC) No. 338/97 on the implementation of CITES; or the Natura 2000 network the centerpiece
for nature & biodiversity policy, encompassing the bird Directive (79/409/EEC/ changed to
2009/147/EC)and the habitats directive (92/43/EEC). Which are made up of multiple SACs
(Special Areas of Conservation, linked to the habitats directive) & SPAs (Special Protected
Areas, linked to the bird directive), throughout Europe.
EU legislation is ruled in Article 249 Treaty for the Functioning of the European Union (TFEU).
Topics for common EU legislation are:
• Climate change
• Air pollution
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• Water protection and management
• Waste management
• Soil protection
• Protection of nature, species and biodiversity
• Noise pollution
• Cooperation for the environment with third countries (other than EU member states)
• Civil protection
Middle East
The U.S. Environmental Protection Agency is working with countries in the Middle East to
improve “environmental governance, water pollution and water security, clean fuels and
vehicles, public participation, and pollution prevention.”[23]
Oceania
The main concerns on environmental issues in the Oceanic Region are “illegal releases of air and
water pollutants, illegal logging/timber trade, illegal shipment of hazardous wastes, including e-
waste and ships slated for destruction, and insufficient institutional structure/lack of enforcement
capacity”.[24] The Secretariat of the Pacific Regional Environmental Programme (SPREP) is an
international organization between Australia, the Cook Islands, FMS, Fiji, France, Kiribati,
Marshall Islands, Nauru, New Zealand, Niue, Palau, PNG, Samoa, Solomon Island, Tonga,
Tuvalu, USA, and Vanuatu. The SPREP was established in order to provide assistance in
improving and protecting the environment as well as assure sustainable development for future
generations.
Australia
The Environment Protection and Biodiversity Conservation Act 1999 is the center piece of
environmental legislation in the Australian Government. It sets up the “legal framework to
protect and manage nationally and internationally important flora, fauna, ecological communities
and heritage places”.[27] It also focuses on protecting world heritage properties, national heritage
properties, wetlands of international importance, nationally threatened species and ecological
communities, migratory species, Commonwealth marine areas, Great Barrier Reef Marine Park,
and the environment surrounding nuclear activities.[27] Commonwealth v Tasmania (1983), also
known as the "Tasmanian Dam Case", is the most influential case for Australian environmental
law.
Brazil
The Brazilian government created the Ministry of Environment in 1992 in order to develop better
strategies of protecting the environment, use natural resources sustainably, and enforce public
environmental policies. The Ministry of Environment has authority over policies involving
environment, water resources, preservation, and environmental programs involving the Amazon.
Canada
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The Department of the Environment Act establishes the Department of the Environment in the
Canadian government as well as the position Minister of the Environment. Their duties include
“the preservation and enhancement of the quality of the natural environment, including water, air
and soil quality; renewable resources, including migratory birds and other non-domestic flora
and fauna; water; meteorology;" The Environmental Protection Act is the main piece of
Canadian environmental legislation that was put into place March 31, 2000. The Act focuses on
“respecting pollution prevention and the protection of the environment and human health in
order to contribute to sustainable development." Other principle federal statutes include the
Canadian Environmental Assessment Act, and the Species at Risk Act. When provincial and
federal legislation are in conflict federal legislation takes precedence, that being said individual
provinces can have their own legislation such as Ontario's Environmental Bill of Rights, and
Clean Water Act.
China
According to the U.S. Environmental Protection Agency, "China has been working with great
determination in recent years to develop, implement, and enforce a solid environmental law
framework. Chinese officials face critical challenges in effectively implementing the laws,
clarifying the roles of their national and provincial governments, and strengthening the operation
of their legal system." Explosive economic and industrial growth in China has led to significant
environmental degradation, and China is currently in the process of developing more stringent
legal controls. The harmonization of Chinese society and the natural environment is billed as a
rising policy priority.
Ecuador
With the enactment of the 2008 Constitution, Ecuador became the first country in the world to
codify the Rights of Nature. The Constitution, specifically Articles 10 and 71-74, recognizes the
inalienable rights of ecosystems to exist and flourish, gives people the authority to petition on the
behalf of ecosystems, and requires the government to remedy violations of these rights. The
rights approach is a break away from traditional environmental regulatory systems, which regard
nature as property and legalize and manage degradation of the environment rather than prevent
it. The Rights of Nature articles in Ecuador's constitution are part of a reaction to a combination
of political, economic, and social phenomena. Ecuador's abusive past with the oil industry, most
famously the class-action litigation against Chevron, and the failure of an extraction-based
economy and neoliberal reforms to bring economic prosperity to the region has resulted in the
election of a New Leftist regime, led by President Rafael Correa, and sparked a demand for new
approaches to development. In conjunction with this need, the principle of "Buen Vivir," or good
living—focused on social, environmental and spiritual wealth versus material wealth—gained
popularity among citizens and was incorporated into the new constitution. The influence of
indigenous groups, from whom the concept of "Buen Vivir" originates, in the forming of the
constitutional ideals also facilitated the incorporation of the Rights of Nature as a basic tenet of
their culture and conceptualization of "Buen Vivir."
Egypt
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The Environmental Protection Law outlines the responsibilities of the Egyptian government to
“preparation of draft legislation and decrees pertinent to environmental management, collection
of data both nationally and internationally on the state of the environment, preparation of
periodical reports and studies on the state of the environment, formulation of the national plan
and its projects, preparation of environmental profiles for new and urban areas, and setting of
standards to be used in planning for their development, and preparation of an annual report on
the state of the environment to be prepared to the President."
India
In India, Environmental law is governed by the Environment Protection Act, 1986.[42] This act is
enforced by the Central Pollution Control Board and the numerous State Pollution Control
Boards. Apart from this, there are also individual legislations specifically enacted for the
protection of Water, Air, Wildlife, etc. Such legislations include :-
• The Water (Prevention and Control of Pollution) Act, 1974

• The Water (Prevention and Control of Pollution) Cess Act, 1977
• The Forest (Conservation) Act, 1980
• The Air (Prevention and Control of Pollution) Act, 1981
• Air (Prevention and Control of Pollution) (Union Territories) Rules, 1983
• The Biological Diversity Act, 2002 and the Wild Life Protection Act, 1972.
• Batteries (Management and Handling) Rules, 2001
• Recycled Plastics, Plastics Manufacture and Usage Rules, 1999
• The National Green Tribunal established under the National Green Tribunal Act of
2010[43] has jurisdiction over all environmental cases dealing with a substantial
environmental question and acts covered under the Water (Prevention and Control of
Pollution) Act, 1974;
• Water (Prevention and Control of Pollution) Cess Rules, 1978
• Ganga Action Plan, 1986
• The Forest (Conservation) Act, 1980
• The Public Liability Insurance Act, 1991 and the Biological Diversity Act, 2002. The acts
covered under Indian Wild Life Protection Act 1972 do not fall within the jurisdiction of
the National Green Tribunal. Appeals can be filed in the Hon'ble Supreme Court of India.
• Basel Convention on Control of TransboundaryMovements on Hazardous Wastes and
Their Disposal, 1989 and Its Protocols
• Hazardous Wastes (Management and Handling) Amendment Rules, 2003
Japan
The Basic Environmental Law is the basic structure of Japan’s environmental policies replacing
the Basic Law for Environmental Pollution Control and the Nature Conservation Law. The
updated law aims to address “global environmental problems, urban pollution by everyday life,
loss of accessible natural environment in urban areas and degrading environmental protection
capacity in forests and farmlands.”The three basic environmental principles that the Basic
Environmental Law follows are “the blessings of the environment should be enjoyed by the
present generation and succeeded to the future generations, a sustainable society should be
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created where environmental loads by human activities are minimized, and Japan should
contribute actively to global environmental conservation through international cooperation.”
From these principles, the Japanese government have established policies such as
“environmental consideration in policy formulation, establishment of the Basic Environment
Plan which describes the directions of long-term environmental policy, environmental impact
assessment for development projects, economic measures to encourage activities for reducing
environmental load, improvement of social infrastructure such as sewerage system, transport
facilities etc., promotion of environmental activities by corporations, citizens and NGOs,
environmental education, and provision of information, promotion of science and technology."
New Zealand
The Ministry for the Environment and Office of the Parliamentary Commissioner for the
Environment were established by the Environment Act 1986. These positions are responsible for
advising the Minister on all areas of environmental legislation. A common theme of New
Zealand’s environmental legislation is sustainably managing natural and physical resources,
fisheries, and forests. The Resource Management Act 1991 is the main piece of environmental
legislation that outlines the government’s strategy to managing the “environment, including air,
water soil, biodiversity, the coastal environment, noise, subdivision, and land use planning in
general.”
Russia
The Ministry of Natural Resources and Environment of the Russian Federation makes regulation
regarding “conservation of natural resources, including the subsoil, water bodies, forests located
in designated conservation areas, fauna and their habitat, in the field of hunting,
hydrometeorology and related areas, environmental monitoring and pollution control, including
radiation monitoring and control, and functions of public environmental policy making and
implementation and statutory regulation."
Vietnam
Vietnam is currently working with the U.S. Environmental Protection Agency on dioxin
remediation and technical assistance in order to lower methane emissions. In March 2002, the
U.S and Vietnam signed the U.S.-Vietnam Memorandum of Understanding on Research on
Human Health and the Environmental Effects of Agent Orange/Dioxin.
Environmental sociology
Environmental sociology is typically defined as the sociological study of societal-

environmental interactions, although this definition immediately presents the problem of
integrating human cultures with the rest of the environment. Although the focus of the field is the
relationship between society and environment in general, environmental sociologists typically
place special emphasis on studying the social factors that cause environmental problems, the
societal impacts of those problems, and efforts to solve the problems. In addition, considerable
attention is paid to the social processes by which certain environmental conditions become
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socially defined as problems.Although there was sometimes acrimonious debate between the
constructivist and realist "camps" within environmental sociology in the 1990s, the two sides
have found considerable common ground as both increasingly accept that while most
environmental problems have a material reality they nonetheless become known only via human
processes such as scientific knowledge, activists' efforts, and media attention. In other words,
most environmental problems have a real ontological status despite our knowledge/awareness of
them stemming from social processes, processes by which various conditions are constructed as
problems by scientists, activists, media and other social actors. Correspondingly, environmental
problems must all be understood via social processes, despite any material basis they may have
external to humans. This interactiveness is now broadly accepted, but many aspects of the debate
continue in contemporary research in the field.
History
Ancient Greeks idealized life in nature using the idea of the pastoral. Much later, Romantic
writers such as Wordsworth took their inspiration from nature.Modern thought surrounding
human-environment relations can be traced back to Charles Darwin. Darwin’s concept of natural
selection suggested that certain social characteristics played a key role in the survivability of
groups in the natural environment. Although typically taken at the micro-level, evolutionary
principles, particularly adaptability, serve as a microcosm of human ecology. Work by Craig
Humphrey and Frederick Buttel (2002) traces the linkages between Darwin's work on natural
selection, human ecological sociology, and environmental sociology.Sociology developed as a
scholarly discipline in the mid- and late-19th and early 20th centuries, in a context where
biological determinism had failed to fully explain key features of social change, including the
evolving relationship between humans and their natural environments. In its foundational years,
classical sociology thus saw social and cultural factors as the dominant, if not exclusive, cause of
social and cultural conditions. This lens down-played interactive factors in the relationship
between humans and their biophysical environments.Environmental sociology emerged as a
coherent subfield of inquiry after the environmental movement of the 1960s and early 1970s.
The works of William R. Catton, Jr. and Riley Dunlap, among others, challenged the constricted
anthropocentrism of classical sociology. In the late 1970s, they called for a new holistic, or
systems perspective. Since the 1970s, general sociology has noticeably transformed to include
environmental forces in social explanations. Environmental sociology has now solidified as a
respected, interdisciplinary field of study in academia.
Existential dualism
The duality of the human condition rests with cultural uniqueness and evolutionary traits. From
one perspective, humans are embedded in the ecosphere and co-evolved alongside other species.
Humans share the same basic ecological dependencies as other inhabitants of nature. From the
other perspectives, humans are distinguished from other species because of their innovative
capacities, distinct cultures and varied institutions. Human creations have the power to
independently manipulate, destroy, and transcend the limits of the natural environment (Buttel
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and Humphrey, 2002: p. 47).According to Buttel (2005), there are five basic epistemologies in
environmental sociology (kindly mention them). In practice, this means five different theories of
what to blame for environmental degradation, i.e., what to research or consider as important. In
order of their invention, these ideas of what to blame build on each other and thus contradict
each other.
Neo-Malthusianism
Works such as Hardin's the tragedy of the commons (1968) reformulated Malthusian thought
about abstract population increases causing famines into a model of individual selfishness at
larger scales causing degradation of common pool resources such as the air, water, the oceans, or
general environmental conditions. Hardin offered privatization of resources or government
regulation as solutions to environmental degradation caused by tragedy of the commons
conditions. Many other sociologists shared this view of solutions well into the 1970s (see
Ophuls). There have been many critiques of this view particularly political scientist Elinor
Ostrom, or economists Amartya Sen and Ester Boserup.Even though much of mainstream
journalism considers Malthusianism the only view of environmentalism, most sociologists would
disagree with Malthusianism since social organizational issues of environmental degradation are
more demonstrated to cause environmental problems than abstract population or selfishness per
se. For examples of this critique, Ostrom in her book Governing the Commons: The Evolution of
Institutions for Collective Action (1990) argues that instead of self-interest always causing
degradation, it can sometimes motivate people to take care of their common property resources.
To do this they must change the basic organizational rules of resource use. Her research provides
evidence for sustainable resource management systems, around common pool resources that
have lasted for centuries in some areas of the world.Amartya Sen argues in his book Poverty and
Famines: An Essay on Entitlement and Deprivation (1980) that population expansion fails to
cause famines or degradation as Malthusians or Neo-Malthusians argue. Instead, in documented
cases a lack of political entitlement to resources that exist in abundance, causes famines in some
populations. He documents how famines can occur even in the midst of plenty or in the context
of low populations. He argues that famines (and environmental degradation) would only occur in
non-functioning democracies or unrepresentative states.Ester Boserup argues in her book The
Conditions of Agricultural Growth: The Economics of Agrarian Change under Population
Pressure (1965) from inductive, empirical case analysis that Malthus's more deductive
conception of a presumed one-to-one relationship with agricultural scale and population is
actually reversed. Instead of agricultural technology and scale determining and limiting
population as Malthus attempted to argue, Boserup argued the world is full of cases of the direct
opposite: that population changes and expands agricultural methods.Eco-Marxist scholar Allan
Schnaiberg (below) argues against Malthusianism with the rationale that under larger capitalist
economies, human degradation moved from localized, population-based degradation to
organizationally caused degradation of capitalist political economies to blame. He gives the
example of the organized degradation of rainforest areas which states and capitalists push people
off the land before it is degraded by organizational means. Thus, many authors are critical of
Malthusianism, from sociologists (Schnaiberg)to economists (Sen and Boserup), to political
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scientists (Ostrom), and all focus on how a country's social organization of its extraction can
degrade the environment independent of abstract population.
New Ecological Paradigm
In the 1970s, The New Ecological Paradigm (NEP) conception critiqued the claimed lack of
human-environmental focus in the classical sociologists and the Sociological priorities their
followers created. This was critiqued as the Human Exceptionalism Paradigm (HEP). The HEP
viewpoint claims that human-environmental relationships were unimportant sociologically
because humans are 'exempt' from environmental forces via cultural change. This view was
shaped by the leading Western worldview of the time and the desire for Sociology to establish
itself as an independent discipline against the then popular racist-biological environmental
determinism where environment was all. In this HEP view, human dominance was felt to be
justified by the uniqueness of culture, argued to be more adaptable than biological traits.
Furthermore, culture also has the capacity to accumulate and innovate, making it capable of
solving all natural problems. Therefore, as humans were not conceived of as governed by natural
conditions, they were felt to have complete control of their own destiny. Any potential limitation
posed by the natural world was felt to be surpassed using human ingenuity. Research proceeded
accordingly without environmental analysis.In the 1970s, sociological scholars Riley Dunlap and
William R. Catton, Jr. began recognizing the limits of what would be termed the Human
Exemptionalism Paradigm. Catton and Dunlap (1978) suggested a new perspective that took
environmental variables into full account. They coined a new theoretical outlook for Sociology,
the New Ecological Paradigm, with assumptions contrary to HEP.The NEP recognizes the
innovative capacity of humans, but says that humans are still ecologically interdependent as with
other species. The NEP notes the power of social and cultural forces but does not profess social
determinism. Instead, humans are impacted by the cause, effect, and feedback loops of
ecosystems. The Earth has a finite level of natural resources and waste repositories. Thus, the
biophysical environment can impose constraints on human activity. They discussed a few
harbingers of this NEP in 'hybridized' theorizing about topics that were neither exclusively social
nor environmental explanations of environmental conditions. It was additionally a critique of
Malthusian views of the 1960s and 1970s.Dunlap and Catton's work immediately received a
critique from Buttel who argued to the contrary that classical sociological foundations could be
found for environmental sociology, particularly in Weber's work on ancient "agrarian
civilizations" and Durkheim's view of the division of labor as built on a material premise of
specialization/specialization in response to material scarcity. This environmental aspect of
Durkheim has been discussed by Schnaiberg (1971) as well.
Eco-Marxism
In the middle of the HEP/NEP debate, the general trend of Neo-Marxism was occurring. There
was cross pollination. Neo-Marxism was based on the collapse of the widespread believability of
the Marxist social movement in the failed revolts of the 1960s and the rise of many New Social
Movements that failed to fit in many Marxist analytic frameworks of conflict sociology.
Sociologists entered the fray with empirical research on these novel social conflicts. Neo-
Marxism's stress on the relative autonomy of the state from capital control instead of it being
only a reflection of economic determinism of class conflict yielded this novel theoretical
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viewpoint in the 1970s. Neo-Marxist ideas of conflict sociology were applied to
capital/state/labor/environmental conflicts instead of only labor/capital/state conflicts over
production.Therefore, some sociologists wanted to stretch Marxist ideas of social conflict to
analyze environmental social movements from this materialist framework instead of interpreting
environmental movements as a more cultural "New Social Movement" separate than material
concerns. So "Eco-Marxism" was based on using Neo-Marxist conflict sociology concepts of the
relative autonomy of the state applied to environmental conflict.Two people following this
school were James O'Connor (The Fiscal Crisis of the State, 1971) and later Allan
Schnaiberg.Later, a different trend developed in eco-Marxism via the attention brought to the
importance of metabolic analysis in Marx’s thought by John Bellamy Foster. Contrary to
previous assumptions that classical theorists in sociology all had fallen within a Human
Exemptionalist Paradigm, Foster argued that Marx’s materialism lead him to theorize labor as
the metabolic process between humanity and the rest of nature. In Promethean interpretations of
Marx that Foster critiques, there was an assumption his analysis was very similar to the
anthropocentric views critiqued by early environmental sociologists. Instead, Foster argued Marx
himself was concerned about the Metabolic Rift generated by capitalist society’s social
metabolism, particularly in industrial agriculture— Marx had identified an "irreparable rift in the
interdependent process of social metabolism," created by capitalist agriculture that was
destroying the productivity of the land and creating wastes in urban sites that failed to be
reintegrated into the land and thus lead toward destruction of urban workers health
simultaneously. Reviewing the contribution of this thread of eco-marxism to current
environmental sociology, Pellow and Brehm conclude "The metabolic rift is a productive
development in the field because it connects current research to classical theory and links
sociology with an interdisciplinary array of scientific literatures focused on ecosystem
dynamics." Foster emphasized that his argument presupposed the "magisterial work" of Paul
Burkett, who had developed a closely related "red-green" perspective rooted in a direct
examination of Marx's value theory. Burkett and Foster proceeded to write a number of articles
together on Marx's ecological conceptions, reflecting their shared perspective.More recently,
Jason W. Moore inspired by Burkett's value-analytical approach to Marx's ecology and arguing
that Foster's work did not in itself go far enough, has sought to integrate the notion of metabolic
rift with world systems theory, incorporating Marxian value-related conceptions. For Moore, the
modern world-system is a capitalist world-ecology, joining the accumulation of capital, the
pursuit of power, and the production of nature in dialectical unity. Central to Moore's perspective
is a philosophical re-reading of Marx's value theory, through which abstract social labor and
abstract social nature are dialectically bound. Moore argues that the emergent law of value, from
the sixteenth century, was evident in the extraordinary shift in the scale, scope, and speed of
environmental change. What took premodern civilizations centuries to achieve—such as the
deforestation of Europe in the medieval era—capitalism realized in mere decades. This world-
historical rupture, argues Moore, can be explained through a law of value that regards labor
productivity as the decisive metric of wealth and power in the modern world. From this
standpoint, the genius of capitalist development has been to appropriate uncommodified
natures—including uncommodified human natures—as a means of advancing labor productivity
in the commodity system.
Societal-environmental dialectic
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In 1975, the highly influential work of Allan Schnaiberg transfigured environmental sociology,
proposing a societal-environmental dialectic, though within the 'neo-Marxist' framework of the
relative autonomy of the state as well. This conflictual concept has overwhelming political
salience. First, the economic synthesis states that the desire for economic expansion will prevail
over ecological concerns. Policy will decide to maximize immediate economic growth at the
expense of environmental disruption. Secondly, the managed scarcity synthesis concludes that
governments will attempt to control only the most dire of environmental problems to prevent
health and economic disasters. This will give the appearance that governments act more
environmentally consciously than they really do. Third, the ecological synthesis generates a
hypothetical case where environmental degradation is so severe that political forces would
respond with sustainable policies. The driving factor would be economic damage caused by
environmental degradation. The economic engine would be based on renewable resources at this
point. Production and consumption methods would adhere to sustainability regulations. These
conflict-based syntheses have several potential outcomes. One is that the most powerful
economic and political forces will preserve the status quo and bolster their dominance.
Historically, this is the most common occurrence. Another potential outcome is for contending
powerful parties to fall into a stalemate. Lastly, tumultuous social events may result that
redistribute economic and political resources.
Treadmill of production
In 1980, the highly influential work of Allan Schnaiberg entitled The Environment: From
Surplus to Scarcity (1980) was a large contribution to this theme of a societal-environmental
dialectic. Moving away from economic reductionism like other neo-Marxists, Schnaiberg called
for an analysis of how certain projects of "political capitalism" encouraged environmental
degradation instead of all capitalism per se. This ongoing trend in Marxism of 'neo-Marxist'
analysis (meaning, including the relative autonomy of the state) here added the environmental
conditions of abstract additions and withdrawals from the environment as social policies instead
of naturalized contexts.Schnaiberg's political capitalism, otherwise known as the 'Treadmill of
production,' is a model of conflict as well as cooperation between three abstracted groups: the
state, capital (exclusively monopoly capital with its larger fixed costs and thus larger pressures
for ongoing expansion of profits to justify more fixed costs), and (organized) labor. He analyzes
only the United States at length, though sees such a treadmill of production and of environmental
degradation in operation in the Soviet Union or socialist countries as well. The desire for
economic expansion was found to be a common political ground for all three contentious
groups—in capital, labor, and the state—to surmount their separate interests and postpone
conflict by all agreeing on economic growth. Therefore, grounds for a political alliance emerge
among these conflictual actors when monopoly capitalism can convince both of the other nodes
to support its politicized consolidation. This can appeal to the other nodes since it additionally
provides expanding state legitimacy and its own funding while providing (at least at the time)
secure worker employment in larger industries with their desired stable or growing consumption.
This political capitalism works against smaller scale capitalism or other uses of the state or
against other alliances of labor. Schnaiberg called the 'acceleration' of the treadmill this
degradative political support for monopoly capitalism's expansion. This acceleration he felt was
at root merely an informal alliance—based solely on the propaganda from monopoly capital and
the state that worker consumption can only be achieved through further capitalist consolidation.
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However, Schnaiberg felt that environmental damage caused by state-political and labor-
supported capitalist expansion may cause a decline both in the state's funding as well as worker
livelihood. This provides grounds for both to reject their treadmill alliance with monopoly
capital. This would mean severing organized labor support and state policy support of monopoly
capital's desires of consolidation. Schnaiberg is motivated to optimism by this potential if states
and labor movements can be educated to the environmental and livelihood dangers in the long
run of any support of monopoly capital. This potentially means these two groups moving away
from subsidizing and supporting the degradation of the environment. Schnaiberg pins his hopes
for environmental improvement on 'deceleration' of the treadmill—how mounting environmental
degradation might yield a breakdown in the acceleration-based treadmill alliance. This
deceleration was defined as state and working labor movements designing policies to shrink the
scale of the economy as a solution to environmental degradation and their own consumptive
requirements. Meanwhile, in the interim, he argued a common alliance between the three is
responsible for why they prefer to support common economic growth as a common way to avoid
their open conflicts despite mounting environmental costs for the state as well as for laborers due
to environmental disruption.
Ecological modernization and reflexive modernization
By the 1980s, a critique of eco-Marxism was in the offing, given empirical data from countries
(mostly in Western Europe like the Netherlands, Western Germany and somewhat the United
Kingdom) that were attempting to wed environmental protection with economic growth instead
of seeing them as separate. This was done through both state and capital restructuring. Major
proponents of this school of research are Arthur P.J. Mol and Gert Spaargaren. Popular examples
of ecological modernization would be "cradle to cradle" production cycles, industrial ecology,
large-scale organic agriculture, biomimicry, permaculture, agroecology and certain strands of
sustainable development—all implying that economic growth is possible if that growth is well
organized with the environment in mind.
Reflexive modernization
The many volumes of the German sociologist Ulrich Beck first argued from the late 1980s that
our risk society is potentially being transformed by the environmental social movements of the
world into structural change without rejecting the benefits of modernization and industrialization.
This is leading to a form of 'reflexive modernization' with a world of reduced risk and better
modernization process in economics, politics, and scientific practices as they are made less
beholden to a cycle of protecting risk from correction (which he calls our state's organized
irresponsibility)—politics creates ecodisasters, then claims responsibility in an accident, yet
nothing remains corrected because it challenges the very structure of the operation of the
economy and the private dominance of development, for example. Beck's idea of a reflexive
modernization looks forward to how our ecological and social crises in the late 20th century are
leading toward transformations of the whole political and economic system's institutions, making
them more "rational" with ecology in mind.
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Social construction of the environment
Additionally in the 1980s, with the rise of postmodernism in the western academy and the
appreciation of discourse as a form of power, some sociologists turned to analyzing
environmental claims as a form of social construction more than a 'material' requirement.
Proponents of this school include John A. Hannigan, particularly in Environmental Sociology: A
Social Constructionist Perspective (1995). Hannigan argues for a 'soft constructionism'
(environmental problems are materially real though they require social construction to be
noticed) over a 'hard constructionism' (the claim that environmental problems are entirely social
constructs).
Events
The 1960s built strong cultural momentum for environmental causes, giving birth to the modern
environmental movement and large questioning in sociologists interested in analyzing the
movement. Widespread green consciousness moved vertically within society, resulting in a
series of policy changes across many states in the U.S. and Europe in the 1970s. In the United
States, this period was known as the “Environmental Decade” with the creation of the United
States Environmental Protection Agency and passing of the Endangered Species Act, Clean
Water Act, and amendments to the Clean Air Act. Earth Day of 1970, celebrated by millions of
participants, represented the modern age of environmental thought. The environmental
movement continued with incidences such as Love Canal.
Historical studies
While the current mode of thought expressed in environmental sociology was not prevalent until
the 1970s, its application is now used in analysis of ancient peoples. Societies including Easter
Island, the Anaszi, and the Mayans were argued to have ended abruptly, largely due to poor
environmental management. This has been challenged in later work however as the exclusive
cause (biologically trained Jared Diamond's Collapse (2005); or more modern work on Easter
Island). The collapse of the Mayans sent a historic message that even advanced cultures are
vulnerable to ecological suicide—though Diamond argues now it was less of a suicide than an
environmental climate change that led to a lack of an ability to adapt—and a lack of elite
willingness to adapt even when faced with the signs much earlier of nearing ecological problems.
At the same time, societal successes for Diamond included New Guinea and Tikopia island
whose inhabitants have lived sustainably for 46,000 years.John Dryzek et al. argue in Green
States and Social Movements: Environmentalism in the United States, United Kingdom,
Germany, and Norway (2003)[10] that there may be a common global green environmental social
movement, though its specific outcomes are nationalist, falling into four 'ideal types' of
interaction between environmental movements and state power. They use as their case studies
environmental social movements and state interaction from Norway, the United Kingdom, the
United States, and Germany. They analyze the past 30 years of environmentalism and the
different outcomes that the green movement has taken in different state contexts and
cultures.Recently and roughly in temporal order below, much longer-term comparative historical
studies of environmental degradation are found by sociologists. There are two general trends:
many employ world systems theory—analyzing environmental issues over long periods of time
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and space; and others employ comparative historical methods. Some utilize both methods
simultaneously, sometimes without reference to world systems theory (like Whitaker, see
below).Stephen G. Bunker (d. 2005) and Paul S. Ciccantell collaborated on two books from a
world-systems theory view, following commodity chains through history of the modern world
system, charting the changing importance of space, time, and scale of extraction and how these
variables influenced the shape and location of the main nodes of the world economy over the
past 500 years.Their view of the world was grounded in extraction economies and the politics of
different states that seek to dominate the world's resources and each other through gaining
hegemonic control of major resources or restructuring global flows in them to benefit their
locations.The three volume work of environmental world-systems theory by Sing C. Chew
analyzed how "Nature and Culture" interact over long periods of time, starting with World
Ecological Degradation (2001) In later books, Chew argued that there were three "Dark Ages" in
world environmental history characterized by periods of state collapse and reorientation in the
world economy associated with more localist frameworks of community, economy, and identity
coming to dominate the nature/culture relationships after state-facilitated environmental
destruction delegitimized other forms. Thus recreated communities were founded in these so-
called 'Dark Ages,' novel religions were popularized, and perhaps most importantly to him the
environment had several centuries to recover from previous destruction. Chew argues that
modern green politics and bioregionalism is the start of a similar movement of the present day
potentially leading to wholesale system transformation. Therefore, we may be on the edge of yet
another global "dark age" which is bright instead of dark on many levels since he argues for
human community returning with environmental healing as empires collapse.More case oriented
studies were conducted by historical environmental sociologist Mark D. Whitaker analyzing
China, Japan, and Europe over 2,500 years in his book
Ecological Revolution (2009). He argued that instead of environmental movements being "New
Social Movements" peculiar to current societies, environmental movements are very old—being
expressed via religious movements in the past (or in the present like in ecotheology) that begin to
focus on material concerns of health, local ecology, and economic protest against state policy
and its extractions. He argues past or present is very similar: that we have participated with a
tragic common civilizational process of environmental degradation, economic consolidation, and
lack of political representation for many millennia which has predictable outcomes. He argues
that a form of bioregionalism, the bioregional state, is required to deal with political corruption
in present or in past societies connected to environmental degradation. Interestingly, after
looking at the world history of environmental degradation from very different methods, both
sociologists Sing Chew and Mark D. Whitaker came to similar conclusions and are proponents
of (different forms
Ecotheology
Ecotheology is a form of constructive theology that focuses on the interrelationships of religion

and nature, particularly in the light of environmental concerns. Ecotheology generally starts from
the premise that a relationship exists between human religious/spiritual worldviews and the
degradation of nature. It explores the interaction between ecological values, such as
sustainability, and the human domination of nature. The movement has produced numerous
religious-environmental projects around the world.The burgeoning awareness of environmental
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crisis has led to widespread religious reflection on the human relationship with the earth. Such
reflection has strong precedents in most religious traditions in the realms of ethics and
cosmology, and can be seen as a subset or corollary to the theology of nature.It is important to
keep in mind that ecotheology explores not only the relationship between religion and nature in
terms of degradation of nature, but also in terms of ecosystem management in general.
Specifically, ecotheology seeks not only to identify prominent issues within the relationship
between nature and religion, but also to outline potential solutions. This is of particular
importance because many supporters and contributors of ecotheology argue that science and
education are simply not enough to inspire the change necessary in our current environmental
crisis.
Background
The relationship of theology to the modern ecological crisis became an intense issue of debate in
Western academia in 1967, following the publication of the article, "The Historical Roots of Our
Ecological Crisis, " by Lynn White, Jr., Professor of History at the University of California at
Los Angeles. In this work, White puts forward a theory that the Christian model of human
dominion over nature has led to environmental devastation, providing a voice for "The
Ecological Complaint".In 1973, theologian Jack Rogers published an article in which he
surveyed the published studies of approximately twelve theologians which had appeared since
White's article. They reflect the search for "an appropriate theological model" which adequately
assesses the biblical data regarding the relationship between God, humans, and nature.
Precedents in religious thought
Some scholars argue that Christians actually helped bring about the current global environmental
crisis by instructing followers that God, and by extension mankind, transcends nature. Much of
the development of ecotheology as a theological discourse was in response to this argument,
which has been called "The Ecological Complaint". Defendants of this perspective essentially
claim that Christianity promotes the idea of human dominion over nature, treating nature itself as
a tool to be used and even exploited for survival and prosperity. However, Christianity has often
been viewed as the source of positive values towards the environment, and there are many voices
within the Christian tradition whose vision embraces the well-being of the earth and all creatures.
While Francis of Assisi is one of the more obvious influences on Christian ecotheology, there are
many theologians and teachers, such as Isaac of Nineveh and Seraphim of Sarov, whose work
has profound implications for Christian thinkers. Many of these are less well known in the West
because their primary influence has been on the Orthodox Church rather than the Roman
Catholic Church.
The significance of indigenous traditions for the development of ecotheology can also not be
understated. Systems of Traditional Ecological Knowledge, in combination with modern
scientific methods of ecosystem management, are steadily gaining interest as environmental
activists realize the importance of locally invested groups.
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Further exploration
Christian ecotheology draws on the writings of such authors as Jesuit priest and paleontologist
Pierre Teilhard de Chardin, philosopher Alfred North Whitehead, and Passionist priest and
historian Thomas Berry. It is well represented in Protestantism by John B. Cobb, Jr., Jürgen
Moltmann, and Michael Dowd; in ecofeminism by feminist theologians Rosemary Radford
Ruether, Catherine Keller, and Sallie McFague; in Roman Catholicism by John F. Haught; and in
Orthodoxy by Elizabeth Theokritoff and George Nalunnakkal (currently Bishop Geevarghese
Mor Coorilose of the Jacobite Syrian Christian Church). Besides works on theology per se,
interpreters of the ecological significance of scripture, such as Ellen Davis,[6] also play an
important role.Creation Spirituality is another important expression of ecotheology that has been
developed and popularized by Matthew Fox, a former Catholic Dominican friar turned Episcopal
priest. Abraham Joshua Heschel and Martin Buber, both Jewish philosophers, have also left their
mark on Christian ecotheology, and provide significant inspiration for Jewish ecotheology. The
most recent and most complete expression of Jewish ecotheology to date can be found in David
Mevorach Seidenberg's work on Kabbalah and ecology.Hindu ecotheology includes writers such
as Vandana Shiva. Seyyid Hossein Nasr, a Perennialist scholar and Persian Sufi philosopher, was
one of the earlier Muslim voices calling for a re-evaluation of the Western relationship to nature.
Elisabet Sahtouris is an evolutionary biologist and futurist who promotes a vision she believes
will result in the sustainable health and well-being of humanity within the larger living systems
of Earth and the cosmos. She is a lecturer in Gaia Theory and a co-worker with James Lovelock
and Lynn Margulis. Annie Dillard, Pulitzer Prize-winning American author, also combined
observations on nature and philosophical explorations in several ecotheological writings,
including Pilgrim at Tinker Creek. Valerie Brown is a science and environmental journalist
based in Portland, Oregon, whose work has appeared in Environmental Health Perspectives,
21stC, and other publications. She writes regularly about ecotheology. Terry Tempest Williams
is a Mormon writer and conservationist who sensitively and imaginatively explores ecotheology
in her very personal writing. The majority of the content of Indians of the Americas, by former
Bureau of Indian Affairs head John Collier, concerns the link between ecological sustainability
and religion among Native North and South Americans.
Ecological economics
Ecological economics/eco-economics refers to both a transdisciplinary and interdisciplinary

field of academic research that aims to address the interdependence and coevolution of human
economies and natural ecosystems over time and space. It is distinguished from environmental
economics, which is the mainstream economic analysis of the environment, by its treatment of
the economy as a subsystem of the ecosystem and its emphasis upon preserving natural capital.
One survey of German economists found that ecological and environmental economics are
different schools of economic thought, with ecological economists emphasizing strong
sustainability and rejecting the proposition that natural capital can be substituted by human-made
capital. Ecological economics was founded as a modern movement in the works of and
interactions between various European and American academics (see the section on history and
development below). The related field of green economics is, in general, a more politically
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applied form of the subject. According to ecological economist Malte Faber, ecological
economics is defined by its focus on nature, justice, and time. Issues of intergenerational equity,
irreversibility of environmental change, uncertainty of long-term outcomes, and sustainable
development guide ecological economic analysis and valuation. Ecological economists have
questioned fundamental mainstream economic approaches such as cost-benefit analysis, and the
separability of economic values from scientific research, contending that economics is
unavoidably normative rather than positive (i.e. descriptive). Positional analysis, which attempts
to incorporate time and justice issues, is proposed as an alternative. Ecological economics shares
many of its perspectives with feminist economics, including the focus on sustainability, nature,
justice and care values.
History and development
The first principles, deriving from the radiochemist FA Soddy, were laid out in his 1926 book
"Wealth, Money (Virtual Wealth) and Debt" in 1926. Early modern interest in ecology and
economics dates back to the 1940s in the work of K. William Kapp and Karl Polanyi and the
1960s in work by Kenneth Boulding and Herman Daly. However, the first organized meetings of
modern ecological economists occurred in the 1980s. These began in 1982, at the instigation of
Lois Banner, with a meeting held in Sweden (including Robert Costanza, Herman Daly, Charles
Hall, Bruce Hannon, H.T. Odum, and David Pimentel). Most were ecosystem ecologists or
mainstream environmental economists, with the exception of Daly. In 1987, Daly and Costanza
edited an issue of Ecological Modeling to test the waters. A book entitled Ecological Economics,
by Juan Martinez-Alier, was published later that year. 1989 saw the foundation of the
International Society for Ecological Economics and publication of its journal, Ecological
Economics, by Elsevier. Robert Costanza was the first president of the society and first editor of
the journal, currently edited by Richard Howarth.European conceptual founders include Nicholas
Georgescu-Roegen (1971), K. William Kapp (1950) and Karl Polanyi (1944). Some key
concepts of what is now ecological economics are evident in the writings of E.F. Schumacher,
whose book Small Is Beautiful – A Study of Economics as if People Mattered (1973) was
published just a few years before the first edition of Herman Daly's comprehensive and
persuasive Steady-State Economics (1977).[15][16] Other figures include ecologists C.S. Holling,
H.T. Odum and Robert Costanza, biologist Gretchen Daily and physicist Robert Ayres. CUNY
geography professor David Harvey explicitly added ecological concerns to political economic
literature. This parallel development in political economy has been continued by analysts such as
sociologist John Bellamy Foster. The antecedents can be traced back to the Romantics of the
19th century as well as some Enlightenment political economists of that era. Concerns over
population were expressed by Thomas Malthus, while John Stuart Mill hypothesized that the
"stationary state" of an economy was desirable, anticipating later insights of modern ecological
economists, without having had their experience of the social and ecological costs of the
dramatic post-World War II industrial expansion. As Martinez-Alier explores in his book the
debate on energy in economic systems can also be traced into the 19th century e.g. Nobel prize-
winning chemist, Frederick Soddy (1877–1956). Soddy criticized the prevailing belief of the
economy as a perpetual motion machine, capable of generating infinite wealth—a criticism
echoed by his intellectual heirs in the now emergent field of ecological economics. The
Romanian economist Nicholas Georgescu-Roegen (1906–1994), who was among Daly's teachers
at Vanderbilt University, provided ecological economics with a modern conceptual framework
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based on the material and energy flows of economic production and consumption. His magnum
opus, The Entropy Law and the Economic Process (1971), has been highly influential. Articles
by Inge Ropke (2004, 2005) and Clive Spash (1999) cover the development and modern history
of ecological economics and explain its differentiation from resource and environmental
economics, as well as some of the controversy between American and European schools of
thought. An article by Robert Costanza, David Stern, Lining He, and Chunbo Ma responded to a
call by Mick Common to determine the foundational literature of ecological economics by using
citation analysis to examine which books and articles have had the most influence on the
development of the field. However, citations analysis has itself proven controversial and similar
work has been criticized by Clive Spash for attempting to pre-determine what is regarded as
influential in ecological economics through study design and data manipulation. In addition, the
journal Ecological Economics has itself been criticized for swamping the field with mainstream
economics.
Nature and ecology
Natural resources flow through the economy and end up as waste and pollution.A simple circular
flow of income diagram is replaced in ecological economics by a more complex flow diagram
reflecting the input of solar energy, which sustains natural inputs and environmental services
which are then used as units of production. Once consumed, natural inputs pass out of the
economy as pollution and waste. The potential of an environment to provide services and
materials is referred to as an "environment's source function", and this function is depleted as
resources are consumed or pollution contaminates the resources. The "sink function" describes
an environment's ability to absorb and render harmless waste and pollution: when waste output
exceeds the limit of the sink function, long-term damage occurs. Some persistent pollutants, such
as some organic pollutants and nuclear waste are absorbed very slowly or not at all; ecological
economists emphasize minimizing "cumulative pollutants". Pollutants affect human health and
the health of the climate. The economic value of natural capital and ecosystem services is
accepted by mainstream environmental economics, but is emphasized as especially important in
ecological economics. Ecological economists may begin by estimating how to maintain a stable
environment before assessing the cost in dollar terms.
Ethics
Mainstream economics has attempted to become a value-free 'hard science', but ecological
economists argue that value-free economics is generally not realistic. Ecological economics is
more willing to entertain alternative conceptions of utility, efficiency, and cost-benefits such as
positional analysis or multi-criteria analysis. Ecological economics is typically viewed as
economics for sustainable development, and may have goals similar to green politics.
Schools of thought
Various competing schools of thought exist in the field. Some are close to resource and
environmental economics while others are far more heterodox in outlook. An example of the
latter is the European Society for Ecological Economics. An example of the former is the
Swedish Beijer International Institute of Ecological Economics. Clive Spash has argued for the
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classification of the ecological economics movement, and more generally work by different
economic schools on the environment, into three main categories. These are the mainstream new
resource economists, the new environmental pragmatists, and the more radical social ecological
economists. International survey work comparing the relevance of the categories for mainstream
and heterodox economists shows some clear divisions between environmental and ecological
economists.
Differentiation from mainstream schools
Some ecological economists prioritise adding natural capital to the typical capital asset analysis
of land, labor, and financial capital. These ecological economists then use tools from
mathematical economics as in mainstream economics, but may apply them more closely to the
natural world. Whereas mainstream economists tend to be technological optimists, ecological
economists are inclined to be technological sceptics. They reason that the natural world has a
limited carrying capacity and that its resources may run out. Since destruction of important
environmental resources could be practically irreversible and catastrophic, ecological economists
are inclined to justify cautionary measures based on the precautionary principle. The most cogent
example of how the different theories treat similar assets is tropical rainforest ecosystems, most
obviously the Yasuni region of Ecuador.
Allocation of resources
Resource and neoclassical economics focus primarily on the efficient allocation of resources, and
less on two other fundamental economic problems which are central to ecological economics:
distribution (equity) and the scale of the economy relative to the ecosystems upon which it is
reliant. Ecological Economics also makes a clear distinction between growth (quantitative
increase in economic output) and development (qualitative improvement of the quality of life)
while arguing that neoclassical economics confuses the two. Ecological economists point out
that, beyond modest levels, increased per-capita consumption (the typical economic measure of
"standard of living") does not necessarily lead to improvement in human well-being, while this
same consumption can have harmful effects on the environment and broader societal well-being.
Weak versus strong sustainability
The three nested systems of sustainability - the economy wholly contained by society, wholly
contained by the biophysical environment. Clickable.Ecological economics challenges the
conventional approach towards natural resources, claiming that it undervalues natural capital by
considering it as interchangeable with human-made capital—labor and technology. gasses
should motivate us to examine how political, economic and social policies can benefit from
alternative energy. Interestingly enough, shifting our dependence on fossil fuels with specific
interest within just one of the above-mentioned factors easily benefits at least one other. For
instance, photo voltaic (or solar) panels have a 15% efficiency when absorbing the sun's energy,
but its construction demand has increased 120% within both commercial and residential
properties. Additionally, this construction has led to a roughly 30% increase in work demands
(Chen).The potential for the substitution of man-made capital for natural capital is an important
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debate in ecological economics and the economics of sustainability. There is a continuum of
views among economists between the strongly neoclassical positions of Robert Solow and
Martin Weitzman, at one extreme and the ‘entropy pessimists’, notably Nicholas Georgescu-
Roegen and Herman Daly, at the other. Neoclassical economists tend to maintain that man-made
capital can, in principle, replace all types of natural capital. This is known as the weak
sustainability view, essentially that every technology can be improved upon or replaced by
innovation, and that there is a substitute for any and all scarce materials. At the other extreme,
the strong sustainability view argues that the stock of natural resources and ecological functions
are irreplaceable. From the premises of strong sustainability, it follows that economic policy has
a fiduciary responsibility to the greater ecological world, and that sustainable development must
therefore take a different approach to valuing natural resources and ecological
functions.Recently, Stanislav Shmelev developed a new methodology for the assessment of
progress at the macro scale based on multi-criteria methods, which allows consideration of
different perspectives, including strong and weak sustainability or conservationists vs
industrialists and aims to search for a 'middle way' by providing a strong neo-Keynsian economic
push without putting excessive pressure on the natural resources, including water or producing
emissions, both directly and indirectly.
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CHAPTER 13- ENVIRONMENTAL HEALTH ETHICS
Environmental health ethics
Environmental Health Ethics is a field of study that combines environmental health policies
and ethical considerationi towards a mutually acceptable goal. Given the myriad of
environmental issues facing society today a sound ethical background can be applied in an
attempt to reach a compromise between conflicting interests, like anthropocentricism, global
stewardship, religious values, economic development, and public health. A small sample of the
scientific disciplines involved in environmental health ethics include: ecology, toxicology,
epidemiology, and exposure biology.
Environmental Health Topics
Environmental Health embodies a wide range of topics with which there are many ethical issues.
Many of these issues can be traced back to a moral obligation towards to life forms and other
units of biological organization, like ecosystems, and the nature of that obligation. Humanities
place within any given ecosystem must be weighed against the importance of regional, and
global health of the environment as a whole. Human and animal rights, property use, and other
freedoms can be combined with other factors like to form an ethical dilemma social justice,
equality, sustainability, and globalism to form ethical dilemmas. In response to difficulties with
using moral theories to resolve ethical dilemmas various approaches can be used. A case-by-case
approach may be too slow when considering the volume of issues at present, so an alternative
may be better suited to the task. Taking into account commonly accepted moral virtues can guide
conduct and address conflicts between values, rules, and obligations. Most, if not all, of these
generally held principles can be found in the ethical approaches listed above, an example of
which may be 'respect human rights'. This Principle-Based Method for ethical decision making
can be viewed below.
1. State the question or problem.

2. Gather the relevant information.
3. Explore different opinions.
4. Apply ethical principles to the different options.
5. Resolve any conflicts among ethical principles.
6. Take action.
After settling on a methodology for analyzing different ethical situations we can turn to a broad
survey of some of the most relevant issues which face humanity today.
Pest Control
Pesticides are used throughout the world in an attempt to control, repel, or kill pest species.
Though many species of insect can be commonly identified throughout the world others may
harm human health and well-being, while providing a benefit to the overall environment of an
area. One example of the phenomenon is a bee's ability to sting an individual who may have a
serious allergic reaction, though they also play a crucial role in the pollination of an ecosystem.
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A further example would be various species of bat, which though they can transmit rabies, also
help to control mosquito populations. Perhaps the biggest event in the history of pesticide use is
the widespread use of DDT to control various pests, including mosquitoes and lice. Its long-term
effects had not been sufficiently documented and thus it was assumed to be of low toxicity. Over
time the widespread use of DDT began to have serious environmental and human health
consequences. Organisms further up the food chain showed significant amounts of DDT in their
tissues and this presence had adverse health effects, for example, the weakening of predatory
bird eggshells and fish kills. Adverse effects among humans included endocrine system
disruption which can lead to reproductive complications.
Among the most disruptive pesticides are those dubbed Persistent Organic Pollutants (POPs)
which do not break down easily in the environment, or if they do they become something equally
harmful. Because POPs represent such a threat to organisms within an environment, especially
those higher on a food chain, specific international legislation referred to as the Stockholm
Convention banned several of them being used. Some of these pollutants are DDT, aldrin,
chlordane, dieldrin, endrin, heptachlor, hexochlorobenzene, and toxaphene. With these
considerations in place it falls onto lawmakers to regulate responsible use of pesticides, and
ethics can provide a starting point to consider the best option. Extensive use of pesticides would
improve life in the short-term but be harmful in the long-term, and completely banning their use
would likewise be detrimental to overall environmental and human health. One strategy to
encourage is called Integrated Pest Management (IPM), in which pesticides are responsibly used
to limit agricultural loss but also watched for growing resistance and environmental toxicity. The
Center for Disease Control (CDC) have also taken measured to educate clinicians and the public
about relevant issues and the best ways to manage pesticide use.
Genetic Engineering, Food, and Nutrition
Genetic engineering concerns the application of scientific alteration of plant and animal DNA in
order to combat pests, disease, drought, and other factors which can adversely harm the
organism. Objections to Genetically Modified Organisms (GMOs) include theological (playing
God) and economic (GMOs can be costly) viewpoints. Genetic engineering of both plants and
animals must pass through FDA legislation, which may include public labeling of the product or
otherwise marking it as genetically modified.Food and Nutrition also fall under the category of
things regulated by the FDA, however, the ethics of this regulation are not always clear. Health
consequences of unsafe food, eating in overlarge quantities, are well documented yet in all
societies there is no legislation against over-consumption. Ethical properties of utilitarianism and
social justice conflict with humanities freedom of choice in the determining of access to healthy,
safe food.
Pollution and Waste
Air, water, and solid waste pollution are environmental health issues which can adversely affect
people, plants, and animals. From an ethical standpoint many things about pollutants can be
studied, like questions of disposal, storage, recycling, and responsibility. A few examples of air
pollutants include particulate matter, sulfur dioxide, nitrogen oxides, carbon oxides,
chlorofluorocarbons, and heavy metals (e.g. mercury). Perhaps the largest ethical debate
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concerning air pollution is how to balance economic development against the interests of the
public health, safety, and cleanliness. With both sides offering benefits and drawbacks it can be
difficult to establish an acceptable compromise. Legislation enacted to prevent widespread use of
chlorofluorocarbons, which cause significant environmental damage, can be seen as one instance
of economic development taking a lower priority to public health. Water pollution is another
type of widespread contaminant which has ethical implications in mitigating the source and
balancing conflicting priorities. The two types of water contaminants are anthropogenic
compounds (generally referred to as pollutants, such as disinfection products, metals, municipal
and agricultural waste, and petroleum and coal hydrocarbons) and natural contaminants (such as
microorganisms or chemicals like arsenic and nitrogen, which are naturally present in the soil).
the common misconception is that chemicals leaking into the soil will be diluted over time and
rendered harmless. This theory does not take into account Persistent Organic Pollutants, which
do not break down easily, and sometimes break down into more harmful constituents. Most
industrialized nations have legislation in place to protect the public from impure drinking water.
The Safe Drinking Water Act of 1974 established maximum levels of pollutants in public
drinking water, however its power to regulate private sources of bottled water or wells is
severely limited. An additional issue regarding water pollution is the relative scarcity of clean
fresh water on the earth, an issue which acutely presents itself in areas prone to drought.
Agriculture uses a great deal of water, so much so that shortages in drought-prone areas can
significantly affect crop yield. The main ethical issues with water pollution is whether growth
should be restricted in order to preserve public health. An additional issue is the regulation of
private corporations, whose activities may put populations of citizens at risk for groundwater
contamination. Solid waste pollution includes pollutants like agricultural waste, construction
waste, electronic waste, hazardous waste, medical, and mining waste. The two prevailing
strategies for solid waste management are prevention and treatment/disposal. Waste prevention is
the preferable, both economically and environmentally, as it does not necessitate costly removal
and storage. Many of the same ethical issues related above manifest themselves with the
handling and storage of solid waste, as well as an additional social justice issue of exactly where
the storage area for solid waste should be located.
Chemical Regulation
Chemical regulation, including carbon particles and nanotubes and nanotechnology, are very
new technologies whose long-term effects have not been satisfactorily studied. This lack of
research argues that cautionary use of these products is warranted, especially when short-term
effects include harmful symptoms. In opposition to this caution is the nanotechnology industry
which is growing very rapidly and may be able to alleviate many of the problems facing society
today, like selective cancer treatment and the energy crisis. Perhaps the largest obstacle to testing
occurs with the sheer diversity of nanoparticles, of which the only unifying factor is their
minuscule size.
Climate ethics
Climate ethics is an area of research that focuses on the ethical dimensions of climate change
(also known as global warming), and concepts such as climate justice.Human-induced climate
change raises many profound ethical questions, yet many believe that these ethical issues have
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not been addressed adequately in climate change policy debates or in the scientific and economic
literature on climate change; and that, consequently, ethical questions are being overlooked or
obscured in climate negotiations, policies and discussions . It has been pointed out that those
most responsible for climate change are not the same people as those most vulnerable to its
effects.Terms such as climate justice and ecological justice ('eco justice') are used worldwide,
and have been adopted by various groups.
Overview
An article in the scientific journal Nature (Patz, 2005)[1] concluded that the human-induced
warming that the world is now experiencing is already causing 150,000 deaths and 5 million
incidents of disease each year from additional malaria and diarrhea, mostly in the poorest
nations. Death and disease incidents are likely to soar as warming increases. Facts such as this
demonstrate that climate change is compromising rights to life, liberty and personal security.
Hence, ethical analysis of climate change policy must examine how that policy impacts on those
basic rights.The rights to life, liberty, and personal security are basic human rights that are the
foundation for deriving other widely recognized rights found in international law and practice.
These rights, for example, have been the basis for such practical rules as the “no harm principle”
and the “precautionary principle.” These rights are recognized in a number of international
treaties and decisions in international tribunals, and are widely recognized as foundational by
many of the world’s religions. These rights are also expressly set out in Article Three of the
Universal Declaration of Human Rights which expressly provides that:
• Everyone has a right to life, liberty, and personal security.

• Humans have rights to life, liberty, and personal security that create duties in others to
refrain from interference with these basic rights. In this paper we seek to help clarify our
duties to prevent the neglect or violation of those rights. Of course, climate change policy
making raises additional ethical issues including questions about duties to protect future
generations of humans, plants, animals, and ecosystems.
Climate change raises a number of particularly challenging ethical issues about distributive
justice, in particular concerning how to fairly share the benefits and burdens of climate change
policy options. Many of the policy tools often employed to solve environmental problems such
as cost-benefit analysis usually do not adequately deal with these issues because they often
ignore questions of just distribution.
Collaborative Program on the Ethical Dimensions of Climate Change
In December 2004 in Buenos Aires, Argentina, the Collaborative Program on the Ethical
Dimensions of Climate Change was launched at the 10th Conference of Parties to the United
Nations Framework Convention on Climate Change. The major outcome of this meeting was the
Buenos Aires Declaration on the Ethical Dimensions of Climate Change.
Objectives
The program on the Ethical Dimensions of Climate Change seeks to:
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• Facilitate express examination of ethical dimensions of climate change particularly for
those issues entailed by specific positions taken by governments, businesses, NGOs,
organizations, or individuals on climate change policy matters;
• Create better understanding about the ethical dimensions of climate change among policy
makers and the general public;
• Assure that people around the world, including those most vulnerable to climate change,
participate in any ethical inquiry about responses to climate change;
• Develop an interdisciplinary approach to inquiry about the ethical dimensions of climate
change and support publications that examine the ethical dimensions of climate change;
• Make the results of scholarship on the ethical dimensions of climate change available to
and accessible to policy makers, scientists, and citizen groups;
• Integrate ethical analysis into the work of other institutions engaged in climate change
policy including the Intergovernmental Program on Climate Change and the Conference
of the Parties to the United Nations Conference on Climate Change.
Position
Given the severity of impact to be expected and given the likelihood that some level of important
disruptions in living conditions will occur for great numbers of people due to climate change
events, this group contends that there is sufficient convergence among ethical principles to make
a number of concrete recommendations on how governments should act, or identify ethical
problems with positions taken by certain governments, organizations, or individuals.
Facts about climate change and fundamental human rights provide the starting point for climate
ethics.
Members
Members of the Ethical Dimensions of Climate Change program include:
Rock Ethics Institute, Penn State University Secretariat
• Penn State Institutes of the Environment

• Pennsylvania Consortium for Interdisciplinary Environmental Policy
• Brazilian Forum on Climate Change
• Center for Ethics, University of Montana
• Centre for Applied Ethics, Cardiff University
• Centre for Global Ethics, Birmingham University
• Coordination of Post Graduate Programs in Engineering of the Federal University of Rio
de Janeiro–The Energy Planning Program
• EcoEquity
• Global Ecological Integrity Group
• International Virtual Institute on Global Changes
• IUCN Environmental Law Commission–Ethics Specialist Group
• Munasinghe Institute for Development
• New Directions: Science, Humanities, Policy
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• Oxford Climate Policy
• Sustainability Research Institute, University of Leeds
• Tyndall Centre for Climate Change Research
Conservation (ethic)
Satellite photograph of industrial deforestation in the Tierras Bajas project in eastern Bolivia,
using skyline logging and replacement of forests by agriculture
Much attention has been given to preserving the natural characteristics of Hopetoun Falls,
Australia, while allowing access for visitors.
Conservation is an ethic of resource use, allocation, and protection. Its primary focus is upon
maintaining the health of the natural world, its fisheries, habitats, and biological diversity.
Secondary focus is on materials conservation, including non-renewable resources such as metals,
minerals and fossil fuels, and energy conservation, which is important to protect the natural
world. Those who follow the conservation ethic and, especially, those who advocate or work
toward conservation goals are termed conservationists. It is important to note that the terms
conservation and preservation are frequently conflated outside of the academic, scientific, and
professional literatures. The US National Park Service offers the following explanation of the
important ways in which these two terms represent very different conceptions of environmental
protection ethics:″Conservation and preservation are closely linked and may indeed seem to
mean the same thing. Both terms involve a degree of protection, but how that is protection is
carried out is the key difference. Conservation is generally associated with the protection of
natural resources, while preservation is associated with the protection of buildings, objects, and
landscapes. Put simply conservation seeks the proper use of nature, while preservation seeks
protection of nature from use. During the environmental movement of the early 20th century,
two opposing factions emerged: conservationists and preservationists. Conservationists sought to
regulate human use while preservationists sought to eliminate human impact altogether.″
Introduction
To conserve habitat in terrestrial ecoregions and to stop deforestation is a goal widely shared by
many groups with a wide variety of motivations.To protect sea life from extinction due to
overfishing or climate change is another commonly stated goal of conservation — ensuring that
"some will be available for future generations" to continue a way of life.The consumer
conservation ethic is sometimes expressed by the four R's: " Rethink, Reduce, Recycle, Repair"
This social ethic primarily relates to local purchasing, moral purchasing, the sustained, and
efficient use of renewable resources, the moderation of destructive use of finite resources, and
the prevention of harm to common resources such as air and water quality, the natural functions
of a living earth, and cultural values in a built environment.The principal value underlying most
expressions of the conservation ethic is that the natural world has intrinsic and intangible worth
along with utilitarian value — a view carried forward by the scientific conservation movement
and some of the older Romantic schools of ecology movement.More Utilitarian schools of
conservation seek a proper valuation of local and global impacts of human activity upon nature
in their effect upon human well being, now and to posterity. How such values are assessed and
exchanged among people determines the social, political, and personal restraints and imperatives
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by which conservation is practiced. This is a view common in the modern environmental
movement.These movements have diverged but they have deep and common roots in the
conservation movement.In the United States of America, the year 1864 saw the publication of
two books which laid the foundation for Romantic and Utilitarian conservation traditions in
America. The posthumous publication of Henry David Thoreau's Walden established the
grandeur of unspoiled nature as a citadel to nourish the spirit of man. From George Perkins
Marsh a very different book, Man and Nature, later subtitled "The Earth as Modified by Human
Action", catalogued his observations of man exhausting and altering the land from which his
sustenance derives.
Protected areas in developing countries, where probably as many as 70–80 percent of the species
of the world live, still enjoy very little effective management and protection. Some countries,
such as Mexico, have non-profit civil organizations and land owners dedicated to protect vast
private property, such is the case of Hacienda Chichen's Maya Jungle Reserve and Bird Refuge [4]
in Chichen Itza, Yucatán. The Adopt A Ranger Foundation has calculated that worldwide about
140,000 rangers are needed for the protected areas in developing and transition countries. There
are no data on how many rangers are employed at the moment, but probably less than half the
protected areas in developing and transition countries have any rangers at all and those that have
them are at least 50% short This means that there would be a worldwide ranger deficit of
105,000 rangers in the developing and transition countries.
One of the world's foremost conservationists, Dr. Kenton Miller, stated about the importance of
rangers: "The future of our ecosystem services and our heritage depends upon park rangers. With
the rapidity at which the challenges to protected areas are both changing and increasing, there
has never been more of a need for well prepared human capacity to manage. Park rangers are the
backbone of park management. They are on the ground. They work on the front line with
scientists, visitors, and members of local communities."
Conservation movement
The conservation movement, also known as nature conservation, is a political, environmental

and a social movement that seeks to protect natural resources including animal and plant species
as well as their habitat for the future.The early conservation movement included fisheries and
wildlife management, water, soil conservation and sustainable forestry. The contemporary
conservation movement has broadened from the early movement's emphasis on use of
sustainable yield of natural resources and preservation of wilderness areas to include
preservation of biodiversity. Some say the conservation movement is part of the broader and
more far-reaching environmental movement, while others argue that they differ both in ideology
and practice.
The conservation movement can be traced back to John Evelyn's work Sylva, presented as a
paper to the Royal Society in 1662. Published as a book two years later, it was one of the most
highly influential texts on forestry ever published. Timber resources in England were becoming
dangerously depleted at the time, and Evelyn advocated the importance of conserving the forests
by managing the rate of depletion and ensuring that the cut down trees get replenished.
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The field developed during the 18th century, especially in Prussia and France where scientific
forestry methods were developed. These methods were first applied rigorously in British India
from the early-19th century. The government was interested in the use of forest produce and
began managing the forests with measures to reduce the risk of wildfire in order to protect the
"household" of nature, as it was then termed. This early ecological idea was in order to preserve
the growth of delicate teak trees, which was an important resource for the Royal Navy. Concerns
over teak depletion were raised as early as 1799 and 1805 when the Navy was undergoing a
massive expansion during the Napoleonic Wars; this pressure led to the first formal conservation
Act, which prohibited the felling of small teak trees. The first forestry officer was appointed in
1806 to regulate and preserve the trees necessary for shipbuilding. This promising start received
a setback in the 1820s and 30s, when laissez-faire economics and complaints from private
landowners brought these early conservation attempts to an end.
Origins of the modern conservation movement
Conservation was revived in the mid-19th century, with the first practical application of
scientific conservation principles to the forests of India. The conservation ethic that began to
evolve included three core principles: that human activity damaged the environment, that there
was a civic duty to maintain the environment for future generations, and that scientific,
empirically based methods should be applied to ensure this duty was carried out. Sir James
Ranald Martin was prominent in promoting this ideology, publishing many medico-
topographical reports that demonstrated the scale of damage wrought through large-scale
deforestation and desiccation, and lobbying extensively for the institutionalization of forest
conservation activities in British India through the establishment of Forest Departments. Edward
Percy Stebbing warned of desertification of India. The Madras Board of Revenue started local
conservation efforts in 1842, headed by Alexander Gibson, a professional botanist who
systematically adopted a forest conservation program based on scientific principles. This was the
first case of state management of forests in the world. These local attempts gradually received
more attention by the British government as the unregulated felling of trees continued unabated.
In 1850, the British Association in Edinburgh formed a committee to study forest destruction at
the behest of Dr. Hugh Cleghorn a pioneer in the nascent conservation movement.He had
become interested in forest conservation in Mysore in 1847 and gave several lectures at the
Association on the failure of agriculture in India. These lectures influenced the government
under Governor-General Lord Dalhousie to introduce the first permanent and large-scale forest
conservation program in the world in 1855, a model that soon spread to other colonies, as well
the United States. In the same year, Cleghorn organised the Madras Forest Department and in
1860 the Department banned the use shifting cultivation. Cleghorn's 1861 manual, The forests
and gardens of South India, became the definitive work on the subject and was widely used by
forest assistants in the subcontinent. In 1861, the Forest Department extended its remit into the
Punjab. Sir Dietrich Brandis, a German forester, joined the British service in 1856 as
superintendent of the teak forests of Pegu division in eastern Burma. During that time Burma's
teak forests were controlled by militant Karen tribals. He introduced the "taungya" system, in
which Karen villagers provided labour for clearing, planting and weeding teak plantations. After
seven years in Burma, Brandis was appointed Inspector General of Forests in India, a position he
served in for 20 years. He formulated new forest legislation and helped establish research and
training institutions. The Imperial Forest School at Dehradun was founded by him. Germans
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were prominent in the forestry administration of British India. As well as Brandis, Berthold
Ribbentrop and Sir William P.D. Schlich brought new methods to Indian conservation, the latter
becoming the Inspector-General in 1883 after Brandis stepped down. Schlich helped to establish
the journal Indian Forester in 1874, and became the founding director of the first forestry school
in England at Cooper's Hill in 1885. He authored the five-volume Manual of Forestry (1889–96)
on silviculture, forest management, forest protection, and forest utilisation, which became the
standard and enduring textbook for forestry students.
Conservation in the United States
The American movement received its inspiration from 19th century works that exalted the
inherent value of nature, quite apart from human usage. Author Henry David Thoreau (1817-
1862) made key philosophical contributions that exalted nature. Thoreau was interested in
peoples' relationship with nature and studied this by living close to nature in a simple life. He
published his experiences in the book Walden, which argued that people should become
intimately close with nature. The ideas of Sir Brandis, Sir William P.D. Schlich and Carl A.
Schenck were also very influential - Gifford Pinchot, the first chief of the USDA Forest Service,
relied heavily upon Brandis' advice for introducing professional forest management in the U.S.
and on how to structure the Forest Service. Both Conservationists and Preservationists appeared
in political debates during the Progressive Era in the early 20th century. There were three main
positions. The laissez-faire position held that owners of private property—including lumber and
mining companies, should be allowed to do anything they wished for their property. The
conservationists, led by future President Theodore Roosevelt and his close ally George Bird
Grinnell, were motivated by the wanton waste that was taking place at the hand of market forces,
including logging and hunting. This practice resulted in placing a large number of North
American game species on the edge of extinction. Roosevelt recognized that the laissez-faire
approach of the U.S. Government was too wasteful and inefficient. In any case, they noted, most
of the natural resources in the western states were already owned by the federal government. The
best course of action, they argued, was a long-term plan devised by national experts to maximize
the long-term economic benefits of natural resources. To accomplish the mission, Roosevelt and
Grinnell formed the Boone and Crockett Club in 1887. The Club was made up of the best minds
and influential men of the day. The Boone and Crockett Club's contingency of conservationists,
scientists, politicians, and intellectuals became Roosevelt's closest advisers during his march to
preserve wildlife and habitat across North America. Preservationists, led by John Muir (1838–
1914), argued that the conservation policies were not strong enough to protect the interest of the
natural world because they continued to focus on the natural world as a source of economic
production.The debate between conservation and preservation reached its peak in the public
debates over the construction of California's Hetch Hetchy dam in Yosemite National Park which
supplies the water supply of San Francisco. Muir, leading the Sierra Club, declared that the
valley must be preserved for the sake of its beauty: "No holier temple has ever been consecrated
by the heart of man."
President Roosevelt put conservationist issue high on the national agenda. He worked with all
the major figures of the movement, especially his chief advisor on the matter, Gifford Pinchot
and was deeply committed to conserving natural resources. He encouraged the Newlands
Reclamation Act of 1902 to promote federal construction of dams to irrigate small farms and
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placed 230 million acres (360,000 mi2 or 930,000 km2) under federal protection. Roosevelt set
aside more federal land for national parks and nature preserves than all of his predecessors
combined. Roosevelt established the United States Forest Service, signed into law the creation of
five national parks, and signed the year 1906 Antiquities Act, under which he proclaimed 18 new
national monuments. He also established the first 51 bird reserves, four game preserves, and 150
national forests, including Shoshone National Forest, the nation's first. The area of the United
States that he placed under public protection totals approximately 230,000,000 acres
(930,000 km2). Gifford Pinchot had been appointed by McKinley as chief of Division of Forestry
in the Department of Agriculture. In 1905, his department gained control of the national forest
reserves. Pinchot promoted private use (for a fee) under federal supervision. In 1907, Roosevelt
designated 16 million acres (65,000 km2) of new national forests just minutes before a deadline.
In May 1908, Roosevelt sponsored the Conference of Governors held in the White House, with a
focus on natural resources and their most efficient use. Roosevelt delivered the opening address:
"Conservation as a National Duty.".In 1903 Roosevelt toured the Yosemite Valley with John
Muir, who had a very different view of conservation, and tried to minimize commercial use of
water resources and forests. Working through the Sierra Club he founded, Muir succeeded in
1905 in having Congress transfer the Mariposa Grove and Yosemite Valley to the federal
government. While Muir wanted nature preserved for its own sake, Roosevelt subscribed to
Pinchot's formulation, "to make the forest produce the largest amount of whatever crop or service
will be most useful, and keep on producing it for generation after generation of men and trees."
Theodore Roosevelt's view on conservationism remained dominant for decades; - Franklin D.
Roosevelt authorised the building of many large-scale dams and water projects, as well as the
expansion of the National Forest System to buy out sub-marginal farms. In 1937, the Pittman–
Robertson Federal Aid in Wildlife Restoration Act was signed into law, providing funding for
state agencies to carry out their conservation efforts.
Since 1970
Environmental reemerged on the national agenda in 1970, with Republican Richard Nixon
playing a major role, especially with his creation of the Environmental Protection Agency. The
debates over the public lands and environmental politics played a supporting role in the decline
of liberalism and the rise of modern environmentalism. Although Americans consistently rank
environmental issues as "important", polling data indicates that in the voting booth voters rank
the environmental issues low relative to other political concerns.The growth of the Republican
party's political power in the inland West (apart from the Pacific coast) was facilitated by the rise
of popular opposition to public lands reform. Successful Democrats in the inland West and
Alaska typically take more conservative positions on environmental issues than Democrats from
the Coastal states. Conservatives drew on new organizational networks of think tanks, industry
groups, and citizen-oriented organizations, and they began to deploy new strategies that affirmed
the rights of individuals to their property, protection of extraction rights, to hunt and recreate,
and to pursue happiness unencumbered by the federal government at the expense of resource
conservation.
Areas of concern
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Deforestation and overpopulation are issues affecting all regions of the world. The consequent
destruction of wildlife habitat has prompted the creation of conservation groups in other
countries, some founded by local hunters who have witnessed declining wildlife populations first
hand. Also, it was highly important for the conservation movement to solve problems of living
conditions in the cities and the overpopulation of such places.
Boreal forest and the Arctic
The idea of incentive conservation is a modern one but its practice has clearly defended some of
the sub Arctic wildernesses and the wildlife in those regions for thousands of years, especially by
indigenous peoples such as the Evenk, Yakut, Sami, Inuit and Cree. The fur trade and hunting by
these peoples have preserved these regions for thousands of years. Ironically, the pressure now
upon them comes from non-renewable resources such as oil, sometimes to make synthetic
clothing which is advocated as a humane substitute for fur. (See Raccoon dog for case study of
the conservation of an animal through fur trade.) Similarly, in the case of the beaver, hunting and
fur trade were thought to bring about the animal's demise, when in fact they were an integral part
of its conservation. For many years children's books stated and still do, that the decline in the
beaver population was due to the fur trade. In reality however, the decline in beaver numbers was
because of habitat destruction and deforestation, as well as its continued persecution as a pest (it
causes flooding). In Cree lands however, where the population valued the animal for meat and
fur, it continued to thrive. The Inuit defend their relationship with the seal in response to outside
critics.
Latin America (Bolivia
The Izoceño-Guaraní of Santa Cruz Department, Bolivia is a tribe of hunters who were
influential in establishing the Capitania del Alto y Bajo Isoso (CABI). CABI promotes economic
growth and survival of the Izoceno people while discouraging the rapid destruction of habitat
within Bolivia's Gran Chaco. They are responsible for the creation of the 34,000 square
kilometre Kaa-Iya del Gran Chaco National Park and Integrated Management Area (KINP). The
KINP protects the most biodiverse portion of the Gran Chaco, an ecoregion shared with
Argentina, Paraguay and Brazil. In 1996, the Wildlife Conservation Society joined forces with
CABI to institute wildlife and hunting monitoring programs in 23 Izoceño communities. The
partnership combines traditional beliefs and local knowledge with the political and
administrative tools needed to effectively manage habitats. The programs rely solely on
voluntary participation by local hunters who perform self-monitoring techniques and keep
records of their hunts. The information obtained by the hunters participating in the program has
provided CABI with important data required to make educated decisions about the use of the
land. Hunters have been willing participants in this program because of pride in their traditional
activities, encouragement by their communities and expectations of benefits to the area.
Africa (Botswana
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In order to discourage illegal South African hunting parties and ensure future local use and
sustainability, indigenous hunters in Botswana began lobbying for and implementing
conservation practices in the 1960s. The Fauna Preservation Society of Ngamiland (FPS) was
formed in 1962 by the husband and wife team: Robert Kay and June Kay, environmentalists
working in conjunction with the Batawana tribes to preserve wildlife habitat.The FPS promotes
habitat conservation and provides local education for preservation of wildlife. Conservation
initiatives were met with strong opposition from the Botswana government because of the
monies tied to big-game hunting. In 1963, BaTawanga Chiefs and tribal hunter/adventurers in
conjunction with the FPS founded Moremi National Park and Wildlife Refuge, the first area to
be set aside by tribal people rather than governmental forces. Moremi National Park is home to a
variety of wildlife, including lions, giraffes, elephants, buffalo, zebra, cheetahs and antelope, and
covers an area of 3,000 square kilometers. Most of the groups involved with establishing this
protected land were involved with hunting and were motivated by their personal observations of
declining wildlife and habitat.
Earth Economics
Earth Economics, a 501c3 non-profit headquartered in Tacoma, Washington, United States, is

dedicated to researching and applying the economic solutions of tomorrow today. Earth
Economics provides robust, science-based, ecologically sound, economic analysis, policy and
tools to governments, agencies, non governmental organizations (NGOs), and grassroots
organizations. This information is intended to positively transform international, national and
regional economic systems and business accounting practices, towards a sustainable economy.
Earth Economics has a small in-house staff of economists that collaborate with experts in
economics, ecology, hydrology, policy and systems modeling.
Mission statement
Earth Economics applies new economic tools and principles to meet the challenges of the 21st
century: achieving the need for just and equitable communities, healthy ecosystems, and
sustainable economies.
History
Since 1998, Earth Economics has been promoting science-based economics to change local and
international policy on ecosystem health, fisheries, forests, mining, energy, multilateral
institutions, international finance, and toxics. The organization was initially founded as a project
of the Tides Center by five activists from various fields. Its original name was Asia-Pacific
Environmental Exchange (APEX). Over the ensuing years, Earth Economics evolved into a
successful, autonomous organization and received IRS 501(c)3 tax exempt, public charity status
in March 2006. Earth Economics a track record of improving environmental and economic
issues, working alongside NGOs, private businesses and local, state and federal jurisdictions. In
2009, one of the organization’s projects, The Basel Action Network (aka BAN) which focuses on
toxics in the environment, spun off to form an independent 501c(3) non-profit.
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Ecosystem Service Valuations:
Working with public, private and NGO agencies, Earth Economics’ Ecosystem Service
Valuation (ESV) studies quantify the value of the goods and services provided by regional
ecosystems. This valuation justifies the shift of investment toward environmental preservation
and/or restoration.
Economic Environmental Impact Statements:

Working with planners, policy makers and private consulting firms, Earth Economics provides
justification for specific projects and scenarios based on environmental economic analysis.
Green Jobs Analysis:

Working with local and regional economists, agencies, businesses and jurisdictions, Earth
Economics analyzes the jobs that will be created, maintained, or lost by doing or not doing a
project.
Accounting and Management Strategies:

Working with public utilities, businesses, large land owners and managers, Earth Economics
identifies, and helps clients adopt, new management approaches that value ecosystem services in
addition to built infrastructure and raw materials.
Scenario Mapping and Modeling:

Working with leading systems modelers, ecologists and hydrologists, Earth Economics analyzes
ecosystem services such as freshwater provisioning, carbon sequestration, flood protection,
biodiversity and hurricane protection. This information is used to provide current and future
maps showing ecosystem services provisioning, beneficiaries and damage under different
planning scenarios.
Funding Mechanisms for Conservation and Restoration:

Working with local and state jurisdictions, Earth Economics applies innovative approaches to
fund critical natural infrastructure and conservation work.
Educational Outreach:
Working with philanthropic organizations, environmental and policy NGOs, schools and public
agencies, Earth Economics conducts workshops, lectures and media events to increase awareness
about ecological economics.
Conversion of Built Capital to Sustainable Function:

Working with the electronic recycling industry, paper mills and other industries, Earth
Economics helps catalyze the shift from unsustainable to sustainable technology and industrial
processes.
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Accomplishments
Earth Economics has produced dozens of studies and done hundreds of presentations since their
founding in 1998. Some of their most noteworthy accomplishments include:
• Providing the economic argument for not drilling for oil in Ecuador’s Yasuni National
Park and helping to set up a multibillion-dollar international fund for Amazon forest
protection which resulted in international agreements to leave Ecuador’s largest oil
reserves in the ground. Soon after, Ecuador became the first OPEC nation to recognize
climate change, peak oil and the need to conserve critical ecosystem services.
• Working with local partners to help the Army Corps of Engineers realize the physical and
economic value of Louisiana’s wetlands for hurricane protection, which resulted in the
first Corps’ cost-benefit analysis exemption and application of multi-criteria decision
making to include economics, public safety and wetland restoration.
• Establishing the world’s first electronic recycling certification program, which resulted in
tripling the profits for the industry’s greenest recyclers and shifting 40% of world trade in
electronic waste.
• Working with governments and the fishing industry to develop a framework for
converting the spot prawn fisheries to the world’s highest value, most sustainable and
first trap-only shrimp industry, resulting in increased incomes for local communities
through fair pricing (from $3 per lb to $12–18 per lb).
• Working with industry and Washington leadership to define voluntary industrial
indicators for the pulp and paper mill industry resulting in increased environmental
efficiency and profitability for participating mills.
• Demonstrating the economic value of coastal mangrove systems, resulting in new
national policies for adoption and protection in the Philippines including mangrove
replanting, a moratorium on shrimp aquaculture and increased reforestation efforts.
• Providing economic analysis and studies on international lending and environmental
impacts, resulting in upgraded lending standards at the World Bank, Asian Development
Bank, InterAmerican Development Bank, and 35 export credit agencies and strengthened
environmental impact assessment and indigenous people’s policies.
Training the Next Generation
Earth Economics has provided training and practical experience to over 160 post-doc, graduate
and undergraduate students in the form of thesis work, practicums and internships. At any one
time, they have 3-8 interns training at Earth Economics. University partnerships include
University of Maryland, University of Vermont, Louisiana State University, Duke University,
Pacific Lutheran University, University of Washington, Washington State University, Seattle
Pacific University, The Evergreen State College, Oregon State University, Portland State
University, FLACSO University, Andian University of Simon Bolivar. Paid internship positions
ranging in length from 6–12 months are posted on their website.
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Environmental design
Environmental design is the process of addressing surrounding environmental parameters when

devising plans, programs, policies, buildings, or products. Classical prudent design may have
always considered environmental factors; however, the environmental movement beginning in
the 1940s has made the concept more explicit. Environmental design can also refer to the applied
arts and sciences dealing with creating the human-designed environment. These fields include
architecture, geography, urban planning, landscape architecture, and interior design.
Environmental design can also encompass interdisciplinary areas such as historical preservation
and lighting design. In terms of a larger scope, environmental design has implications for the
industrial design of products: innovative automobiles, wind-electricity generators, solar-electric
equipment, and other kinds of equipment could serve as examples. Currently, the term has
expanded to apply to ecological and sustainability issues.The photo shows a training meeting
with factory workers in a stainless steel ecodesign company from Rio de Janeiro, Brazil.
The first traceable concepts of environmental designs focused primarily on solar heating, which
began in Ancient Greece around 500 BCE. At the time, most of Greece had exhausted its supply
of wood for fuel, leading architects to design houses that would capture the solar energy of the
sun. The Greeks understood that the position of the sun varies throughout the year. For a latitude
of 40 degrees in summer the sun is high in the south, at an angle of 70 degrees at the zenith,
while in winter, the sun travels a lower trajectory, with a zenith of 26 degrees. Greek houses
were built with south-facing façades which received little to no sun in the summer but would
receive full sun in the winter, warming the house. Additionally, the southern orientation also
protected the house from the colder northern winds. This clever arrangement of buildings
influenced the use of the grid pattern of ancient cities. With the North-South orientation of the
houses, the streets of Greek cities mainly ran East-West. The practice of solar architecture
continued with the Romans, who similarly had deforested much of their native Italian Peninsula
by the first century BCE. The Roman heliocaminus, literally 'solar furnace', functioned with the
same aspects of the earlier Greek houses. The numerous public baths were oriented to the south.
Roman architects added glass to windows to allow for the passage of light and to conserve
interior heat as it could not escape. The Romans also used greenhouses to grow crops all year
long and to cultivate the exotic plants coming from the far corners of the Empire. Pliny the Elder
wrote of greenhouses that supplied the kitchen of the Emperor Tiberius during the year. Along
with the solar orientation of buildings and the use of glass as a solar heat collector, the ancients
knew other ways of harnessing solar energy. The Greeks, Romans and Chinese developed curved
mirrors that could concentrate the sun's rays on an object with enough intensity to make it burn
in seconds. The solar reflectors were often made of polished silver, copper or brass.
Early roots of modern environmental design began in the late 19th Century with writer/designer
William Morris, who rejected the use of industrialized materials and processes in wallpaper,
fabrics and books his studio produced. He and others, such as John Ruskin felt that the industrial
revolution would lead to harm done to nature and workers.
The narrative of Brian Danitz and Chris Zelov's documentary film Ecological Design: Inventing
the Future asserts that in the decades after World War II, "The world was forced to confront the
dark shadow of science and industry." From the middle of the twentieth century, thinkers like
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Buckminster Fuller have acted as catalysts for a broadening and deepening of the concerns of
environmental designers. Nowadays, energy efficiency, appropriate technology, organic
horticulture and agriculture, land restoration, New Urbanism, and ecologically sustainable
energy and waste systems are recognized considerations or options and may each find
application. By integrating renewable energy sources such as solar photovoltaic, solar thermal,
and even geothermal energy into structures, it is possible to create zero emission buildings,
where energy consumption is self-generating and non-polluting. It is also possible to construct
"energy-plus buildings" which generate more energy than they consume, and the excess could
then be sold to the grid. In the United States, the LEED Green Building Rating System rates
structures on their environmental sustainability.
Environmental engineering
Environmental Engineering is the branch of engineering concerned with the application of

scientific and engineering principles for protection of human populations from the effects of
adverse environmental factors; protection of environments, both local and global, from the
potentially deleterious effects of natural and human activities; and improvement of
environmental quality. Environmental engineering can also be described as a branch of applied
science and technology that addresses the issues of energy preservation, production asset and
control of waste from human and animal activities. Furthermore, it is concerned with finding
plausible solutions in the field of public health, such as waterborne diseases, implementing laws
which promote adequate sanitation in urban, rural and recreational areas. It involves waste water
management, air pollution control, recycling, waste disposal, radiation protection, industrial
hygiene, environmental sustainability, public health and environmental engineering law. It also
includes studies on the environmental impact of proposed construction projects.Environmental
engineers study the effect of technological advances on the environment. To do so, they conduct
studies on hazardous-waste management to evaluate the significance of such hazards, advise on
treatment and containment, and develop regulations to prevent mishaps. Environmental
engineers design municipal water supply and industrial wastewater treatment systems. They
address local and worldwide environmental issues such as the effects of acid rain, global
warming, ozone depletion, water pollution and air pollution from automobile exhausts and
industrial sources. At many universities environmental engineering programs are offered at either
the department of civil engineering or the department of chemical engineering at engineering
faculties. Environmental "civil" engineers focus on hydrology, water resources management,
bioremediation, and water treatment plant design. Environmental "chemical" engineers, on the
other hand, focus on environmental chemistry, advanced air and water treatment technologies
and separation processes. Additionally, engineers are more frequently obtaining specialized
training in law (J.D.) and are utilizing their technical expertise in the practices of environmental
engineering law.Most jurisdictions also impose licensing and registration requirements.
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Development
Ever since people first recognized that their health is related to the quality of their environment,
they have applied principles to attempt to improve the quality of their environment. The ancient
Indian Harappan civilization utilized early sewers in some cities more than 5000 years ago. The
Romans constructed aqueducts to prevent drought and to create a clean, healthful water supply
for the metropolis of Rome. In the 15th century, Bavaria created laws restricting the development
and degradation of alpine country that constituted the region's water supply.The field emerged as
a separate environmental discipline during the middle third of the 20th century in response to
widespread public concern about water and pollution and increasingly extensive environmental
quality degradation. However, its roots extend back to early efforts in public health engineering.
Modern environmental engineering began in London in the mid-19th century when Joseph
Bazalgette designed the first major sewerage system that reduced the incidence of waterborne
diseases such as cholera. The introduction of drinking water treatment and sewage treatment in
industrialized countries reduced waterborne diseases from leading causes of death to rarities. In
many cases, as societies grew, actions that were intended to achieve benefits for those societies
had longer-term impacts which reduced other environmental qualities. One example is the
widespread application of the pesticide DDT to control agricultural pests in the years following
World War II. While the agricultural benefits were outstanding and crop yields increased
dramatically thus reducing world hunger substantially, and malaria was controlled better than it
ever had been, numerous species were brought to the verge of extinction due to the impact of the
DDT on their reproductive cycles. The story of DDT as vividly told in Rachel Carson's Silent
Spring (1962) is considered to be the birth of the modern environmental movement and the of the
modern field of "environmental engineering." Conservation movements and laws restricting
public actions that would harm the environment have been developed by various societies for
millennia. Notable examples are the laws decreeing the construction of sewers in London and
Paris in the 19th century and the creation of the U.S. national park system in the early 20th
century.
Scientists have air pollution dispersion models to evaluate the concentration of a pollutant at a
receptor or the impact on overall air quality from vehicle exhausts and industrial flue gas stack
emissions. To some extent, this field overlaps the desire to decrease carbon dioxide and other
greenhouse gas emissions from combustion processes. They apply scientific and engineering
principles to evaluate if there are likely to be any adverse impacts to water quality, air quality,
habitat quality, flora and fauna, agricultural capacity, traffic impacts, social impacts, ecological
impacts, noise impacts, visual (landscape) impacts, etc. If impacts are expected, they then
develop mitigation measures to limit or prevent such impacts. An example of a mitigation
measure would be the creation of wetlands in a nearby location to mitigate the filling in of
wetlands necessary for a road development if it is not possible to reroute the road.In the United
States, the practice of environmental assessment was formally initiated on January 1, 1970, the
effective date of the National Environmental Policy Act (NEPA). Since that time, more than 100
developing and developed nations either have planned specific analogous laws or have adopted
procedure used elsewhere. NEPA is applicable to all federal agencies in the United States.
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Water supply and treatment
Engineers and scientists work to secure water supplies for potable and agricultural use. They
evaluate the water balance within a watershed and determine the available water supply, the
water needed for various needs in that watershed, the seasonal cycles of water movement
through the watershed and they develop systems to store, treat, and convey water for various
uses. Water is treated to achieve water quality objectives for the end uses. In the case of a potable
water supply, water is treated to minimize the risk of infectious disease transmission, the risk of
non-infectious illness, and to create a palatable water flavor. Water distribution systems are
designed and built to provide adequate water pressure and flow rates to meet various end-user
needs such as domestic use, fire suppression, and irrigation.
Wastewater treatment
There are numerous wastewater treatment technologies. A wastewater treatment train can consist
of a primary clarifier system to remove solid and floating materials, a secondary treatment
system consisting of an aeration basin followed by flocculation and sedimentation or an activated
sludge system and a secondary clarifier, a tertiary biological nitrogen removal system, and a final
disinfection process. The aeration basin/activated sludge system removes organic material by
growing bacteria (activated sludge). The secondary clarifier removes the activated sludge from
the water. The tertiary system, although not always included due to costs, is becoming more
prevalent to remove nitrogen and phosphorus and to disinfect the water before discharge to a
surface water stream or ocean outfall.
Air pollution management
Scientists have developed air pollution dispersion models to evaluate the concentration of a
pollutant at a receptor or the impact on overall air quality from vehicle exhausts and industrial
flue gas stack emissions. To some extent, this field overlaps the desire to decrease carbon
dioxide and other greenhouse gas emissions from combustion processes.
Environmental Protection Agency
The U.S. Environmental Protection Agency (EPA) is one of the many agencies that work with
environmental engineers to solve key issues. An important component of EPA’s mission is to
protect and improve air, water, and overall environmental quality in order to avoid or mitigate
the consequences of harmful effects.
Ecological engineering for sustainable agriculture in arid and semiarid West African
regions
Ecological engineering offers new alternatives for the management of agricultural systems that
are more tailored to the ever-changing social and environmental necessities in these regions. This
requires managing the complexity of agrosystems, while striving to mimic the functioning of
natural ecosystems of West African drylands and taking advantage of traditional practices and
local know-how resulting from a long process of adaptation to environmental constraints.
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1. Acting on biodiversity. Biodiversity is essential to the productivity of ecosystems and
their temporal stability under the impact of external disturbances. Several ecological
processes related to biodiversity may be intensified for the benefit of agrosilvopastoral
systems: promoting diversity and soil microorganism activity to benefit plants,
associating and utilizing the mutual benefits of plants
2. Utilizing organic matter and nutrient cycles. The productivity of agrosystems with low
chemical input use in dryland regions is primarily based on efficient organic resource
management, and in turn on the nutrient and energy flows they induce. It is thus possible
to intervene at several levels: enhancing crop-livestock farming integration to preserve
natural resources, restoring the biological activity of soils via specific organic inputs,
supplying nutrients to plants locally.
3. Enhancing available water use. Water supplies are limited and irregular in dryland areas.
Current management of these supplies—which involves capturing rainwater and surface
runoff—could be improved in several ways: adapting to erratic rainfall or drought risks
by focusing on: (i) the organization of the farm and community (farm plot patterns in
association with the random rainfall distribution, etc.), and on (ii) cropping techniques to
reduce crop water needs (plant choices, weeding, etc.), preserving water in crop fields by
hampering runoff, accounting for the essential role of trees regarding soil and water in
drylands.
4. Managing landscapes and associated ecological processes. Ecological crop pest
regulation by their natural enemies is one ecosystem service provided by biodiversity.
Better pest management could be considered in association with promoting biodiversity
at different scales, e.g. from the plant to the landscape.
Education
Courses aimed at developing graduates with specific skills in environmental systems or

environmental technology are becoming more common and fall into broad classes:
• Mechanical engineering courses oriented towards designing machines and mechanical

systems for environmental use such as water treatment facilities, pumping stations,
garbage segregation plants and other mechanical facilities;
• Environmental engineering or environmental systems courses oriented towards a civil
engineering approach in which structures and the landscape are constructed to blend with
or protect the environment;
• Environmental chemistry, sustainable chemistry or environmental chemical engineering
courses oriented towards understanding the effects (good and bad) of chemicals in the
environment. Focus on mining processes, pollutants and commonly also cover
biochemical processes;
• Environmental technology courses oriented towards producing electronic or electrical
graduates capable of developing devices and artifacts able to monitor, measure, model
and control environmental impact, including monitoring and managing energy generation
from renewable sources.
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Environmental resource management
Environmental resource management is the management of the interaction and impact of

human societies on the environment. It is not, as the phrase might suggest, the management of
the environment itself. Environmental resources management aims to ensure that ecosystem
services are protected and maintained for future human generations, and also maintain ecosystem
integrity through considering ethical, economic, and scientific (ecological) variables.[1]
Environmental resource management tries to identify factors affected by conflicts that rise
between meeting needs and protecting resources. It is thus linked to environmental protection,
sustainability and integrated landscape management.
Significance
Environmental resource management is an issue of increasing concern, as reflected in its

prevalence in seminal texts influencing global socio-political frameworks such as the Brundtland
Commission's Our Common Future,[2] which highlighted the integrated nature of environment
and international development and the Worldwatch Institute's annual State of the World (book
series) reports.The environment determines nature of every objects around the sphere. The
behaviour, type of religion, culture and economic practices.
Scope
Improved agricultural practices such as these terraces in northwest Iowa can serve to preserve
soil and improve water quality
Environmental resource management can be viewed from a variety of perspectives.

Environmental resource management involves the management of all components of the
biophysical environment, both living (biotic) and non-living (abiotic). This is due to the
interconnected and network of relationships amongst all living species and their habitats. The
environment also involves the relationships of the human environment, such as the social,
cultural and economic environment with the biophysical environment. The essential aspects of
environmental resource management are ethical, economical, social, and technological. These
underlie principles and help make decisions.The concept of environmental determinism,
probabilism and possibilism are significant in the concept of environmental reasource
management.It should be noted that environmental resource management covers many areas in
the field of science: geography, biology, physics, chemistry, sociology, psychology, phisiology,
etc.
Aspects
Environmental resource management strategies are intrinsically driven by conceptions of human-

nature relationships. Ethical aspects involve the cultural and social issues relating to the
environment, and dealing with changes to it. "All human activities take place in the context of
certain types of relationships between society and the bio-physical world (the rest of nature),"
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and so, there is a great significance in understanding the ethical values of different groups around
the world. Broadly speaking, two schools of thought exist in environmental ethics:
Anthropocentrism and Ecocentrism each influencing a broad spectrum of environmental resource
management styles along a continuum. These styles perceive "...different evidence, imperatives,
and problems, and prescribe different solutions, strategies, technologies, roles for economic
sectors, culture, governments, and ethics, etc."Anthropocentrism, "...an inclination to evaluate
reality exclusively in terms of human values," is an ethic reflected in the major interpretations of
Western religions and the dominant economic paradigms of the industrialised world.
Anthropocentrism looks at nature as existing solely for the benefit of man, and as a commodity
to use for the good of humanity and to improve human quality of life. Anthropocentric
environmental resource management is therefore not the conservation of the environment solely
for the environment's sake, but rather the conservation of the environment, and ecosystem
structure, for human sake.
Ecocentrism
Ecocentrists believe in the intrinsic value of nature while maintaining that human beings must
use and even exploit nature to survive and live. It is this fine ethical line that ecocentrists
navigate between fair use and abuse. At an extreme of the ethical scale, ecocentrism includes
philosophies such as ecofeminism and deep ecology, which evolved as a reaction to dominant
anthropocentric paradigms. "In its current form, it is an attempt to synthesize many old and some
new philosophical attitudes about the relationship between nature and human activity, with
particular emphasis on ethical, social, and spiritual aspects that have been downplayed in the
dominant economic worldview."
Economic
A water harvesting system collects rainwater from the Rock of Gibraltar into pipes that lead to
tanks excavated inside the rock. The economy functions within, and is dependent upon goods
and services provided by natural ecosystems. The role of the environment is recognized in both
classical economics and neoclassical economics theories, yet the environment held a spot on the
back-burner of economic policies from 1950 to 1980 due to emphasis from policy makers on
economic growth. With the prevalence of environmental problems, many economists embraced
the notion that, "If environmental sustainability must coexist for economic sustainability, then
the overall system must [permit] identification of an equilibrium between the environment and
the economy." As such, economic policy makers began to incorporate the functions of the
natural environment—or natural capital — particularly as a sink for wastes and for the provision
of raw materials and amenities. Debate continues among economists as to how to account for
natural capital, specifically whether resources can be replaced through the use of knowledge and
technology, or whether the economy is a closed system that cannot be replenished and is finite.
Economic models influence environmental resource management, in that management policies
reflect beliefs about natural capital scarcity. For someone who believes natural capital is infinite
and easily substituted, environmental management is irrelevant to the economy. For example,
economic paradigms based on neoclassical models of closed economic systems are primarily
concerned with resource scarcity, and thus prescribe legalizing the environment as an economic
externality for an environmental resource management strategy. This approach has often been
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termed 'Command-and-control'. Colby has identified trends in the development of economic
paradigms, among them, a shift towards more ecological economics since the 1990s.
Ecological
"The pairing of significant uncertainty about the behaviour and response of ecological systems
with urgent calls for near-term action constitutes a difficult reality, and a common lament" for
many environmental resource managers. Scientific analysis of the environment deals with
several dimensions of ecological uncertainty. These include: structural uncertainty resulting
from the misidentification, or lack of information pertaining to the relationships between
ecological variables; parameter uncertainty referring to "uncertainty associated with parameter
values that are not known precisely but can be assessed and reported in terms of the
likelihood…of experiencing a defined range of outcomes"; and stochastic uncertainty stemming
from chance or unrelated factors.[16] Adaptive management is considered a useful framework for
dealing with situations of high levels of uncertainty though it is not without its detractors. A
common scientific concept and impetus behind environmental resource management is carrying
capacity. Simply put, carrying capacity refers to the maximum number of organisms a particular
resource can sustain. The concept of carrying capacity, whilst understood by many cultures over
history, has its roots in Malthusian theory. An example is visible in the EU Water Framework
Directive. However, "it is argued that Western scientific knowledge ... is often insufficient to
deal with the full complexity of the interplay of variables in environmental resource
management. These concerns have been recently addressed by a shift in environmental resource
management approaches to incorporate different knowledge systems including traditional
knowledge, reflected in approaches such as adaptive co-management community-based natural
resource management and transitions management. among others.
Sustainability
Sustainability and environmental resource management involves managing economic, social, and
ecological systems within and external to an organizational entity so it can sustain itself and the
system it exists in. In context, sustainability implies that rather than competing for endless
growth on a finite planet, development improves quality of life without necessarily consuming
more resources. Sustainably managing environmental resources requires organizational change
that instills sustainability values that portrays these values outwardly from all levels and
reinforces them to surrounding stakeholders. The end result should be a symbiotic relationship
between the sustaining organization, community, and environment. Many drivers compel
environmental resource management to take sustainability issues into account. Today's economic
paradigms do not protect the natural environment, yet they deepen human dependency on
biodiversity and ecosystem services. Ecologically, massive environmental degradation and
climate change threaten the stability of ecological systems that humanity depends on. Socially,
an increasing gap between rich and poor and the global North-South divide denies many access
to basic human needs, rights, and education, leading to further environmental destruction. The
planet's unstable condition is caused by many anthropogenic sources. As an exceptionally
powerful contributing factor to social and environmental change, the modern organisation has
the potential to apply environmental resource management with sustainability principals to
achieve highly effective outcomes. To achieve sustainable development with environmental
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resource management an organisation should coincide with sustainability principles, such as:
social and environmental accountability, long-term planning; a strong, shared vision; a holistic
focus; devolved and consensus decision making; broad stakeholder engagement and justice;
transparency measures; trust; and flexibility, to name a few.
Current paradigm shifts
To adjust to today's environment of quick social and ecological changes, some organizations
have begun to experiment with various new tools and concepts. Those that are more traditional
and stick to hierarchical decision making have difficulty dealing with the demand for lateral
decision making that supports effective participation. Whether it be a matter of ethics or just
strategic advantage organizations are internalizing sustainability principles. Examples of some of
the world's largest and most profitable corporations who are shifting to sustainable
environmental resource management are: Ford, Toyota, BMW, Honda, Shell, Du Pont, Swiss Re,
Hewlett-Packard, and Unilever. An extensive study by the Boston Consulting Group reaching
1,560 business leaders from diverse regions, job positions, expertise in sustainability, industries,
and sizes of organizations, revealed the many benefits of sustainable practice as well as its
viability. It is important to note that though sustainability of environmental resource management
has improved, corporate sustainability, for one, has yet to reach the majority of global companies
operating in the markets. The three major barriers to preventing organizations to shift towards
sustainable practice with environmental resource management are: not understanding what
sustainability is; having difficulty modeling an economically viable case for the switch; and
having a flawed execution plan, or a lack thereof. Therefore, the most important part of shifting
an organization to adopt sustainability in environmental resource management would be to create
a shared vision and understanding of what sustainability is for that particular organization, and to
clarify the business case.
Private sector
The private sector comprises private corporations and non-profit institutions serving households.
The private sector's traditional role in environmental resource management is that of the recovery
of natural resources. Such private sector recovery groups include mining (minerals and
petroleum), forestry and fishery organisations. Environmental resource management undertaken
by the private sectors varies dependent upon the resource type, that being renewable or non-
renewable and private and common resources (also see Tragedy of the Commons).
Environmental managers from the private sector also need skills to manage collaboration within
a dynamic social and political environment.
Civil society
Civil society comprises associations in which societies voluntarily organise themselves into and
which represent a wide range of interests and ties. These can include community-based
organisations, indigenous peoples' organisations and non-government organisations (NGO).
Functioning through strong public pressure, civil society can exercise their legal rights against
the implementation of resource management plans, particularly land management plans. The aim
of civil society in environmental resource management is to be included in the decision-making
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process by means of public participation. Public participation can be an effective strategy to
invoke a sense of social responsibility of natural resources.
Tools
As with all management functions, effective management tools, standards and systems are
required. An environmental management standard or system or protocol attempts to reduce
environmental impact as measured by some objective criteria. The ISO 14001 standard is the
most widely used standard for environmental risk management and is closely aligned to the
European Eco-Management and Audit Scheme (EMAS). As a common auditing standard, the
ISO 19011 standard explains how to combine this with quality management.Other environmental
management systems (EMS) tend to be based on the ISO 14001 standard and many extend it in
various ways:
• The Green Dragon Environmental Management Standard is a five level EMS designed
for smaller organisations for whom ISO 14001 may be too onerous and for larger
organisations who wish to implement ISO 14001 in a more manageable step-by-step
approach,[51]
• BS 8555 is a phased standard that can help smaller companies move to ISO 14001 in six
manageable steps,
• The Natural Step focuses on basic sustainability criteria and helps focus engineering on
reducing use of materials or energy use that is unsustainable in the long term,
Other strategies exist that rely on making simple distinctions rather than building top-down
management "systems" using performance audits and full cost accounting. For instance,
Ecological Intelligent Design divides products into consumables, service products or durables
and unsaleables — toxic products that no one should buy, or in many cases, do not realize they
are buying. By eliminating the unsaleables from the comprehensive outcome of any purchase,
better environmental resource management is achieved without systems.Recent successful cases
have put forward the notion of integrated management. It shares a wider approach and stresses
out the importance of interdisciplinary assessment. It is an interesting notion that might not be
adaptable to all cases.
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CHAPTER 14- CORPORATE SOCIAL RESPONSIBILITY AND ETHICS
The evolution of corporate social responsibility in India refers to changes over time in India
of the cultural norms of corporations' engagement of corporate social responsibility (CSR),
with CSR referring to way that businesses are managed to bring about an overall positive impact
on the communities, cultures, ...
Evolution of corporate social responsibility in India
The evolution of corporate social responsibility in India refers to changes over time in India
of the cultural norms of corporations' engagement of corporate social responsibility (CSR), with
CSR referring to way that businesses are managed to bring about an overall positive impact on
the communities, cultures, societies and environments in which they operate.[1] The fundamentals
of CSR rest on the fact that not only public policy but even corporates should be responsible
enough to address social issues. Thus companies should deal with the challenges and issues
looked after to a certain extent by the states. Among other countries India has one of the oldest
traditions of CSR. But CSR practices are regularly not practiced or done only in namesake
specially by MNCs with no cultural and emotional attachments to India. Much has been done in
recent years to make Indian Entrepreneurs aware of social responsibility as an important segment
of their business activity but CSR in India has yet to receive widespread recognition. If this goal
has to be realised then the CSR approach of corporates has to be in line with their attitudes
towards mainstream business- companies setting clear objectives, undertaking potential
investments, measuring and reporting performance publicly.
The Four Phases of CSR Development in India
The history of CSR in India has its four phases which run parallel to India's historical
development and has resulted in different approaches towards CSR. However the phases are not
static and the features of each phase may overlap other phases.
The First Phase
In the first phase charity and philanthropy were the main drivers of CSR. Culture, religion,
family values and tradition and industrialization had an influential effect on CSR. In the pre-
industrialization period, which lasted till 1850, wealthy merchants shared a part of their wealth
with the wider society by way of setting up temples for a religious cause. Moreover, these
merchants helped the society in getting over phases of famine and epidemics by providing food
from their godowns and money and thus securing an integral position in the society. With the
arrival of colonial rule in India from the 1850s onwards, the approach towards CSR changed.
The industrial families of the 19th century such as Tata, Godrej, Bajaj, Modi, Birla, Singhania
were strongly inclined towards economic as well as social considerations. However it has been
observed that their efforts towards social as well as industrial development were not only driven
by selfless and religious motives but also influenced by caste groups and political objectives. ] Or
studies
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The Second Phase
In the second phase, during the independence movement, there was increased stress on Indian
Industrialists to demonstrate their dedication towards the progress of the society. This was when
Mahatma Gandhi introduced the notion of "trusteeship", according to which the industry leaders
had to manage their wealth so as to benefit the common man. "I desire to end capitalism almost,
if not quite, as much as the most advanced socialist. But our methods differ. My theory of
trusteeship is no make-shift, certainly no camouflage. I am confident that it will survive all other
theories." This was Gandhi's words which highlights his argument towards his concept of
"trusteeship". Gandhi's influence put pressure on various Industrialists to act towards building
the nation and its socio-economic development.[4] According to Gandhi, Indian companies were
supposed to be the "temples of modern India". Under his influence businesses established trusts
for schools and colleges and also helped in setting up training and scientific institutions. The
operations of the trusts were largely in line with Gandhi's reforms which sought to abolish
untouchability, encourage empowerment of women and rural development.
The Third Phase
The third phase of CSR (1960–80) had its relation to the element of "mixed economy",
emergence of Public Sector Undertakings (PSUs) and laws relating labour and environmental
standards. During this period the private sector was forced to take a backseat. The public sector
was seen as the prime mover of development Because of the stringent legal rules and regulations
surrounding the activities of the private sector, the period was described as an "era of command
and control". The policy of industrial licensing, high taxes and restrictions on the private sector
led to corporate malpractices This led to enactment of legislation regarding corporate
governance, labour and environmental issues. PSUs were set up by the state to ensure suitable
distribution of resources (wealth, food etc.) to the needy. However the public sector was
effective only to a certain limited extent. This led to shift of expectation from the public to the
private sector and their active involvement in the socio-economic development of the country
became absolutely necessary In 1965 Indian academicians, politicians and businessmen set up a
national workshop on CSR aimed at reconciliation. They emphasized upon transparency, social
accountability and regular stakeholder dialogues. In spite of such attempts the CSR failed to
catch steam.
The Fourth Phase
In the fourth phase (1980 - 2013) Indian companies started abandoning their traditional
engagement with CSR and integrated it into a sustainable business strategy. In the 1990s the first
initiation towards globalization and economic liberalization were undertaken. Controls and
licensing system were partly done away with which gave a boost to the economy the signs of
which are very evident today. Increased growth momentum of the economy helped Indian
companies grow rapidly and this made them more willing{Gajare, R.S. (2014). A conceptual
study of CSR development in India. In D.B. Patil & D.D. Bhakkad, Redefining Management
Practices and Marketing in Modern Age Dhule, India: Atharva Publications (p. 152-154).} and
able to contribute towards social cause. Globalization has transformed India into an important
destination in terms of production and manufacturing bases of TNCs are concerned. As Western
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markets are becoming more and more concerned about labour and environmental standards in
the developing countries, Indian companies which export and produce goods for the developed
world need to pay a close attention to compliance with the international standards.
Current State of CSR in India
As discussed above, CSR is not a new concept in India. Ever since their inception, corporates
like the Tata Group, the Aditya Birla Group,and Indian Oil Corporation, to name a few, have
been involved in serving the community. Through donations and charity events, many other
organizations have been doing their part for the society. The basic objective of CSR in these days
is to maximize the company's overall impact on the society and stakeholders. CSR policies,
practices and programs are being comprehensively integrated by an increasing number of
companies throughout their business operations and processes. A growing number of corporates
feel that CSR is not just another form of indirect expense but is important for protecting the
goodwill and reputation, defending attacks and increasing business competitiveness. Companies
have specialised CSR teams that formulate policies, strategies and goals for their CSR programs
and set aside budgets to fund them. These programs are often determined by social philosophy
which have clear objectives and are well defined and are aligned with the mainstream business.
The programs are put into practice by the employees who are crucial to this process. CSR
programs ranges from community development to development in education, environment and
healthcare etc. For example, a more comprehensive method of development is adopted by some
corporations such as Bharat Petroleum Corporation Limited, Maruti Suzuki India Limited.
Provision of improved medical and sanitation facilities, building schools and houses, and
empowering the villagers and in process making them more self-reliant by providing vocational
training and a knowledge of business operations are the facilities that these corporations focus
on. Many of the companies are helping other peoples by providing them good standard of
living.Also, corporates increasingly join hands with non-governmental organizations (NGOs)
and use their expertise in devising programs which address wider social problems.CSR has gone
through many phases in India. The ability to make a significant difference in the society and
improve the overall quality of life has clearly been proven by the corporates. Not one but all
corporates should try and bring about a change in the current social situation in India in order to
have an effective and lasting solution to the social woes . Partnerships between companies,
NGOs and the government should be facilitated so that a combination of their skills such as
expertise, strategic thinking, manpower and money to initiate extensive social change will put
the socio-economic development of India on a fast track. An Indian garment manufacturing
company called Kitex has taken over the administration of a small village called
Kizhakkambalam by winning the local body elections held in November, 2015. Mainstream
political leaders and environmental activists feel that this can lead to a dangerous precedent
because corporate body can have a hidden agenda in taking over the administration of political
bodies. Former Indian MP Sebastian Paul says that "the company was at loggerheads with the
former panchayat on issues like environmental pollution so we don’t know what their vested
interest is in taking over the panchayat. They also employ a big segment of the population there
and also give out dole to locals. This model can be replicated...it is setting a dangerous
precedent.” Environmentalists like C.R.Neelakantan point out that the Kitex group has became
active in social service only after they were involved in court cases connected with water and
land pollution.
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Law
Under the Companies Act, 2013, any company having a net worth of rupees 500 crore or more or
a turnover of rupees 1,0000 crore or more or a net profit of rupees 5 crore or more has to spend at
least 2% of last 3 years average net profits on CSR activities as specified in Schedule VII of the
Companies Act, 2013 and as amended from time to time.[10] The rules came into effect from 1
April 2014. SEBI, as per its notification on August 13, 2012, has mentioned that enterprises are
accountable to the larger society and "adoption of responsible business practices in the interest of
the social set-up and the environment are as vital as their financial and operational performance".
SEBI has mandated the inclusion of Business Responsibility Reports as part of the annual reports
of the Top 100 listed entities based on market capitalization at BSE and NSE. It is mandatory to
make these reports available on the website of the company. For companies that do not belong to
Top 100, inclusion of Business Responsibility Reports is not mandatory, though SEBI
encourages its inclusion in the annual report and website.
Corporate social responsibility (CSR, also called corporate conscience, corporate

citizenship or responsible business) is a form of corporate self-regulation integrated into a
business model. CSR policy functions as a self-regulatory mechanism whereby a business
monitors and ensures its active compliance with the spirit of the law, ethical standards and
national or international norms. With some models, a firm's implementation of CSR goes beyond
compliance and engages in "actions that appear to further some social good, beyond the interests
of the firm and that which is required by law." The aim is to increase long-term profits and
shareholder trust through positive public relations and high ethical standards to reduce business
and legal risk by taking responsibility for corporate actions. CSR strategies encourage the
company to make a positive impact on the environment and stakeholders including consumers,
employees, investors, communities, and others.
Proponents argue that corporations increase long-term profits by operating with a CSR
perspective, while critics argue that CSR distracts from businesses' economic role. A 2000 study
compared existing econometric studies of the relationship between social and financial
performance, concluding that the contradictory results of previous studies reporting positive,
negative, and neutral financial impact, were due to flawed empirical analysis and claimed when
the study is properly specified, CSR has a neutral impact on financial outcomes.
Criticsquestioned the "lofty" and sometimes "unrealistic expectations" in CSR. or that CSR is
merely window-dressing, or an attempt to pre-empt the role of governments as a watchdog over
powerful multinational corporations.Political sociologists became interested in CSR in the
context of theories of globalization, neoliberalism and late capitalism. Some sociologists viewed
CSR as a form of capitalist legitimacy and in particular point out that what began as a social
movement against uninhibited corporate power was transformed by corporations into a 'business
model' and a 'risk management' device, often with questionable results. CSR is titled to aid an
organization's mission as well as serve as a guide to what the company represents for its
consumers. Business ethics is the part of applied ethics that examines ethical principles and
moral or ethical problems that can arise in a business environment. ISO 26000 is the recognized
international standard for CSR. Public sector organizations (the United Nations for example)
adhere to the triple bottom line (TBL). It is widely accepted that CSR adheres to similar
principles, but with no formal act of legislation.
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Definition
The term "corporate social responsibility" became popular in the 1960s and has remained a term
used indiscriminately by many to cover legal and moral responsibility more narrowly construed.
Business Dictionary defines CSR as "A company’s sense of responsibility towards the
community and environment (both ecological and social) in which it operates. Companies
express this citizenship (1) through their waste and pollution reduction processes, (2) by
contributing educational and social programs and (3) by earning adequate returns on the
employed resources." A broader definition expands from a focus on stakeholders to include
philanthropy and volunteering.
Consumer perspectives
Most consumers agree that while achieving business targets, companies should do CSR at the
same time. Most consumers believe companies doing charity will receive a positive response.
Somerville also found that consumers are loyal and willing to spend more on retailers that
support charity. Consumers also believe that retailers selling local products will gain loyalty.
Smith (2013) shares the belief that marketing local products will gain consumer trust. However,
environmental efforts are receiving negative views given the belief that this would affect
customer service. Oppewal et al. (2006) found that not all CSR activities are attractive to
consumers. They recommended that retailers focus on one activity. Becker-Olsen (2006) found
that if the social initiative done by the company is not aligned with other company goals it will
have a negative impact. Mohr et al.(2001) and Groza et al. (2011) also emphasise the
importance of reaching the consumer.
Approaches
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CSR Approaches
Some commentators have identified a difference between the Canadian (Montreal school of
CSR), the Continental European and the Anglo-Saxon approaches to CSR.[21] It is said that for
Chinese consumers,[22] a socially responsible company makes safe, high-quality products; for
Germans it provides secure employment; in South Africa it makes a positive contribution to
social needs such as health care and education.[23] And even within Europe the discussion about
CSR is very heterogeneous. A more common approach to CSR is corporate philanthropy. This
includes monetary donations and aid given to nonprofit organizations and communities.
Donations are made in areas such as the arts, education, housing, health, social welfare and the
environment, among others, but excluding political contributions and commercial event
sponsorship. Another approach to CSR is to incorporate the CSR strategy directly into
operations. For instance, procurement of Fair Trade tea and coffee.
Creating Shared Value, or CSV is based on the idea that corporate success and social welfare are
interdependent. A business needs a healthy, educated workforce, sustainable resources and adept
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government to compete effectively. For society to thrive, profitable and competitive businesses
must be developed and supported to create income, wealth, tax revenues and philanthropy. The
Harvard Business Review article Strategy & Society: The Link between Competitive Advantage
and Corporate Social Responsibility provided examples of companies that have developed deep
linkages between their business strategies and CSR. CSV acknowledges trade-offs between
short-term profitability and social or environmental goals, but emphasizes the opportunities for
competitive advantage from building a social value proposition into corporate strategy. CSV
gives the impression that only two stakeholders are important - shareholders and
consumers.Many companies employ benchmarking to assess their CSR policy, implementation
and effectiveness. Benchmarking involves reviewing competitor initiatives, as well as measuring
and evaluating the impact that those policies have on society and the environment, and how
others perceive competitor CSR strategy.
Cost-benefit analysis
In competitive markets cost-benefit analysis of CSR initiatives, can be examined using a

resource-based view (RBV). According to Barney (1990) "formulation of the RBV, sustainable
competitive advantage requires that resources be valuable (V), rare (R), inimitable (I) and non-
substitutable (S)." A firm introducing a CSR-based strategy might only sustain high returns on
their investment if their CSR-based strategy could not be copied (I). However, should
competitors imitate such a strategy, that might increase overall social benefits. Firms that choose
CSR for strategic financial gain are also acting responsibly.RBV presumes that firms are bundles
of heterogeneous resources and capabilities that are imperfectly mobile across firms. This
imperfect mobility can produce competitive advantages for firms that acquire immobile
resources. McWilliams and Siegel (2001) examined CSR activities and attributes as a
differentiation strategy. They concluded that managers can determine the appropriate level of
investment in CSR by conducting cost benefit analysis in the same way that they analyze other
investments.Reinhardt (1998) found that a firm engaging in a CSR-based strategy could only
sustain an abnormal return if it could prevent competitors from imitating its strategy.
Scope
Initially, CSR emphasized the official behavior of individual firms. Later, it expanded to include
supplier behavior and the uses to which products were put and how they were disposed of after
they lost value.
Supply chain
Incidents like the 2013 Savar building collapse pushed companies to consider how the behavior
of their suppliers impacted their overall impact on society. Irresponsible behavior reflected on
both the misbehaving firm, but also on its corporate customers. Supply chain management
expanded to consider the CSR context. Wieland and Handfield (2013) suggested that companies
need to include social responsibility in their reviews of component quality. They highlighted the
use of technology in improving visibility across the supply chain.
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Implementation
CSR may be based within the human resources, business development or public relations
departments of an organisation,[11] or may be a separate unit reporting to the CEO or the board of
directors.
Engagement plan
An engagement plan can assist in reaching a desired audience. A corporate social responsibility
individual or team plans the goals and objectives of the organization. As with any corporate
activity, a defined budget demonstrates commitment and scales the program's relative
importance.
Accounting, auditing and reporting
Social accounting is the communication of social and environmental effects of a company's

economic actions to particular interest groups within society and to society at large. Social
accounting emphasizes the notion of corporate accountability. Crowther defines social
accounting as "an approach to reporting a firm’s activities which stresses the need for the
identification of socially relevant behavior, the determination of those to whom the company is
accountable for its social performance and the development of appropriate measures and
reporting techniques." Reporting guidelines and standards serve as frameworks for social
accounting, auditing and reporting:
Ethics training
The rise of ethics training inside corporations, some of it required by government regulation, has
helped CSR to spread. The aim of such training is to help employees make ethical decisions
when the answers are unclear. The most direct benefit is reducing the likelihood of "dirty hands",
fines and damaged reputations for breaching laws or moral norms. Organizations see increased
employee loyalty and pride in the organization.
Common
Environmental sustainability: recycling, waste management, water management, renewable

energy, reusable materials, 'greener' supply chains, reducing paper use and adopting Leadership
in Energy and Environmental Design (LEED) building standards. Community involvement: This
can include raising money for local charities, providing volunteers, sponsoring local events,
employing local workers, supporting local economic growth, engaging in fair trade practices, etc.
Ethical marketing: Companies that ethically market to consumers are placing a higher value on
their customers and respecting them as people who are ends in themselves. They do not try to
manipulate or falsely advertise to potential consumers. This is important for companies that want
to be viewed as ethical.
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Social license
“Social license” refers to a local community’s acceptance or approval of a company. Social

license exists outside formal regulatory processes. Social license can nevertheless be acquired
through timely and effective communication, meaningful dialogue and ethical and responsible
behavior. Displaying commitment to CSR is one way to achieve social license, by enhancing a
company’s reputation.
Potential business benefits
A large body of literature exhorts business to adopt measures non-financial measures of success
(e.g., Deming's Fourteen Points, balanced scorecards). While CSR benefits are hard to quantify,
Orlitzky, Schmidt and Rynes found a correlation between social/environmental performance and
financial performance.The business case for CSR within a company employs one or more of
these arguments:
Triple bottom line
"People, planet and profit", also known as the triple bottom line form one way to evaluate CSR.
"People" refers to fair labour practices, the community and region where the business operates.
"Planet" refers to sustainable environmental practices. Profit is the economic value created by the
organization after deducting the cost of all inputs, including the cost of the capital (unlike
accounting definitions of profit). This measure was claimed to help some companies be more
conscious of their social and moral responsibilities. However, critics claim that it is selective and
substitutes a company's perspective for that of the community. Another criticism is about the
absence of a standard auditing procedure. The term was coined by John Elkington in 1994.
Human resources
A CSR program can be an aid to recruitment and retention, particularly within the competitive
graduate student market. Potential recruits often consider a firm's CSR policy. CSR can also help
improve the perception of a company among its staff, particularly when staff can become
involved through payroll giving, fundraising activities or community volunteering. CSR has been
credited with encouraging customer orientation among customer-facing employees.
Risk management
Managing risk is an important executive responsibility. Reputations that take decades to build up
can be ruined in hours through corruption scandals or environmental accidents. These draw
unwanted attention from regulators, courts, governments and media. CSR can limit these risks.
Brand differentiation
CSR can help build customer loyalty based on distinctive ethical values. Some companies use
their commitment to CSR as their primary positioning tool, e.g., The Co-operative Group, The
Body Shop and American Apparel Some companies use CSR methodologies as a strategic tactic
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to gain public support for their presence in global markets, helping them sustain a competitive
advantage by using their social contributions as another form of advertising.
Reduced scrutiny
Corporations are keen to avoid interference in their business through taxation and/or regulations.
A CSR program can persuade governments and the public that a company takes health and
safety, diversity and the environment seriously, reducing the likelihood that company practices
will be closely monitored.
Supplier relations
Appropriate CSR programs can increase the attractiveness of supplier firms to potential customer
corporations. E.g., a fashion merchandiser may find value in an overseas manufacturer that uses
CSR to establish a positive image—and to reduce the risks of bad publicity from uncovered
misbehavior.
Criticisms and concerns
CSR concerns include its relationship to the purpose of business and the motives for engaging in
it.
Nature of business
Milton Friedman and others argued that a corporation's purpose is to maximize returns to its
shareholders and that obeying the laws of the jurisdictions within which it operates constitutes
socially responsible behavior. While some CSR supporters claim that companies practicing CSR,
especially in developing countries, are less likely to exploit workers and communities, critics
claim that CSR itself imposes outside values on local communities with unpredictable outcomes.
Better governmental regulation and enforcement, rather than voluntary measures, are an
alternative to CSR that moves decision-making and resource allocation from public to private
bodies. However, critics claim that effective CSR must be voluntary as mandatory social
responsibility programs regulated by the government interferes with people’s own plans and
preferences, distorts the allocation of resources, and increases the likelihood of irresponsible
decisions. Some critics believe that CSR programs are undertaken by companies to distract the
public from ethical questions posed by their core operations. They argue that the reputational
benefits that CSR companies receive (cited above as a benefit to the corporation) demonstrate the
hypocrisy of the approach.
Misdirection
Another concern is that sometimes companies use CSR to direct public attention away from
other, harmful business practices. For example, McDonald's Corporation positioned its
association with Ronald McDonald House as CSR[76] while its meals have been accused of
promoting poor eating habits.
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Controversial industries
Industries such as tobacco, alcohol or munitions firms make products that damage their
consumers and/or the environment. Such firms may engage in the same philanthropic activities
as those in other industries. This duality complicates assessments of such firms with respect to
CSR.
The Kizhakkambalam takeover
Textile company Kitex has taken over the administration of an entire Indian village called
Kizhakkambalam near Cochin by winning the local body elections. Environmentalists and
mainstream politicians of India point out that this can lead to a dangerous precedent because the
company got actively involved in CSR only after they were caught red-handed in polluting the
village.
Negative impact of corporate psychopathy
As corporate psychopaths have little or no conscience or care or empathy, it follows logically

that they are not driven by any notion of social responsibility or commitment to employees or to
the wider public.
Stakeholder influence
One motivation for corporations to adopt CSR is to satisfy stakeholders.Branco and Rodrigues
(2007) describe the stakeholder perspective of CSR as the set of views of corporate responsibility
held by all groups or constituents with a relationship to the firm. In their normative model the
company accepts these views as long as they do not hinder the organization. The stakeholder
perspective fails to acknowledge the complexity of network interactions that can occur in cross-
sector partnerships. It relegates communication to a maintenance function, similar to the
exchange perspective.
Ethical consumerism
The rise in popularity of ethical consumerism over the last two decades can be linked to the rise
of CSR.[83] Consumers are becoming more aware of the environmental and social implications of
their day-to-day consumption decisions and in some cases make purchasing decisions related to
their environmental and ethical concerns.
Socially responsible investing
Shareholders and investors, through socially responsible investing are using their capital to
encourage behavior they consider responsible. However, definitions of what constitutes ethical
behavior vary. For example, some religious investors in the US have withdrawn investment from
companies that violate their religious views, while secular investors divest from companies that
they see as imposing religious views on workers or customers.
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Creating shared value
Non-governmental organizations are also taking an increasing role, leveraging the media and the
Internet to increase the visibility of corporate behavior. Through education and dialogue, the
development of community awareness in pushing businesses to change their behavior is
growing. Creating Shared Value (CSV) claims to be more community aware than CSR. Several
companies are refining their collaboration with stakeholders accordingly.
Public policies
Some national governments promote socially and environmentally responsible corporate

practices. The heightened role of government in CSR has facilitated the development of
numerous CSR programs and policies. Various European governments have pushed companies
to develop sustainable corporate practices. CSR critics such as Robert Reich argued that
governments should set the agenda for social responsibility with laws and regulation that
describe how to conduct business responsibly.
Regulation
Fifteen European Union countries actively engaged in CSR regulation and public policy
development. CSR efforts and policies are different among countries, responding to the
complexity and diversity of governmental, corporate and societal roles. Studies claimed that the
role and effectiveness of these actors were case-specific. The variety among companies
complicates regulatory processes. Self-regulation allows each corporate actor to balance profits
and social responsibility without cumbersome governmental involvement. Studies suggest that
mandated CSR distorts the allocation of resources and increases the likelihood of irresponsible
decisions. Bulkeley cited the Australian government's actions to avoid compliance with the
Kyoto Protocol in 1997, over concerns of economic loss and national interest. The Australian
government claimed that the pact would damage Australia more than any other OECD nation.[91]
In November 2007, the new Prime Minister Kevin Rudd ratified the protocol.Canada adopted
CSR in 2007. Prime Minister Harper encouraged Canadian mining companies to meet Canada’s
newly developed CSR standards. The ‘Heilbronn Declaration’ is a voluntary agreement of
enterprises and institutions in Germany especially of the Heilbronn-Franconia region signed the
15th of September 2012. The approach of the ‘Heilbronn Declaration’ targets the decisive factors
of success or failure, the achievements of the implementation and best practices regarding CSR.
A form of responsible entrepreneurship shall be initiated to meet the requirements of
stakeholders’ trust in economy. It is an approach to make voluntary commitments more binding.
Laws
In the 1800s,the US government could take away a firm's license if it acted irresponsibly.
Corporations were viewed as "creatures of the state" under the law. In 1819, the United States
Supreme Court in Dartmouth College vs. Woodward established a corporation as a legal person
in specific contexts. This ruling allowed corporations to be protected under the Constitution and
prevented states from regulating firms. Recently countries included CSR policies in government
agendas. On 16 December 2008, the Danish parliament adopted a bill making it mandatory for
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the 1100 largest Danish companies, investors and state-owned companies to include CSR
information in their financial reports. The reporting requirements became effective on 1 January
2009. The required information included:
• CSR/SRI policies
• How such policies are implemented in practice
• Results and management expectations
CSR/SRI is voluntary in Denmark, but if a company has no policy on this it must state its
positioning on CSR in financial reports. In 1995, item S50K of the Income Tax Act of Mauritius
mandated that companies registered in Mauritius paid 2% of their annual book profit to
contribute to the social and environmental development of the country. In 2014, India also
enacted a mandatory minimum CSR spending law. Under Companies Act, 2013, any company
having a net worth of 500 crore or more or a turnover of 1,000 crore or a net profit of 5 crore
must spend 2% of their net profits on CSR activities. The rules came into effect from 1 April
2014.
Crises and their consequences
Crises have encouraged the adoption of CSR. The CERES principles were adopted following the
1989 Exxon Valdez incident. Other examples include the lead paint used by toy maker Mattel,
which required the recall of millions of toys and caused the company to initiate new risk
management and quality control processes. Magellan Metals was found responsible for lead
contamination killing thousands of birds in Australia. The company ceased business immediately
and had to work with independent regulatory bodies to execute a cleanup. Odwalla experienced a
crisis with sales dropping 90% and its stock price dropping 34% due to cases of E. coli. The
company recalled all apple or carrot juice products and introduced a new process called "flash
pasteurization" as well as maintaining lines of communication constantly open with customers.
Geography
Corporations that employ CSR behaviors do not always behave consistently in all parts of the
world. Conversely, a single behavior may not be considered ethical in all jurisdictions. E.g.,
some jurisdictions forbid women from driving, while others require women to be treated equally
in employment decisions.
ISO 26000
ISO, the International Organization for Standardization, launched an International Standard

providing guidelines for social responsibility (SR) named ISO 26000 or simply ISO SR. It was
released on 1 November 2010. Its goal is to contribute to global sustainable development, by
encouraging business and other organizations to practice social responsibility to improve their
impacts on their workers, their natural environments and their communities.
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Voluntary Guidance Standard for All Organizations
ISO 26000 offers guidance on socially responsible behavior and possible actions. There are three
ways it is different from the more widespread standards designed for companies to use to meet
particular requirements for activities such as manufacturing, managing, accounting and
reporting.
1) ISO 26000 is a voluntary guidance standard- that is, it does not contain requirements such as
those used when a standard is offered for "certification". There is a certain learning curve
associated with using ISO 26000, because there is no specific external reward - certification -
explicitly tied to ISO 26000. ISO recommends that users say, for example, that they have "used
ISO 26000 as a guide to integrate social responsibility into our values and practices."2) ISO
26000 is designed for use by all organizations, not only businesses and corporations.
Organizations, such as hospitals and schools, charities (not-for-profits), etc. are also included.
ISO 26000 makes particular efforts to show that its flexibility means that it can be applied by
small businesses and other groups as well So far, many of the earliest users of ISO 26000 have
been multi-national corporations, especially those based in Europe, and East Asia, particularly
Japan.3)ISO 26000 was developed through a multi-stakeholder process, meeting in eight
Working Group Plenary Sessions between 2005 and 2010, with additional committee meetings
and consultations on e-mail throughout the five-year process. Approximately five hundred
delegates participated in this process, drawn from six stakeholder groups: Industry, Government,
NGO (non-governmental organization), Labour, Consumer, and SSRO (Service, Support,
Research and Others - primarily academics and consultants). Leadership of various task groups
and committees was "twinned" between "developing" and "developed" countries, to ensure
viewpoints from different economic and cultural contexts. Since ISO operates on a parliamentary
procedure form based on consensus, the final agreed-on standard was the result of deliberation
and negotiations; no one group was able to block it, but also no one group was able to achieve its
objectives when others strongly disagreed. The goal was to make ISO 26000 accessible and
usable by all organizations, in different countries, precisely because it reflects the goals and
concerns of each and all of the stakeholder groups in its final compromise form.
Key Principles and Core Subjects of ISO 26000
The Seven Key Principles, advocated as the roots of socially responsible behavior, are:
• Accountability
• Transparency
• Ethical behavior
• Respect for stakeholder interests (stakeholders are individuals or groups who are affected
by, or have the ability to impact, the organization's actions)
• Respect for the rule of law
• Respect for international norms of behavior
• Respect for human rights
The Seven Core Subjects, which every user of ISO 26000 should consider, are:
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• Organizational governance
• Human rights
• Labor practices
• Environment
• Fair operating practices
• Consumer issues
• Community involvement and development
Many of the 84 pages of the standard are devoted to definitions, examples, and suggestions on
how to identify and communicate with stakeholders, and how to identify and address specific
issues in each Core Subject area.
Additional information and critiques
The ISO 26000 Scope states "This International Standard is not a management system standard.
It is not intended or appropriate for certification purposes or regulatory or contractual use. Any
offer to certify, or claims to be certified, to ISO 26000 would be a misrepresentation of the intent
and purpose and a misuse of this International Standard. As this International Standard does not
contain requirements, any such certification would not be a demonstration of conformity with
this International Standard." This statement includes that ISO 26000 cannot be used as basis for
audits, conformity tests and certificates, or for any other kind of compliance statements. It can
however be used as a statement of intention by the CEO and this is seen as its main value.The
practical value of ISO 26000 might be limited if it merely provided a common understanding of
social responsibility instead of also facilitating management routines and practices leading to
social responsibility. Despite the non-certifiability some scholars see distinct elements of a
management system standard also in ISO 26000.[5] Against this background, the potential
benefits of the new standard, the managerial relevance, and specific limitations of ISO 26000 are
currently being discussed. As a guidance document the ISO 26000 is an offer, voluntary in use,
and encourages organizations to discuss their social responsibility issues and possible actions
with relevant stakeholders. As service providers, certification bodies do not belong to an
organization’s stakeholders. ISO 26000 encourages its users to reconsider an organization's
social responsibility or "socially responsible behaviour" and to identify/select from its
recommendations those where the organization could/should engage in contributions to society.
ISO 26000 encourages its users to report to their stakeholders, and get feedback, on actions taken
to improve their social responsibility.
It is this identification of "stakeholders" that makes the ISO 26000 an important step forward in
solving the dilemma presented by corporations still in pursuit of single bottom line
accountability, moving the discussion beyond Triple Bottom Line Accountability. It is also an
important step in the development of business-led social responsibility initiatives which evidence
suggests is much more effective than government regulated social responsibly policies.
Project aim
There is a range of many different opinions as to the right approach to ethical and socially
responsible behavior by businesses, ranging from strict legislation at one end to complete
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freedom at the other. ISO 26000 is looking for a golden middle way that promotes respect and
responsibility based on known reference documents without stifling creativity and development.
ISO (established 1947 to promote international trade by developing manufacturing standards) is
now composed of 162 members, each of which is a National Standards Board of a particular
country. ISO's expansion into the field of Social Responsibility (Corporate Social Responsibility)
was driven by many factors, including a recognition that the pace of global development calls for
increasing actions by organizations, including businesses, to reduce their harmful impacts on
people and communities, and increase their positive impacts.
Development leadership
ISO chose Swedish Standards Institute (SIS) and ABNT, Brazilian Association of Technical
Standards to provide the joint leadership of the ISO Working Group on Social Responsibility
(WG SR). The WG SR was given the task of drafting an International Standard for social
responsibility that was published in 2010 as ISO 26000.
Target: wide range
The need for organizations in both public and private sectors to behave in a socially responsible
way is becoming a generalized requirement of society. It is shared by the stakeholder groups that
participated in the WG SR to develop ISO 26000: industry, government, labour, consumers,
nongovernmental organizations, and others, in addition to geographical and gender-based
balance.[9] A Memorandum of Understanding was developed between the ISO Group and the
United Nations Global Compact in order to both develop and promote the ISO 26000 as the go to
Standard for CSR. Unfortunately the United Nations Global Compact did not fulfill its
commitment under that MOU nor subsequent commitments to bring the ISO 26000 to the other
90 UN agencies.
Creating shared value (CSV) is a business concept first introduced in Harvard Business Review
article Strategy & Society: The Link between Competitive Advantage and Corporate Social
Responsibility. The concept was further expanded in the January 2011 follow-up piece entitled
"Creating Shared Value: Redefining Capitalism and the Role of the Corporation in
Society".Written by Michael E. Porter, a leading authority on competitive strategy and head of
the Institute for Strategy and Competitiveness at Harvard Business School, and Mark R. Kramer,
Kennedy School at Harvard University and co-founder of FSG, the article provides insights and
relevant examples of companies that have developed deep links between their business strategies
and corporate social responsibility (CSR). In 2012, Kramer and Porter, with the help of the
global not-for-profit advisory firm FSG,[3] founded the Shared Value Initiative to enhance
knowledge sharing and practice surrounding creating shared value, globally.
The central premise behind creating shared value is that the competitiveness of a company and
the health of the communities around it are mutually dependent. Recognizing and capitalizing on
these connections between societal and economic progress has the power to unleash the next
wave of global growth and to redefine capitalism.
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Critics, on the other hand, argue that “Porter and Kramer basically tell the old story of economic
rationality as the one and only tool of smart management, with faith in innovation and growth,
and they celebrate a capitalism that now needs to adjust a little bit.” They regard the author’s
arguments as a “one-trick pony approach” with little chance that an increasingly critical civil
society will buy into such a story.
Mechanism
Companies can create shared value opportunities in three ways:
• Re-conceiving products and markets – Companies can meet social needs while better
serving existing markets, accessing new ones, or lowering costs through innovation
• Redefining productivity in the value chain – Companies can improve the quality,
quantity, cost, and reliability of inputs and distribution while they simultaneously act as a
steward for essential natural resources and drive economic and social development
• Enabling local cluster development – Companies do not operate in isolation from their
surroundings. To compete and thrive, for example, they need reliable local suppliers, a
functioning infrastructure of roads and telecommunications, access to talent, and an
effective and predictable legal system
Many approaches to CSR pit businesses against society, emphasizing the costs and limitations of
compliance with externally imposed social and environmental standards. CSV acknowledges
tradeoffs between short-term profitability and social or environmental goals, but focuses more on
the opportunities for competitive advantage from building a social value proposition into
corporate strategy.
Ecological accounting challenges
A significant challenge of CSV resides in accounting for ecological values and costs that are
generated within the realm of agricultural production. Up to 90% of the ecological footprint in
food processing can be attributed to land management activities outside the control of
corporations. An eco commerce model that accounts for ecosystem services at the production
unit (farm) level allows "shared value" to emanate from the production unit outward. Centering
the shared value at the farm level allows for utilities, biomass processors, food processors,
environmental liability insurers, landlords, and governments to participate in the shared value
process. This ecocommerce shared value process accounts for and includes positive externalities
within the economic system.
Comparison with corporate social responsibility
Corporate social responsibility (CSR) differs from Creating Shared Value, although they share
the same ground of "doing well by doing good". Mark Kramer, the co-writer of Harvard
Business Review article on Creating Shared Value, states in his "Creating Shared Value" blog
that the major difference is CSR is about responsibility, whereas CSV is about creating value.
Whether it is an extended "new form of CSR" or "shared value", CSV is fundamentally different
from the CSR activities of the past. Rather, CSV is a transition and expansion from the concept
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of CSR. Business responsibility has evolved from Traditional CSR 1.0 (Stages: Defensive,
Charitable, Promotional and Strategic), Transformative CSR 2.0 and to CSR 3.0 what is similar
to CSV.[10] Such development of stages by redefining CSR has laid theoretical foundations for
companies and society to sustainably and communally overcome societal issues. As capitalism
matures, it is companies’ duties to break itself out of the traditional CSR by realizing its
limitations and try to restructure and pursue new market strategies that value both economic and
societal development.CSV concept supersedes CSR for it is a way for corporations to sustain in
the competitive capitalistic market. Whereas CSR focuses on reputation with placing value in
doing good by societal pressure, it generates both economic and societal benefits relative to cost
in real competition of maximizing the profits. Instead of being pushed by external factors, CSV
is internally generated not confined to financial budget as CSR is. With the advent of CSV and
following strong worldwide advocacy for it, companies started to overthink about their vision for
their sustainable growth. Critics, however, argue that Porter & Kramer seem to have “a very
particular and limited understanding of CSR, one that neither reflects the academic debates of the
past few decades nor captures most of today’s CSR practices adequately. Instead of dealing with
a contemporary understanding of CSR, corporate social responsibility seems to be used instead
as a straw man to rhetorically justify the authors’ contribution and its proclaimed originality.“
Academic literature
Origins and development of shared value
A literature review was conducted into the important early work of 'shared value'. Researchers
found some literature focusing on the development of shared value by Porter and Kramer (2006)
with most work coming from few sources like the Monitor Group. More extensively the
literature is from development organisations focusing on case studies into the interrelated area of
business ventures at the bottom of the pyramid or inclusive business strategies/models. Outside
these case studies, limited literature was found so the paper presented lessons learnt from shared
value and interrelated business models to show how they developed and business strategies to
engage with the bottom of the pyramid. the term “shared value” is found in Porter and Kramer
(2006), “Strategy and society: the link between competitive advantage and corporate social
responsibility” and was a development by Porter of previous thinking on business strategy. From
the Corporate Social Responsibility perspective, they observed companies could have worked
harder reflecting flaws in CSR that business is pitted against society rather recognising their
interdependence; and second, CSR is viewed in a generic sense rather than strategically. To
boost innovation and competitive advantage they say companies need to make CSR part of their
core business strategy and researchers saw this as development of Porter’s 1985 ‘Competitive
Advantage’ work where firms’ activities were redefined through their value chains to boost
competitive advantage through cost improvements or differentiation. They argue shared value
can do both contrasts with Milton Friedman’s view that the social responsibility of business is to
increase its profits. Social value activities can overlap with traditional CSR. Efforts to promote
sustainability through CSR may cut costs for the company and boost profitability, CSR and core
business processes can become indistinguishable from one another, moving to what the authors’
term “corporate social integration. By drawing attention to the way society impinges on business
(rather than only business on society) it provides justification for solving society’s problems as a
core business strategy. Porter and Kramer (2002) “The Competitive Advantage of Corporate
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Philanthropy”, seeks to address the tension of addressing the demand for greater levels of CSR
with the demand for short term profits focusing on how a society’s ‘competitive context’ impacts
business arguing it is possible to see long term economic and social goals as connected.
The researchers found Shared value has not greatly progressed, with subsequent literature
focused on the types of models and activities that businesses are undertaking to create shared
value (create shared value). They claim a slight development was Porter and Kramer’s 2011
attempt to broaden the concept of shared value beyond the arena of corporate social
responsibility with a greater focus on the nature of capitalism and markets, noting dislocations
with current capitalism, emphasising the inherent social nature of markets, and suggesting that
by adopting shared value principles business and society will be reconnected creating new
innovation and socially imbued capitalism. Whilst it can be argued that capitalism would
certainly change if businesses on mass re-orientated their core frameworks to focus on shared
value there is little analysis on how this would occur. The authors themselves recognise this.
Porter and Kramer identify GE, Google, IBM and Unilever as having adopted shared value
principles but note that, “our recognition of the transformative power of shared value is still in its
genesis.” and argue that addressing social constraints does not necessarily raise internal costs for
firms. Through innovation in new technologies, operating methods, and management approaches
a firm can improve society while increasing their productivity and profitability. To create shared
value companies should:-
• Reconceive products and markets to provide appropriate services and meet unmet needs.
For example, the provision of low-cost cell phones developed new market opportunities
as well as new services for the poor.
• Redefine productivity in the value chain to mitigate risks and boost productivity. For
example, in reducing excess packing in product distribution reducing cost and
environmental degradation.
• Enable local cluster development by improving the external framework that supports the
company’s operations, for example by developing the skills of suppliers.
The business perspective
The researchers found little evidence of an overall business perspective on the shared value
framework, not surprising given the relatively newness of the concept as firms may have been
pursuing shared value practices without it being realised as such, especially outside of the US
and it was not clear how to measure if a business is pursuing shared value as opposed to
overlapping areas of CSR or philanthropic activities. Counterfactuals of non SV approaches in
case studies were not offered and tools and strategies to integrate, operationalise and measure
shared value are only now being developed. They found authors that have promoted shared value
provide case studies from US based Multinational Corporations (MNCs) that are explicitly
pursuing shared value principles and that resource flows could be significant as GE are investing
$6bn to improve health-care access through there ‘Healthymagination’ programme. They found
little analysis as to how much this represents of total GE investment or how shared value
investment in a sector compares with nonshared value- investment. The researchers claim Multi
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National Corporation motivations are mixed with some highlighting climate change and others a
desire for employees to have better links with local communities.They found little
documentation outside success stories of influence elsewhere. Porter noted in, “Measuring
shared value; how to unlock value by linking social and Business Results” that without clear
evidence of the impact of the shared value proposition (and tools to measure it) it will be difficult
to attract investors. The researchers propose that shared value may have added to the wider
discourse that views the private sector as key for development and profitable business models as
consistent with enhancing social impact but make clear that they don’t mean that shared value
directly influenced the more established interest in inclusive business, with few of the initial
inclusive business papers discussing shared value concepts in any detail. They say a more direct
influence, consistent with moves in inclusive business, is companies pursuing shared value
developed new types of relationships with other organisations like NGOs.
Shared value and the bottom of the pyramid
Much focus has been on the application of shared value at the bottom of the pyramid reflecting
both greater social needs among this group and the new markets they offer. The researchers
mention Porter and Kramers example of Hindustan Unilever’s innovation in hygiene products
distribution, using smaller package sizes, creating new business opportunities and appropriate
products for the poor, a classic the bottom of the pyramid model. They also mention Prahalad
and Harts “The Fortune at the Bottom of the Pyramid” paper which sets out how attractive the
bottom of the pyramid is for MNCs with commercial and social opportunities through mutual
value creation by reorientating their core business to provide products for these consumers. The
researchers claim this thesis challenged assumptions that business success and creating social
value was not possible at the lower end of the market.
Inclusive business models
Direct links between shared value and the bottom of the pyramid were further brought together
in a 2007 conference titled “The role of the private sector in expanding economic opportunity
through collaborative action” hosted by Harvard CSR Initiative, FSG Social Impact Advisors,
and the IFC focusing on how companies could improve livelihoods of the bottom of the pyramid
through both new services and new markets. Two complementary frameworks companies were
using promoting shared value were examined by the researchers:
• "inclusive business models" which aim to directly involve the poor in their value chains
• "complementary strategies" that aim to enhance the overall environment for such models
to flourish, for example by shaping public policy or up-skilling workers. The researchers
used the 2008 UNDP definition “create value by providing products and services to or
sourcing from the poor, including the earned income strategies of non-governmental
organisations” to describe‘Inclusive business models’ as an umbrella term for a range of
models. They show the UNDP paper (2008) “Creating Value for All: Strategies for Doing
Business with the Poor” which examines over 50 inclusive business ventures and the
partnership between World Business Council for Sustainable Development (WBCSD)
and SNV (2008) which developed the concept in Latin America, captured in, “Inclusive
Business - profitable business for successful development.” They found whilst inclusive
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business is closely related to shared value in that both highlight profits motives as being
compatible with “doing good”, its origins are less centred in CSR strategies, and that
Caroline Ashley in her 2009 paper that as the shared value concept moved CSR to be
more grounded in business strategy and inclusive business moved sustainable business
terminology towards a more profit and less ethical framework. Within inclusive business
there is also less of a focus on gaining competitive advantage through social impact
(although that is still one of the potential benefits) with the overriding feature that marries
profit with development impact. Inclusive business models can be found in a wide variety
of companies, while shared value literature has so tended to be focused on MNCs, and as
noted in relation to Hindustan Unilever, a number of business models could be described
as consistent with shared value and inclusive business.
Application of Inclusive business models
The landscape of inclusive business
This section provides an insight into both practical development and the types of business
strategies being pursued. The researchers of the literature review into shared value found no
single framework for shared value or inclusive business models. They found Davis commenting
in 2012[15] about how the corporate sector is highly non-uniform and Caroline Ashley’s 2009
paper, “Harnessing core business for development impact” illustrating four inclusive business
models with different value propositions and the variation in size of inclusive business models. •
Group A consists of commercial businesses that sell products needed by the poor which possess
a high development impact such as financial services. • Group B are companies that impact the
poor in the normal course of their activities but take deliberate action to expand and improve this
impact, for example, mining companies that improve their local value chains. • Group C captures
SMEs that are embedded in the local economy and therefore dependent on its development. •
Group D companies are enterprises that focus on a social product but with a commercial model
of delivery.The researchers found that while much of the literature on shared value concentrates
on MNCs, the focus in developing countries is on a range of different company types.
Applying inclusive business models to the bottom of the pyramid
The researchers identified a number of constraints for companies attempting to create shared
value. They found the IFC presenting the results of a survey analysing the obstacles to
companies wishing to incorporate inclusive business models in their value chains. Around 90%
of the 167 applicants identified access to finance as one of the main obstacles to their business.
They found other major obstacles included poor infrastructure and lack of qualified labour with
the UNDP also identifying further obstacles including a hard-to-reach customer base, suppliers
with limited capabilities, limited market information and inadequate regulation. As inclusive
business model products are often entering new markets they tend to be push based requiring
high levels of awareness-building and education, unlike pull categories that customers already
desire, like low cost cell phones.They found Lucci’s 2012 paper “Post-2015 Millennium
Development Goals: What role for business?” identifying two dominant core business models
pursued at the bottom of the pyramid: “harnessing innovation capacity” and “leveraging supply
chains and the production process.” The first can in part be viewed as the earlier framework of
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inclusive business models, which aimed to target low-income consumers through product
innovation, such as the example mentioned above of Unilever Hindustan marketing products in
more appropriate packaging which relied on a high return of capital employed, often through
shared access services, and a low cost, high volume strategy. In contrast, they found a recent
business review paper by Simanis] who argued there was a flaw in this low-price, low-margin,
high-volume strategy that MNCs have adopted and only works if two characteristics exist: the
ability to leverage existing infrastructure that already serves wealthier customers; and consumers
already know how to buy and use the product offering. They found Simanis theorised these
characteristics were often missing with him concluding that “because the high costs of doing
business among the very poor demand a high contribution per transaction, companies must
embrace the reality that high margins aren’t just a top-of-the-pyramid phenomenon; they’re also
a necessity for ensuring sustainable businesses at the bottom of the pyramid.” Simanis’s three
solutions for generating higher values are
• a localised base product with final processing prior to sale as close to the target market as
possible, saving on labour costs;
• offering an enabling service to improve the value of the service offered;
• and to cultivate customer peer groups to drive up aggregate demand.
These received criticism in Karnani’s 2007 paper which suggests that costs to serve the poor are
still too high and the bottom of the pyramid will not be reached. The researchers found
consistencies with an IFC report that a number of its successful models were ‘whole pyramid’
models, with the ‘bottom of the pyramid’ segments part of a broader market, allowing companies
to leverage existing infrastructure, achieve economies of scale, cross subsidise and manage risk.
Karnani (2007) also argued that as the poor often make choices that are not in their own self-
interest like the use of whitening cream in developing countries, consumer-led models that
develop new product options may be inappropriate with much of the current discussion around
consumer protection and over-indebtedness in microfinance] Karnanis paper also criticises the
focus on MNCs in exploiting opportunities at the bottom of the pyramid given the greater
development impact that SMEs could potentially have and he argues that inclusive business
models frameworks should see the poor primarily as producers rather than as consumers. London
et al. Analyzed the specific constraints producers face: on value creation that relate to a
producer's ability to access affordable and high-quality raw material, financial, and production
resources; and on value capture that relate to a producer's ability to access the marketplace, assert
market power, and obtain secure and consistent transactions. The researchers thought London et
al.’s focus on producers similar to the broader development of inclusive business models
incorporated by UNDP (2008)] and in Porter and Kramer] with a greater focus on value chain
development as opposed to product innovation. Lucci’ second major category and she provides
the example of SABMiller encouraging the local production of sorghum in Uganda to replace
more expensive imports of barley, developing local production alongside more affordable raw
materials for their breweries. Within these broad categories there are a huge range of specific
models that companies have adopted. An IFC publication identifies a range of model types
which include:-
234
• “micro distribution and retail” which leverages existing retail outlets in neighbourhoods
where consumers make small, frequent purchases locally, like telecommunication
companies selling airtime;
• “experience-based customer credit” provided by non-financial firms mostly to their own
employees, providing access to finance and to the provider companies.
• “last-mile grid utilities” through a combination of financing, technology and management
innovations, mitigate normal constraints extend grid coverage to more distant and often
lower-income neighbourhoods;
• “smallholder procurement” value chain upgrades through aggregation methods;
• “value for money housing” through a combination of facilitating mortgage financial and
new housing products which are appropriate to the poor including support services, such
as understanding training in the mortgage process; and
• “e-transaction platforms” which can bring a range of new services (and therefore new
markets) more conveniently and securely to the poor.”
Inclusive business (and shared value) ecosystems
The researchers wrote that an emerging development in these models consistent across the
inclusive business and shared value literature is the types of partnerships that they may involve
between companies and other actors. They found companies need often to enter into broader
partnerships to leverage local knowledge or scale up interventions. Lucci ref name="odi" />
highlights two examples of this:
• the Southern Agricultural Growth Corridor of Tanzania (SAGCOT) where governments

and donors commit to investing in infrastructure to incentivise agricultural business
• longer term platforms that seek to recreate market mechanisms in research and
development, such as work by the GAVI Alliance in health vaccines. They found
Davis[15] arguing that the state and corporate sector need a “genuinely symbiotic
relationship” which recognises the potential developmental activity that companies
undertake as core operations, noting however that this rarely exists. An emerging
development that builds on this is captured in a joint collaboration between the IFC and
Harvard’s CSR Initiative “Tackling Barriers to Scale: From Inclusive Business Models to
Inclusive Business Ecosystems” who suggest that despite some successes, given the
levels of investment, inclusive business models record is limited and there are systemic
barriers to scale that can only be tackled in collaboration with other players in the private
sector, in government and in civil society. This can be achieved by strengthening
‘inclusive business ecosystems’ through “strategically engaging the networks of
interconnected, interdependent players whose actions determine whether or not their
inclusive business models will succeed.” This move of focus away from the firm level,
similar to market development approaches, such as Making Markets Work for the Poor
(M4P). They conclude the initial stage of the research by identifying that a number of
strategies companies have used to strengthen these eco-systems including the bottom of
the pyramid awareness-raising and capacity building within the company, research,
information-sharing and public policy dialogue.
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Measurement and impact
Researchers found little rigorous analysis into the impact of shared value mechanisms, with the
majority of evidence existing as standalone case studies of mixed analytical rigour. As
documented above, many of these are highly positive stories combining evidence of increased
revenue growth with first hand stories of social impact and found it was difficult to find a
comprehensive and rigorous study into their overall impact. says that feel-good stories aside, it’s
been nearly impossible to gauge the success of these ventures.” And this further complicated in
relation to inclusive business models by the variety of business cases for companies operating at
the bottom of the pyramid. They found London also arguing that the predominant focus in terms
of social impact is on income, missing wider social dimensions and ignoring potential negatives
like undesirable products becoming more accessible and proposed this as less of the case for
inclusive business models, often supported by development agencies that have more experience
with the wider dynamics of social impact at the bottom of the pyramid. All current measurement
models suffer from standard impact challenges, with the emphasis on tasks completed or
products distributed rather than outcomes. They say there is little attempt to fully attribute a
company’s impact through the use of counterfactuals and recommend Wachfor a description of
current methods used. Establishing attribution to a specific company’s intervention is made more
difficult given the growing emphasis on partnerships that the bottom of the pyramid approaches
entail. As the researchers commentary shows, most of the impact discussion to date has been
focused on the contribution of companies to enhancing development. They call for future
research to go a step further and attempt to establish the linkages between pursuing core business
model and the subsequent impact on both business and social indicators for example, compared
to a counterfactual of a non-core business approach. Porter et al. discus the problems of current
measurement tools that measure business and social impact separately and provides guidance in
how to link social benefit to core indicators.
Successful strategies
Notwithstanding the limitations in the evidence base there have been a number of reports that
have sought to capture and synthesise lessons from successful shared value and inclusive
business ventures. In an extensive report looking into various aspects of inclusive business
models,[34] Gradl and Knobloch document a range of benefits for business, in particular access to
new markets, in terms of access to new consumers and producers and through the potential for
cheaper and higher quality production based on growth-intensive sales and the development of
new products. They found that enhanced reputation may also lead to enhanced partnerships from
customers, suppliers and governments UNDP.[18] An IFC report into the impact of their portfolio
of inclusive business models,[35] found that revenue growth had been the main business outcome
for business, whereas development outcomes included expanded economic opportunities for
suppliers, distributors and retailers and access to goods and services. They found factors which
led to successful models included, adaption of products and processes that leveraged networks
and to reach significant numbers of low-income consumers; models designed to be appropriate
with low-income groups’ cash management strategies, also leveraging social networks of the
poor; capacity building of suppliers, distributors and retailers and collaborations with other
organisations (NGOs, development organisation, social enterprises) to leverage knowledge and
infrastructure. UNDP (2008) also highlight that business have had to remove market constraints
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that would more normally be the province of government, for example by investing in education,
energy supply and infrastructure. This is consistent with Porter and Kramer (2006) view on
competitive context. They found Hills, et al. mention a number of external conditions were also
identified that successful shared value companies had been able to leverage, including
governments' openness to private sector participation in socio-economic development and/or the
availability of external funding. Indian government support of ICICI Lombard’s weather-based
insurance and microfinance providers (through priority lending mechanisms),DFID’s support of
Vodafone in developing M-PESA. Strong partners are also important, either through civil society
organisations that provide insights into local needs or other companies that share similar
philosophies, for example distributors who may also need to adapt their business model. The
level of penetration in ICT can significantly lower transactions costs and link informal
economies to more established markets. They found Hills et al.[36] identify two key areas that are
essential for successful create shared value companies, “intentionality” and “materiality.”
Intentionality requires a company or business unit to set specific goals for intended social and
financial benefits with clear guidelines that can guide resource allocation decisions along the
way and recommend looking at Gradl and Jenkins. A number of company factors are identified
that help successful implementation, these include: a culture of innovation that allows
experimentation, together with a long term outlook; senior management embracing shared value
principles; cross department buy in; and strong local buy in at a local level like affiliates in
developing countries. They also stress the importance of building local knowledge through
developing local structures and/or strong local partners and employing multidisciplinary teams
that are open to new ideas. The concluded by saying that materiality is important as it
incentivises management to support CVS. It represents the extent to which creating shared value
is central to the financial performance of a business unit or company and as materiality grows
strategies are likely to be scaled up.
Shared Value Initiative
The Shared Value Initiative (SVI) was created in the fall of 2012 with a commitment to action at
the Clinton Global Initiative. The SVI serves as a global knowledge and learning hub for
companies and other stakeholders in SV strategies of practice. The establishment of the SVI
capitalizes on global momentum surrounding Shared Value by driving new adoption of SV
strategies amongst companies while also improving the implementation of SV strategies that
have already been put into practice. The SVI engages in four major activities – deepening and
documenting knowledge, creating toolkits for implementation, building communities of practice
via both physical and virtual engagement opportunities, and serving as a general steward of the
concept of Share Value. The founders of SVI have committed to developing the following
capacities within the first two years of the initiative: developing and interactive communications
platform, developing shared value content and events, and conducting outreach to a wide range
of stakeholders by identifying and developing outreach plans for stakeholders critical to shared
value adoption and implementation. The SVI is managed and staffed by the global social impact
consulting firm FSG. Current SVI programs include shared value executive education, an
affiliate program that trains consulting firms on the implementation of SV strategies, an online
community portal, and a variety of shared value resources. The SVI also hosts the Global Shared
Value Summit, an annual three-day gathering of over 200 leaders from the business, public, and
not-for-profit sectors citation.
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Benchmarking
Benchmarking is the process of comparing one's business processes and performance metrics to
industry bests and best practices from other companies. Dimensions typically measured are
quality, time and cost. In the process of best practice benchmarking, management identifies the
best firms in their industry, or in another industry where similar processes exist, and compares
the results and processes of those studied (the "targets") to one's own results and processes. In
this way, they learn how well the targets perform and, more importantly, the business processes
that explain why these firms are successful.Benchmarking is used to measure performance using
a specific indicator (cost per unit of measure, productivity per unit of measure, cycle time of x
per unit of measure or defects per unit of measure) resulting in a metric of performance that is
then compared to others. Also referred to as "best practice benchmarking" or "process
benchmarking", this process is used in management which particularly shows VEMR strategic
management, in which organizations evaluate various aspects of their processes in relation to
best practice companies' processes, usually within a peer group defined for the purposes of
comparison. This then allows organizations to develop plans on how to make improvements or
adapt specific best practices, usually with the aim of increasing some aspect of performance.
Benchmarking may be a one-off event, but is often treated as a continuous process in which
organizations continually seek to improve their practices.
History
The term bench mark, or benchmark, originates from the chiseled horizontal marks that
surveyors made in stone structures, into which an angle-iron could be placed to form a "bench"
for a leveling rod, thus ensuring that a leveling rod could be accurately repositioned in the same
place in the future. These marks were usually indicated with a chiseled arrow below the
horizontal line. Benchmarking is most used to measure performance using a specific indicator
(cost per unit of measure, productivity per unit of measure, cycle time of x per unit of measure or
defects per unit of measure) resulting in a metric of performance that is then compared to others.
In 1994, one of the first technical journal named "Benchmarking: An International Journal" was
published.
In 2008, a comprehensive survey on benchmarking was commissioned by The Global

Benchmarking Network, a network of benchmarking centres representing 22 coun
1. Mission and Vision Statements and Customer (Client) Surveys are the most used (by
77% of organizations) of 20 improvement tools, followed by SWOT analysis (strengths,
weaknesses, opportunities, and threats) (72%), and Informal Benchmarking (68%).
Performance Benchmarking was used by 49% and Best Practice Benchmarking by 39%.
2. The tools that are likely to increase in popularity the most over the next three years are
Performance Benchmarking, Informal Benchmarking, SWOT, and Best Practice
Benchmarking. Over 60% of organizations that are not currently using these tools
indicated they are likely to use them in the next three years.
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Procedure
There is no single benchmarking process that has been universally adopted. The wide appeal and
acceptance of benchmarking has led to the emergence of benchmarking methodologies. One
seminal book is Boxwell's Benchmarking for Competitive Advantage (1994).[3] The first book on
benchmarking, written and published by Kaiser Associates,[4] is a practical guide and offers a
seven-step approach. Robert Camp (who wrote one of the earliest books on benchmarking in
1989)[5] developed a 12-stage approach to benchmarking.
The 12 stage methodology consists of:
1. Select subject
2. Define the process
3. Identify potential partners
4. Identify data sources
5. Collect data and select partners
6. Determine the gap
7. Establish process differences
8. Target future performance
9. Communicate
10. Adjust goal
11. Implement
12. Review and recalibrate
The following is an example of a typical benchmarking methodology:
• Identify problem areas: Because benchmarking can be applied to any business process or
function, a range of research techniques may be required. They include informal
conversations with customers, employees, or suppliers; exploratory research techniques
such as focus groups; or in-depth marketing research, quantitative research, surveys,
questionnaires, re-engineering analysis, process mapping, quality control variance
reports, financial ratio analysis, or simply reviewing cycle times or other performance
indicators. Before embarking on comparison with other organizations it is essential to
know the organization's function and processes; base lining performance provides a point
against which improvement effort can be measured.
• Identify other industries that have similar processes: For instance, if one were interested
in improving hand-offs in addiction treatment one would identify other fields that also
have hand-off challenges. These could include air traffic control, cell phone switching
between towers, transfer of patients from surgery to recovery rooms.
• Identify organizations that are leaders in these areas: Look for the very best in any
industry and in any country. Consult customers, suppliers, financial analysts, trade
associations, and magazines to determine which companies are worthy of study.
• Survey companies for measures and practices: Companies target specific business
processes using detailed surveys of measures and practices used to identify business
process alternatives and leading companies. Surveys are typically masked to protect
confidential data by neutral associations and consultants.
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• Visit the "best practice" companies to identify leading edge practices: Companies
typically agree to mutually exchange information beneficial to all parties in a
benchmarking group and share the results within the group.
• Implement new and improved business practices: Take the leading edge practices and
develop implementation plans which include identification of specific opportunities,
funding the project and selling the ideas to the organization for the purpose of gaining
demonstrated value from the process.
Costs
The three main types of costs in benchmarking are:
• Visit Costs - This includes hotel rooms, travel costs, meals, a token gift, and lost labor
time.
• Time Costs - Members of the benchmarking team will be investing time in researching
problems, finding exceptional companies to study, visits, and implementation. This will
take them away from their regular tasks for part of each day so additional staff might be
required.
• Benchmarking Database Costs - Organizations that institutionalize benchmarking into
their daily procedures find it is useful to create and maintain a database of best practices
and the companies associated with each best practice now.
The cost of benchmarking can substantially be reduced through utilizing the many internet
resources that have sprung up over the last few years. These aim to capture benchmarks and best
practices from organizations, business sectors and countries to make the benchmarking process
much quicker and cheaper.
Technical/product benchmarking
The technique initially used to compare existing corporate strategies with a view to achieving the
best possible performance in new situations (see above), has recently been extended to the
comparison of technical products. This process is usually referred to as "technical
benchmarking" or "product benchmarking". Its use is well-developed within the automotive
industry ("automotive benchmarking"), where it is vital to design products that match precise
user expectations, at minimal cost, by applying the best technologies available worldwide. Data
is obtained by fully disassembling existing cars and their systems. Such analyses were initially
carried out in-house by car makers and their suppliers. However, as these analyses are expensive,
they are increasingly being outsourced to companies who specialize in this area. Outsourcing has
enabled a drastic decrease in costs for each company (by cost sharing) and the development of
efficient tools (standards, software).-
Types
Benchmarking can be internal (comparing performance between different groups or teams within
an organization) or external (comparing performance with companies in a specific industry or
across industries). Within these broader categories, there are three specific types of
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benchmarking: 1) Process benchmarking, 2) Performance benchmarking and 3) Strategic
benchmarking. These can be further detailed as follows:
• Process benchmarking - the initiating firm focuses its observation and investigation of
business processes with a goal of identifying and observing the best practices from one or
more benchmark firms. Activity analysis will be required where the objective is to
benchmark cost and efficiency; increasingly applied to back-office processes where
outsourcing may be a consideration. Benchmarking is appropriate in nearly every case
where process redesign or improvement is to be undertaking so long as the cost of the
study does not exceed the expected benefit.
• Financial benchmarking - performing a financial analysis and comparing the results in an
effort to assess your overall competitiveness and productivity.
• Benchmarking from an investor perspective- extending the benchmarking universe to
also compare to peer companies that can be considered alternative investment
opportunities from the perspective of an investor.
• Benchmarking in the public sector - functions as a tool for improvement and innovation
in public administration, where state organizations invest efforts and resources to achieve
quality, efficiency and effectiveness of the services they provide. Performance
benchmarking - allows the initiator firm to assess their competitive position by
comparing products and services with those of target firms.
• Product benchmarking - the process of designing new products or upgrades to current
ones. This process can sometimes involve reverse engineering which is taking apart
competitors products to find strengths and weaknesses.
• Strategic benchmarking - involves observing how others compete. This type is usually
not industry specific, meaning it is best to look at other industries.
• Functional benchmarking - a company will focus its benchmarking on a single function
to improve the operation of that particular function. Complex functions such as Human
Resources, Finance and Accounting and Information and Communication Technology are
unlikely to be directly comparable in cost and efficiency terms and may need to be
disaggregated into processes to make valid comparison.
• Best-in-class benchmarking - involves studying the leading competitor or the company
that best carries out a specific function.
• Operational benchmarking embraces everything from staffing and productivity to office
flow and analysis of procedures performed. Energy benchmarking - process of collecting,
analysing and relating energy performance data of comparable activities with the purpose
of evaluating and comparing performance between or within entities. Entities can include
processes, buildings or companies. Benchmarking may be internal between entities
within a single organization, or - subject to confidentiality restrictions - external between
competing entities.
Tools
Benchmarking software can be used to organize large and complex amounts of information.
Software packages can extend the concept of benchmarking and competitive analysis by
allowing individuals to handle such large and complex amounts or strategies. Such tools support
different types of benchmarking (see above) and can reduce the above costs significantly.
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Metric benchmarking
Another approach to making comparisons involves using more aggregative cost or production
information to identify strong and weak performing units. The two most common forms of
quantitative analysis used in metric benchmarking are data envelope analysis (DEA) and
regression analysis. DEA estimates the cost level an efficient firm should be able to achieve in a
particular market. In infrastructure regulation, DEA can be used to reward companies/operators
whose costs are near the efficient frontier with additional profits. Regression analysis estimates
what the average firm should be able to achieve. With regression analysis, firms that performed
better than average can be rewarded while firms that performed worse than average can be
penalized. Such benchmarking studies are used to create yardstick comparisons, allowing
outsiders to evaluate the performance of operators in an industry. Advanced statistical
techniques, including stochastic frontier analysis, have been used to identify high and weak
performers in industries, including applications to schools, hospitals, water utilities, and electric
utilities. One of the biggest challenges for metric benchmarking is the variety of metric
definitions used among companies or divisions. Definitions may change over time within the
same organization due to changes in leadership and priorities. The most useful comparisons can
be made when metrics definitions are common between compared units and do not change so
improvements can be verified.
Cost–benefit analysis
Cost–benefit analysis (CBA), sometimes called benefit–cost analysis (BCA), is a systematic

approach to estimating the strengths and weaknesses of alternatives that satisfy transactions,
activities or functional requirements for a business. It is a technique that is used to determine
options that provide the best approach for the adoption and practice in terms of benefits in labor,
time and cost savings etc.[1] The CBA is also defined as a systematic process for calculating and
comparing benefits and costs of a project, decision or government policy (hereafter, "project").
Broadly, CBA has two purposes:
1. To determine if it is a sound investment/decision (justification/feasibility),

2. To provide a basis for comparing projects. It involves comparing the total expected cost
of each option against the total expected benefits, to see whether the benefits outweigh
the costs, and by how much.[2]
CBA is related to, but distinct from cost-effectiveness analysis. In CBA, benefits and costs are
expressed in monetary terms, and are adjusted for the time value of money, so that all flows of
benefits and flows of project costs over time (which tend to occur at different points in time) are
expressed on a common basis in terms of their net present value.
Closely related, but slightly different, formal techniques include cost-effectiveness analysis,
cost–utility analysis, risk–benefit analysis, economic impact analysis, fiscal impact analysis, and
social return on investment (SROI) analysis.
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Theory
Cost–benefit analysis is often used by governments and other organizations, such as private
sector businesses, to appraise the desirability of a given policy. It is an analysis of the expected
balance of benefits and costs, including an account of foregone alternatives and the status quo.
CBA helps predict whether the benefits of a policy outweigh its costs, and by how much relative
to other alternatives (i.e. one can rank alternate policies in terms of the cost–benefit ratio).
Generally, accurate cost–benefit analysis identifies choices that increase welfare from a
utilitarian perspective. Assuming an accurate CBA, changing the status quo by implementing the
alternative with the lowest cost–benefit ratio can improve Pareto efficiency. An analyst using
CBA should recognize that perfect appraisal of all present and future costs and benefits is
difficult, and while CBA can offer a well-educated estimate of the best alternative, perfection in
terms of economic efficiency and social welfare are not guaranteed.
Process
The following is a list of steps that comprise a generic cost–benefit analysis.[6]
1. List alternative projects/programs.

2. List stakeholders.
3. Select measurement(s) and measure all cost/benefit elements.
4. Predict outcome of cost and benefits over relevant time period.
5. Convert all costs and benefits into a common currency.
6. Apply discount rate.
7. Calculate net present value of project options.
8. Perform sensitivity analysis.
9. Adopt recommended choice.
Evaluation
CBA attempts to measure the positive or negative consequences of a project, which may include:
1. Effects on users or participants

2. Effects on non-users or non-participants
3. Externality effects
4. Option value or other social benefits.
A similar breakdown is employed in environmental analysis of total economic value. Both costs
and benefits can be diverse. Financial costs tend to be most thoroughly represented in cost-
benefit analyses due to relatively abundant market data. The net benefits of a project may
incorporate cost savings or public willingness to pay compensation (implying the public has no
legal right to the benefits of the policy) or willingness to accept compensation (implying the
public has a right to the benefits of the policy) for the welfare change resulting from the policy.
The guiding principle of evaluating benefits is to list all (categories of) parties affected by an
intervention and add the (positive or negative) value, usually monetary, that they ascribe to its
effect on their welfare.The actual compensation an individual would require to have their welfare
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unchanged by a policy is inexact at best. Surveys (stated preference techniques) or market
behavior (revealed preference techniques) are often used to estimate the compensation associated
with a policy; however, survey respondents often have strong incentives to misreport their true
preferences and market behavior does not provide any information about important non-market
welfare impacts.One controversy is valuing a human life, e.g. when assessing road safety
measures or life-saving medicines. However, this can sometimes be avoided by using the related
technique of cost-utility analysis, in which benefits are expressed in non-monetary units such as
quality-adjusted life years. For example, road safety can be measured in terms of cost per life
saved, without formally placing a financial value on the life. However, such non-monetary
metrics have limited usefulness for evaluating policies with substantially different outcomes.
Additionally, many other benefits may accrue from the policy, and metrics such as 'cost per life
saved' may lead to a substantially different ranking of alternatives than traditional cost–benefit
analysis.
Another controversy is valuing the environment, which in the 21st century is typically assessed
by valuing ecosystem services to humans, such as air and water quality and pollution.[7]
Monetary values may also be assigned to other intangible effects such as business reputation,
market penetration, or long-term enterprise strategy alignment.
Time and discounting
CBA usually tries to put all relevant costs and benefits on a common temporal footing using time
value of money calculations. This is often done by converting the future expected streams of
costs and benefits into a present value amount using a discount rate. Empirical studies and a
technical framework suggest that in reality, people do discount the future like this. The choice of
discount rate is subjective. A smaller rate values future generations equally with the current
generation. Larger rates (e.g. a market rate of return) reflects humans' attraction to time
inconsistency—valuing money that they receive today more than money they get in the future.
The choice makes a large difference in assessing interventions with long-term effects. One issue
is the equity premium puzzle, in which long-term returns on equities may be rather higher than
they should be. If so then arguably market rates of return should not be used to determine a
discount rate, as doing so would have the effect of undervaluing the distant future (e.g. climate
change).
Risk and uncertainty
Risk associated with project outcomes is usually handled using probability theory. This can be
factored into the discount rate (to have uncertainty increasing over time), but is usually
considered separately. Particular consideration is often given to risk aversion—the preference for
avoiding loss over achieving gain. Expected return calculations do not account for the
detrimental effect of uncertainty. Uncertainty in CBA parameters (as opposed to risk of project
failure etc.) can be evaluated using a sensitivity analysis, which shows how results respond to
parameter changes. Alternatively a more formal risk analysis can be undertaken using Monte
Carlo simulations.
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History
The French engineer and economist Jules Dupuit, credited with the creation of cost–benefit
analysis.The concept of CBA dates back to an 1848 article by Jules Dupuit and was formalized
in subsequent works by Alfred Marshall. The Corps of Engineers initiated the use of CBA in the
US, after the Federal Navigation Act of 1936 effectively required cost–benefit analysis for
proposed federal waterway infrastructure.[11] The Flood Control Act of 1939 was instrumental in
establishing CBA as federal policy. It demanded that "the benefits to whomever they accrue [be]
in excess of the estimated costs."
Public policy
The application for broader public policy started from the work of Otto Eckstein,] who in 1958
laid out a welfare economics foundation for CBA and its application for water resource
development. Over the 1960s, CBA was applied in the US for water quality,[14] recreation travel,
and land conservation. During this period, the concept of option value was developed to
represent the non-tangible value of preserving resources such as national parks.CBA was later
expanded to address both intangible and tangible benefits of public policies relating to mental
illness, substance abuse, college education, and chemical waste policies. In the US, the National
Environmental Policy Act of 1969 first required the application of CBA for regulatory programs,
and since then, other governments have enacted similar rules. Government guidebooks for the
application of CBA to public policies include the Canadian guide for regulatory analysis,
Australian guide for regulation and finance, US guide for health care programs, and US guide for
emergency management programs.
Transportation investment
CBA application for transport investment started in the UK, with the M1 motorway project in
1960. It was later applied on many projects including London Underground's Victoria line. Later,
the New Approach to Appraisal (NATA) was introduced by the then Department for Transport,
Environment and the Regions. This presented cost–benefit results and detailed environmental
impact assessments in a balanced way. NATA was first applied to national road schemes in the
1998 Roads Review but subsequently rolled out to all transport modes. As of 2011 it was a
cornerstone of transport appraisal in the UK and is maintained and developed by the Department
for Transport.The EU's 'Developing Harmonised European Approaches for Transport Costing
and Project Assessment' (HEATCO) project, part of its Sixth Framework Programme, reviewed
transport appraisal guidance across EU member states and found that significant differences exist
between countries. HEATCO's aim was to develop guidelines to harmonise transport appraisal
practice across the EU. Transport Canada promoted the use of CBA for major transport
investments with the 1994 issuance of its Guidebook. In the US, both federal and state transport
departments commonly apply CBA, using a variety of available software tools including HERS,
BCA.Net, StatBenCost, Cal-BC, and TREDIS. Guides are available from the Federal Highway
Administration, Federal Aviation Administration, Minnesota Department of Transportation,
California Department of Transportation (Caltrans), and the Transportation Research Board
Transportation Economics Committee.
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CBA and Regulation under various US Administrations
The increased usage of CBA in the US regulatory process is often associated with President
Ronald Reagan's administration. Though the use of CBA in US policy making dating back many
decades, Reagan's Executive Order 12291 mandated the use of CBA in the regulatory process.
Reagan campaigned on a deregulation platform, and once he took office in 1981 quickly issued
this EO, which vested the Office of Information and Regulatory Affairs (OIRA) with the
authority to review agency regulations and required federal agencies to produce regulatory
impact analyses when the annual impact could be estimated over $100M. Shortly thereafter, in
the 1980s, academic and institutional critiques of CBA started to emerge. The three main
criticisms were:
That CBA could be used for political goals. Debates on the merits of cost and benefit
comparisons can be used to sidestep political or philosophical goals, rules and regulations.That
CBA is inherently anti-regulatory, therefore not a neutral analysis tool. This is an ethical
argument: that the monetization of policy impacts is an inappropriate tool for assessing things
such as mortality risks and distributional impacts.That the length of time necessary to complete
CBA can create significant delays, which can impede policy regulations.These criticisms
continued through the 1990s under the Clinton administration, who furthered the anti-regulatory
environment through his Executive Order 12866. EO 12866 changed some of Reagan's language,
requiring benefits to justify, rather than exceed costs, and added "reduction of discrimination or
bias" as one of the benefits to be analyzed. Criticisms of aspects of CBA, including uncertainly
valuations, discounting future values, and the calculation of risk, were used to argue that CBA
should play no part in the regulatory process. The use of CBA in the regulatory process
continues today under the Obama administration, though the debate over its practical and
objective value continues. Some analysts oppose the use of CBA in policy making, while those
in favor of its use favor improvements to the analysis and calculations.
Accuracy
The value of a cost–benefit analysis depends on the accuracy of the individual cost and benefit
estimates. Comparative studies indicate that such estimates are often flawed, preventing
improvements in Pareto and Kaldor-Hicks efficiency. Causes of these inaccuracies include;
Overreliance on data from past projects (often differing markedly in function or size and the skill
levels of the team members)
1. Use of subjective impressions by assessment team members

2. Inappropriate use of heuristics to derive money cost of the intangible elements
3. Confirmation bias among project supporters (looking for reasons to proceed).
Interest groups may attempt to include or exclude significant costs from an analysis to influence
the outcome.In the case of the Ford Pinto (where, because of design flaws, the Pinto was liable to
burst into flames in a rear-impact collision), the company's decision was not to issue a recall.
Ford's cost–benefit analysis had estimated that based on the number of cars in use and the
probable accident rate, deaths due to the design flaw would cost it about $49.5 million to settle
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wrongful death lawsuits versus recall costs of $137.5 million. Ford overlooked (or considered
insignificant) the costs of the negative publicity that would result, which forced a recall and
damaged sales. In health economics, some analysts think cost–benefit analysis can be an
inadequate measure because willingness-to-pay methods of determining the value of human life
can be influenced by income level. They support use of variants such as cost–utility analysis and
quality-adjusted life year to analyze the effects of health policies. For some environmental
effects cost-benefit analysis can be substituted with cost-effectiveness analysis. This is especially
true when there is only one type of physical outcome that is sought, such as the reduction of
energy use by increasing energy efficiency. Using cost-effectiveness analysis is less laborious
and time-consuming as it does not involve the monetization of outcomes, which can be difficult
in some cases. In environmental and occupational health regulation, it has been argued that if
modern cost–benefit analyses had been applied prospectively to decisions such as whether to
mandate the removal of lead from gasoline, build the Hoover Dam in the Black Canyon of the
Colorado, and regulate workers' exposure to vinyl chloride, these measures would not have been
implemented even though they are considered to be highly successful in retrospect.[42] The Clean
Air Act has been cited in retrospective studies as a case where benefits exceeded costs, but the
knowledge of the benefits (attributable largely to the benefits of reducing particulate pollution)
was not available until many years later.
Guns versus butter model
• Business case
• Economic forecasting
• Have one's cake and eat it too
• Opportunity cost
• Scarcity
• Social impact assessment
• Tax choice
• There ain't no such thing as a free lunch
• Trade-off
Corporate governance
Corporate governance broadly refers to the mechanisms, processes and relations by which
corporations are controlled and directed. Governance structures and principles identify the
distribution of rights and responsibilities among different participants in the corporation (such as
the board of directors, managers, shareholders, creditors, auditors, regulators, and other
stakeholders) and includes the rules and procedures for making decisions in corporate affairs.[2]
Corporate governance includes the processes through which corporations' objectives are set and
pursued in the context of the social, regulatory and market environment. Governance
mechanisms include monitoring the actions, policies, practices, and decisions of corporations,
their agents, and affected stakeholders. Corporate governance practices are affected by attempts
to align the interests of stakeholders. Interest in the corporate governance practices of modern
corporations, particularly in relation to accountability, increased following the high-profile
collapses of a number of large corporations during 2001–2002, most of which involved
accounting fraud; and then again after the recent financial crisis in 2008.Corporate scandals of
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various forms have maintained public and political interest in the regulation of corporate
governance. In the U.S., these include Enron and MCI Inc. (formerly WorldCom). Their demise
led to the enactment of the Sarbanes-Oxley Act in 2002, a U.S. federal law intended to restore
public confidence in corporate governance. Comparable failures in Australia (HIH, One.Tel) are
associated with the eventual passage of the CLERP 9 reforms. Similar corporate failures in other
countries stimulated increased regulatory interest (e.g., Parmalat in Italy).
Stakeholder interests
In contemporary business corporations, the main external stakeholder groups are shareholders,
debtholders, trade creditors and suppliers, customers, and communities affected by the
corporation's activities. Internal stakeholders are the board of directors, executives, and other
employees.
Much of the contemporary interest in corporate governance is concerned with mitigation of the
conflicts of interests between stakeholders. In large firms where there is a separation of
ownership and management and no controlling shareholder, the principal–agent issue arises
between upper-management (the "agent") which may have very different interests, and by
definition considerably more information, than shareholders (the "principals"). The danger arises
that, rather than overseeing management on behalf of shareholders, the board of directors may
become insulated from shareholders and beholden to management. This aspect is particularly
present in contemporary public debates and developments in regulatory policy. Ways of
mitigating or preventing these conflicts of interests include the processes, customs, policies,
laws, and institutions which affect the way a company is controlled. An important theme of
governance is the nature and extent of corporate accountability. A related discussion at the macro
level focuses on the effect of a corporate governance system on economic efficiency, with a
strong emphasis on shareholders' welfare. This has resulted in a literature focussed on economic
analysis.
Other definitions
Corporate governance has also been more narrowly defined as "a system of law and sound
approaches by which corporations are directed and controlled focusing on the internal and
external corporate structures with the intention of monitoring the actions of management and
directors and thereby, mitigating agency risks which may stem from the misdeeds of corporate
officers." One source defines corporate governance as "the set of conditions that shapes the ex
post bargaining over the quasi-rents generated by a firm."] The firm itself is modelled as a
governance structure acting through the mechanisms of contract. Here corporate governance may
include its relation to corporate finance.
Principles
Contemporary discussions of corporate governance tend to refer to principles raised in three

documents released since 1990: The Cadbury Report (UK, 1992), the Principles of Corporate
Governance (OECD, 1999, 2004 and 2015), the Sarbanes-Oxley Act of 2002 (US, 2002). The
Cadbury and Organisation for Economic Co-operation and Development (OECD) reports present
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general principles around which businesses are expected to operate to assure proper governance.
The Sarbanes-Oxley Act, informally referred to as Sarbox or Sox, is an attempt by the federal
government in the United States to legislate several of the principles recommended in the
Cadbury and OECD reports.
• Rights and equitable treatment of shareholders: Organizations should respect the

rights of shareholders and help shareholders to exercise those rights. They can help
shareholders exercise their rights by openly and effectively communicating information
and by encouraging shareholders to participate in general meetings.
• Interests of other stakeholders: Organizations should recognize that they have legal,
contractual, social, and market driven obligations to non-shareholder stakeholders,
including employees, investors, creditors, suppliers, local communities, customers, and
policy makers.
• Role and responsibilities of the board: The board needs sufficient relevant skills and
understanding to review and challenge management performance. It also needs adequate
size and appropriate levels of independence and commitment.
• Integrity and ethical behavior: Integrity should be a fundamental requirement in
choosing corporate officers and board members. Organizations should develop a code of
conduct for their directors and executives that promotes ethical and responsible decision
making.
• Disclosure and transparency: Organizations should clarify and make publicly known
the roles and responsibilities of board and management to provide stakeholders with a
level of accountability. They should also implement procedures to independently verify
and safeguard the integrity of the company's financial reporting. Disclosure of material
matters concerning the organization should be timely and balanced to ensure that all
investors have access to clear, factual information.
Models
Different models of corporate governance differ according to the variety of capitalism in which
they are embedded. The Anglo-American "model" tends to emphasize the interests of
shareholders. The coordinated or [Multistakeholder Model] associated with Continental Europe
and Japan also recognizes the interests of workers, managers, suppliers, customers, and the
community. A related distinction is between market-orientated and network-orientated models of
corporate governance.
Continental Europe (Two-tier board system
Some continental European countries, including Germany, Austria, and the Netherlands, require
a two-tiered Board of Directors as a means of improving corporate governance. In the two-tiered
board, the Executive Board, made up of company executives, generally runs day-to-day
operations while the supervisory board, made up entirely of non-executive directors who
represent shareholders and employees, hires and fires the members of the executive board,
determines their compensation, and reviews major business decisions.
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India
The Securities and Exchange Board of India Committee on Corporate Governance defines
corporate governance as the "acceptance by management of the inalienable rights of shareholders
as the true owners of the corporation and of their own role as trustees on behalf of the
shareholders. It is about commitment to values, about ethical business conduct and about making
a distinction between personal & corporate funds in the management of a company."
United States, United Kingdom
The so-called "Anglo-American model" of corporate governance emphasizes the interests of

shareholders. It relies on a single-tiered Board of Directors that is normally dominated by non-
executive directors elected by shareholders. Because of this, it is also known as "the unitary
system". Within this system, many boards include some executives from the company (who are
ex officio members of the board). Non-executive directors are expected to outnumber executive
directors and hold key posts, including audit and compensation committees. In the United
Kingdom, the CEO generally does not also serve as Chairman of the Board, whereas in the US
having the dual role has been the norm, despite major misgivings regarding the effect on
corporate governance.[34] The number of US firms combining both roles is declining, however. In
the United States, corporations are directly governed by state laws, while the exchange (offering
and trading) of securities in corporations (including shares) is governed by federal legislation.
Many US states have adopted the Model Business Corporation Act, but the dominant state law
for publicly traded corporations is Delaware, which continues to be the place of incorporation for
the majority of publicly traded corporations. Individual rules for corporations are based upon the
corporate charter and, less authoritatively, the corporate bylaws. Shareholders cannot initiate
changes in the corporate charter although they can initiate changes to the corporate bylaws. It is
sometimes colloquially stated that in the USA and the UK 'the shareholders own the company'.
This is, however, a misconception as argued by Eccles & Youmans (2015) and Kay (2015).
Corporations are created as legal persons by the laws and regulations of a particular jurisdiction.
These may vary in many respects between countries, but a corporation's legal person status is
fundamental to all jurisdictions and is conferred by statute. This allows the entity to hold
property in its own right without reference to any particular real person. It also results in the
perpetual existence that characterizes the modern corporation. The statutory granting of
corporate existence may arise from general purpose legislation (which is the general case) or
from a statute to create a specific corporation, which was the only method prior to the 19th
century. In addition to the statutory laws of the relevant jurisdiction, corporations are subject to
common law in some countries, and various laws and regulations affecting business practices. In
most jurisdictions, corporations also have a constitution that provides individual rules that
govern the corporation and authorize or constrain its decision-makers. This constitution is
identified by a variety of terms; in English-speaking jurisdictions, it is usually known as the
Corporate Charter or the [Memorandum] and Articles of Association. The capacity of
shareholders to modify the constitution of their corporation can vary substantially.The U.S.
passed the Foreign Corrupt Practices Act (FCPA) in 1977, with subsequent modifications. This
law made it illegal to bribe government officials and required corporations to maintain adequate
accounting controls. It is enforced by the U.S. Department of Justice and the Securities and
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Exchange Commission (SEC). Substantial civil and criminal penalties have been levied on
corporations and executives convicted of bribery. The UK passed the Bribery Act in 2010. This
law made it illegal to bribe either government or private citizens or make facilitating payments
(i.e., payment to a government official to perform their routine duties more quickly). It also
required corporations to establish controls to prevent bribery.
Sarbanes-Oxley Act
The Sarbanes-Oxley Act of 2002 was enacted in the wake of a series of high-profile corporate
scandals. It established a series of requirements that affect corporate governance in the U.S. and
influenced similar laws in many other countries. The law required, along with many other
elements, that:
• The Public Company Accounting Oversight Board (PCAOB) be established to regulate

the auditing profession, which had been self-regulated prior to the law. Auditors are
responsible for reviewing the financial statements of corporations and issuing an opinion
as to their reliability.
• The Chief Executive Officer (CEO) and Chief Financial Officer (CFO) attest to the
financial statements. Prior to the law, CEO's had claimed in court they hadn't reviewed
the information as part of their defense.
• Board audit committees have members that are independent and disclose whether or not
at least one is a financial expert, or reasons why no such expert is on the audit committee.
• External audit firms cannot provide certain types of consulting services and must rotate
their lead partner every 5 years. Further, an audit firm cannot audit a company if those in
specified senior management roles worked for the auditor in the past year. Prior to the
law, there was the real or perceived conflict of interest between providing an independent
opinion on the accuracy and reliability of financial statements when the same firm was
also providing lucrative consulting services.
• Codes and guidelines[edit]
Corporate governance principles and codes have been developed in different countries and issued
from stock exchanges, corporations, institutional investors, or associations (institutes) of
directors and managers with the support of governments and international organizations. As a
rule, compliance with these governance recommendations is not mandated by law, although the
codes linked to stock exchange listing requirements may have a coercive effect.
Organisation for Economic Co-operation and Development principles
One of the most influential guidelines on corporate governance are the G20/OECD Principles of
Corporate Governance, first published as the OECD Principles in 1999, revised in 2004 and
revised again and endorsed by the G20 in 2015. The Principles often referenced by countries
developing local codes or guidelines. Building on the work of the OECD, other international
organizations, private sector associations and more than 20 national corporate governance codes
formed the United Nations Intergovernmental Working Group of Experts on International
Standards of Accounting and Reporting (ISAR) to produce their Guidance on Good Practices in
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Corporate Governance Disclosure. This internationally agreed benchmark consists of more than
fifty distinct disclosure items across five broad categories: Auditing
• Board and management structure and process

• Corporate responsibility and compliance in organization
• Financial transparency and information disclosure
• Ownership structure and exercise of control rights
Stock exchange listing standards
Companies listed on the New York Stock Exchange (NYSE) and other stock exchanges are
required to meet certain governance standards. For example, the NYSE Listed Company Manual
requires, among many other elements:
• Independent directors: "Listed companies must have a majority of independent

directors...Effective boards of directors exercise independent judgment in carrying out
their responsibilities. Requiring a majority of independent directors will increase the
quality of board oversight and lessen the possibility of damaging conflicts of interest."
(Section 303A.01) An independent director is not part of management and has no
"material financial relationship" with the company.
• Board meetings that exclude management: "To empower non-management directors to
serve as a more effective check on management, the non-management directors of each
listed company must meet at regularly scheduled executive sessions without
management." (Section 303A.03)
• Boards organize their members into committees with specific responsibilities per defined
charters. "Listed companies must have a nominating/corporate governance committee
composed entirely of independent directors." This committee is responsible for
nominating new members for the board of directors. Compensation and Audit
Committees are also specified, with the latter subject to a variety of listing standards as
well as outside regulations. (Section 303A.04 and others)
Other guidelines
The investor-led organisation International Corporate Governance Network (ICGN) was set up
by individuals centered around the ten largest pension funds in the world 1995. The aim is to
promote global corporate governance standards. The network is led by investors that manage 18
trillion dollars and members are located in fifty different countries. ICGN has developed a suite
of global guidelines ranging from shareholder rights to business ethics.The World Business
Council for Sustainable Development (WBCSD) has done work on corporate governance,
particularly on Accounting and Reporting, and in 2004 released Issue Management Tool:
Strategic challenges for business in the use of corporate responsibility codes, standards, and
frameworks. This document offers general information and a perspective from a business
association/think-tank on a few key codes, standards and frameworks relevant to the
sustainability agenda.In 2009, the International Finance Corporation and the UN Global
Compact released a report, Corporate Governance - the Foundation for Corporate Citizenship
and Sustainable Business, linking the environmental, social and governance responsibilities of a
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company to its financial performance and long-term sustainability.Most codes are largely
voluntary. An issue raised in the U.S. since the 2005 Disney decision is the degree to which
companies manage their governance responsibilities; in other words, do they merely try to
supersede the legal threshold, or should they create governance guidelines that ascend to the
level of best practice. For example, the guidelines issued by associations of directors, corporate
managers and individual companies tend to be wholly voluntary but such documents may have a
wider effect by prompting other companies to adopt similar practices.
Governance
Governance refers to "all of processes of governing, whether undertaken by a government,

market or network, whether over a family, tribe, formal or informal organization or territory and
whether through the laws, norms, power or language."[1] It relates to "the processes of interaction
and decision-making among the actors involved in a collective problem that lead to the creation,
reinforcement, or reproduction of social norms and institutions." A variety of entities (known
generically as governing bodies) can govern. The most formal is a government, a body whose
sole responsibility and authority is to make binding decisions in a given geopolitical system
(such as a state) by establishing laws. Other types of governing bodies are possible. These
include an organization (such as a corporation recognized as a legal entity by a government), a
socio-political group (chiefdom, tribe, family, religious denomination, etc.), or another, informal
group of people.Whatever form the entity takes, its governance is the way the rules, norms and
actions are produced, sustained, regulated and held accountable. The degree of formality depends
on the internal rules of a given organization. As such, governance may take many forms, driven
by many different motivations and with many different results. For instance, a government may
operate as a democracy where citizens vote on who should govern and the public good is the
goal, while a non-profit organization may be governed by a small board of directors and pursue
more specific aims.In addition, a variety of external actors without decision-making power can
influence the process of governing. These include lobbies, political parties, and the media.
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CHAPTER 15-GOVERNANCE ANALYTICAL FRAMEWORK
The Governance Analytical Framework
The Governance Analytical Framework (GAF) is a practical methodology for investigating

governance processes, where various stakeholders interact and make decisions regarding
collective issues, thus creating or reinforcing social norms and institutions. It is postulated that
governance processes can be found in any society, and unlike other approaches, that these can be
observed and analysed from a non-normative perspective. It proposes a methodology based on
five main analytical units: problems, actors, norms, processes and nodal points. These logically
articulated analytical units make up a coherent methodology aimed at being used as a tool for
empirical social policy research.
Nonprofit governance
Nonprofit governance has a dual focus: achieving the organization's social mission and the
ensuring the organization is viabile. Both responsibilities relate to fiduciary responsibility that a
board of trustees (sometimes called directors, or Board, or Management Committee—the terms
are interchangeable) has with respect to the exercise of authority over the explicit actions the
organization takes. Public trust and accountability is an essential aspect of organizational
viability so it achieves the social mission in a way that is respected by those whom the
organization serves and the society in which it is located.
Corporate governance
Corporate organizations often use the word governance to describe both:
1. The manner in which boards or their like direct a corporation

2. The laws and customs (rules) applying to that direction
Corporate governance consists of the set of processes, customs, policies, laws and institutions
affecting the way people direct, administer or control a corporation. Corporate governance also
includes the relationships among the many players involved (the stakeholders) and the corporate
goals. The principal players include the shareholders, management, and the board of directors.
Other stakeholders include employees, suppliers, customers, banks and other lenders, regulators,
the environment and the community at large.The first documented use of the word "corporate
governance" is by Richard Eells (1960, pg. 108) to denote "the structure and functioning of the
corporate polity". The "corporate government" concept itself is older and was already used in
finance textbooks at the beginning of the 20th century (Becht, Bolton, Röell 2004).
Project governance
The term governance as used in industry (especially in the information technology (IT) sector)
describes the processes that need to exist for a successful project.
Environmental governance
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Internet governance
Information technology governance
IT governance primarily deals with connections between business focus and IT management.
The goal of clear governance is to assure the investment in IT generate business value and
mitigate the risks that are associated with IT projects.
Regulatory governance
Regulatory governance reflects the emergence of decentered and mutually adaptive policy
regimes which rests on regulation rather than service provision or taxing and spending. The term
captures the tendency of policy regimes to deal with complexity with delegated system of rules.
It is likely to appear in arenas and nations which are more complex, more global, more contested
and more liberally democratic. The term builds upon and extends the terms of the regulatory
state on the one hand and governance on the other. While the term regulatory state marginalize
non-state actors (NGOs and Business) in the domestic and global level, the term governance
marginalizes regulation as a constitutive instrument of governance. The term regulatory
governance therefore allows us to understand governance beyond the state and governance via
regulation.
Participatory governance
Participatory governance focuses on deepening democratic engagement through the participation

of citizens in the processes of governance with the state. The idea is that citizens should play a
more direct roles in public decision-making or at least engage more deeply with political issues.
Government officials should also be responsive to this kind of engagement. In practice,
participatory governance can supplement the roles of citizens as voters or as watchdogs through
more direct forms of involvement.
Multilevel governance
Metagovernance
"Metagovernance" is widely defined as the "governing of governing". It represents the

established ethical principles, or 'norms', that shape and steer the entire governing process. It is
important to note that there are no clearly defined settings within which metagoverning takes
place, or particular persons who are responsible for it. While somebelieve metagoverning to be
the role of the state which is assumed to want to steer actors in a particular direction, it can
"potentially be exercised by any resourceful actor"] who wishes to influence the governing
process. Examples of this include the publishing of codes of conduct at the highest level of
international government, and media focus on specific issues at the socio-cultural level. Despite
their different sources, both seek to establish values in such a way that they become accepted
'norms'. The fact that 'norms' can be established at any level and can then be used to shape the
governance process as whole, means metagovernance is part of both the input and the output of
the governing system.
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Collaborative governance
Governance as a normative concept
Fair governance
When discussing governance in particular organisations, the quality of governance within the
organisation is often compared to a standard of good governance. In the case of a business or of a
non-profit organization, for example, good governance relates to consistent management,
cohesive policies, guidance, processes and decision-rights for a given area of responsibility, and
proper oversight and accountability.
"Good governance" implies that mechanisms function in a way that allows the executives (the
"agents") to respect the rights and interests of the stakeholders (the "principals"), in a spirit of
democracy.
Good governance
Good governance is an indeterminate term used in international development literature to

describe various normative accounts of how public institutions ought to conduct public affairs
and manage public resources. These normative accounts are often justified on the grounds that
they are thought to be conducive to economic ends, such as the eradication of poverty and
successful economic development. Unsurprisingly different organizations have defined
governance and good governance differently to promote different normative ends.The World
Bank defines governance as:the manner in which power is exercised in the management of a
country's economic and social resources for development. The Worldwide Governance
Indicators project of the World Bank defines governance as:the traditions and institutions by
which authority in a country is exercised. This considers the process by which governments are
selected, monitored and replaced; the capacity of the government to effectively formulate and
implement sound policies and the respect of citizens and the state of the institutions that govern
economic and social interactions among them. An alternate definition sees governance as: the
use of institutions, structures of authority and even collaboration to allocate resources and
coordinate or control activity in society or the economy. According to the United Nations
Development Programme's Regional Project on Local Governance for Latin
America:Governance has been defined as the rules of the political system to solve conflicts
between actors and adopt decision (legality). It has also been used to describe the "proper
functioning of institutions and their acceptance by the public" (legitimacy). And it has been used
to invoke the efficacy of government and the achievement of consensus by democratic means
(participation).
Measuring governance
Over the last decade, several efforts have been conducted in the research and international
development community in order to assess and measure the quality of governance of countries
all around the world. Measuring governance is inherently a controversial and political exercise.
A distinction is therefore made between external assessments, peer assessments and self-
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assessments. Examples of external assessments are donor assessments or comparative indices
produced by international non-governmental organisations. An example of a peer assessment is
the African Peer Review Mechanism. Examples of self-assessments are country-led assessments
that can be led by government, civil society, researchers and/or other stakeholders at the national
level.One of these efforts to create an internationally comparable measure of governance and an
example of an external assessment is the Worldwide Governance Indicators project, developed
by members of the World Bank and the World Bank Institute. The project reports aggregate and
individual indicators for more than 200 countries for six dimensions of governance: voice and
accountability, political stability and lack of violence, government effectiveness, regulatory
quality, rule of law, control of corruption. To complement the macro-level cross-country
Worldwide Governance Indicators, the World Bank Institute developed the World Bank
Governance Surveys, which are country-level governance assessment tools that operate at the
micro or sub-national level and use information gathered from a country’s own citizens, business
people and public sector workers to diagnose governance vulnerabilities and suggest concrete
approaches for fighting corruption. A new Worldwide Governance Index (WGI)[22] has been
developed and is open for improvement through public participation. The following domains, in
the form of indicators and composite indexes, were selected to achieve the development of the
WGI: Peace and Security, Rule of Law, Human Rights and Participation, Sustainable
Development, and Human Development.Additionally, in 2009 the Bertelsmann Foundation
published the Sustainable Governance Indicators (SGI), which systematically measure the need
for reform and the capacity for reform within the Organisation for Economic Co-operation and
Development (OECD) countries. The project examines to what extent governments can identify,
formulate and implement effective reforms that render a society well-equipped to meet future
challenges, and ensure their future viability. Section 10 of the Government Performance and
Results Act (GPRA) Modernization Act requires U.S. federal agencies to publish their strategic
and performance plans and reports in machine-readable format.The International Budget
Partnership (IBP) launched the Open Budget Initiative in 2006 with the release of the first Open
Budget Survey (OBS). The OBS is a comprehensive analysis and survey that evaluates whether
central governments give the public access to budget documents and provide opportunities for
public participation in the budget process. To measure the overall commitment to transparency,
the IBP created Open Budget Index (OBI), which assigns a score to each country based on the
results of the survey. While the OBS is released biannually, the IBP recently released a new OBS
Tracker, which serves as an online tool for civil society, the media, and other actors to monitor in
real time whether governments are releasing eight key budget documents. The Open Budget
Index data are used by the Open Government Partnership, development aid agencies, and
increasingly investors in the private sector as key indicators of governance, particularly fiscal
transparency and management of public funds. Examples of country-led assessments include the
Indonesian Democracy Index, monitoring of the Millennium Development Goal 9 on Human
Rights and Democratic Governance in Mongolia and the Gross National Happiness Index in
Bhutan.Section 10 of the Government Performance and Results Act Modernization Act
(GPRAMA) requires U.S. federal agencies to publish their performance plans and reports in
machine-readable format, thereby providing the basis for evaluating the quality of their
performance of the governance functions entrusted to them, as specified in their strategic
objectives and performance indicators. Publishing performance reports openly on the Web in a
standard, machine-readable format is good practice for all organizations whose plans and reports
should be matters of public record.
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Good governance
Good governance is an indeterminate term used in the international development literature to

describe how public institutions conduct public affairs and manage public resources. Governance
is "the process of decision-making and the process by which decisions are implemented (or not
implemented)".[1] The term governance can apply to corporate, international, national, local
governance[1] or to the interactions between other sectors of society. The concept of "good
governance" often emerges as a model to compare ineffective economies or political bodies with
viable economies and political bodies.[2] The concept centers on the responsibility of
governments and governing bodies to meet the needs of the masses as opposed to select groups
in society. Because countries often described as "most successful" are Western liberal democratic
states, concentrated in Europe and the Americas, good governance standards often measure other
state institutions against these states.[2] Aid organizations and the authorities of developed
countries often will focus the meaning of "good governance" to a set of requirements that
conform to the organization's agenda, making "good governance" imply many different things in
many different contexts.
Forms
In international affairs, analysis of good governance can look at any of the following
relationships: between governments and markets,
• between governments and citizens,

• between governments and the private or voluntary sector,
• between elected officials and appointed officials,
The varying types of comparisons comprising the analysis of governance in scholastic and
practical discussion can cause the meaning of "good governance" to vary greatly from
practitioner to practitioner.
Good Governance in Corporate Sectors:In corporate affairs, good governance can be observed
in any of the following relationships:
· between governance and corporate management
· between governance and employee standards
· between governance and corruption in the workplace
The meaning of good governance in regards to corporate sectors varies between actors.
Legislation has been enacted in an attempt to influence good governance in corporate affairs.
The Sarbanes-Oxley Act (2002) set up requirements for businesses to follow. Whistleblowing
has also been widely used by corporations to expose corruption and fraudulent activity.[6]
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Good Governance in Local Governmentsyes
Good Governance is argued to be the most important in local governments. It tries to promote
more relationships between government and
· Empowered citizens
· Neighborhood councils
· Community councils
Good Governance with local government aims to increase civil engagement with more members
of the community in order to get the best options that serves the people.[7]
Good Governance in Scientific Exploration
Before there can be scientific experimentation, organizations must be compliant with good
governance, meaning that testing must be moral and practical. Many research organizations such
as SPICE (Stratospheric Particle Injection for Climate Engineering) a geoengineering research
project that was formed in the U.K. was required to go through stages of evaluation before
testing could be conducted if they were to be funded by stakeholders. In 2011 SPICE made plans
to experiment with solar radiation. The method for this experiment included injecting
stratospheric sulfur aerosols into the Earths atmosphere.The criteria or “stage-gate” that they
must pass before performing their experiment included the following; identify safe and principle
risks, test must be compliant with relevant regulations, future applications and impacts, and
mechanisms put in place to review these in the light of new information, and that the
stakeholders must be regarded and taken into account. Before research can be conducted in the
field of geoengineering it must be scrutinized using good governance to ensure testing isn’t
harmful to the environment and to detail all the possible risks that may occur .
Reform and standards
Three institutions can be reformed to promote good governance: the state, the private sector and
civil society.[9] However, amongst different cultures, the need and demand for reform can vary
depending on the priorities of that country's society.[10] A variety of country level initiatives and
international movements put emphasis on various types of governance reform. Each movement
for reform establishes criteria for what they consider good governance based on their own needs
and agendas. The following are examples of good governance standards for prominent
organizations in the international community.
IMF
The International Monetary Fund (IMF) declared in 1996 that "promoting good governance in all
its aspects, including by ensuring the rule of law, improving the efficiency and accountability of
the public sector, and tackling corruption, as essential elements of a framework within which
economies can prosper."[11] The IMF feels that corruption within economies is caused by the
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ineffective governance of the economy, either too much regulation or too little regulation.[11] To
receive loans from the IMF, countries must have certain good governance policies, as determined
by the IMF, in place.
UN
The United Nations is playing an increasing role in Good Governance. According to former UN
Secretary-General Kofi Annan, “Good governance is ensuring respect for human rights and the
rule of law; strengthening democracy; promoting transparency and capacity in public
administration”. To implement this, the UN goes follows 8 characteristics
World Bank
The World Bank is more concerned with the reform of economic and social resource control.[13]
In 1992, it underlined three aspects of society which they feel affect the nature of a country's
governance: type of political regime;
1. process by which authority is exercised in the management of the economic and social
resources, with a view to development; and
2. capacity of governments to formulate policies and have them effectively implemented.
The Worldwide Governance Indicators is a program funded by the World Bank to measure the
quality of governance of over 200 countries. It uses six dimensions of governance for their
measurements, Voice & Accountability, Political Stability and Lack of Violence, Government
Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption. They have been
studying countries since 1996.[14]
Effects
Good governance defines an ideal which is difficult to achieve in full, though it is something
development supporters consider donating to causes.[15] Major donors and international financial
institutions, like the International Monetary Fund (IMF) or World Bank, are basing their aid and
loans on the condition that the recipient undertake reforms ensuring good governance .[1] This is
mostly due to the close link between poor governance and corruption.[11]
Democratization
Because concepts such as civil society, decentralisation, peaceful conflict management and
accountability are often used when defining the concept of good governance, the definition of
good governance promotes many ideas that closely align with effective democratic
governance.[9] Not surprisingly, emphasis on good governance can sometimes be equated with
promoting democratic government. However, a 2011 literature review analyzing the link
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between democracy and development by Alina Rocha Menocal of the Overseas Development
Institute stresses the inconclusiveness of evidence on this relationship.[16]
Example
A good example of this close association, for some actors, between western democratic
governance and the concept of good governance is the following statement made by U.S.
Secretary of State Hillary Clinton in Nigeria on August 12, 2009: Again, to refer to President
Obama’s speech, what Africa needs is not more strong men, it needs more strong democratic
institutions that will stand the test of time. (Applause.) Without good governance, no amount of
oil or no amount of aid, no amount of effort can guarantee Nigeria’s success. But with good
governance, nothing can stop Nigeria. It’s the same message that I have carried in all of my
meetings, including my meeting this afternoon with your president. The United States supports
the seven-point agenda for reform that was outlined by President Yar'Adua. We believe that
delivering on roads and on electricity and on education and all the other points of that agenda
will demonstrate the kind of concrete progress that the people of Nigeria are waiting for.
Role of political parties
Researchers at the Overseas Development Institute have criticised past studies of good
governance to place too little importance on developing political parties, their capacity and their
ties to their grassroots supporters.[18] While political parties play a key role in well-functioning
democracies, elsewhere political parties are disconnected from voters and dominated by elites,
with few incentives or capabilities to increase the representation of other voters. [18] Political
parties can play a key role in pivotal moments of a state's development, either negatively (e.g.
organising and instigating violence) or positively (e.g. by leading dialogue in a fractured
society). While differences in the electoral system play their role in defining the number of
parties and their influence once in power (proportional, first past the post, etc.), the funding and
expertise available to parties also plays an important role not only in their existence, but their
ability to connect to a broad base of support.[18] While the United Nations Development Program
and the European Commission have been providing funding to political parties since the 1990s,
there are still calls to increase the support for capacity development activities including the
development of party manifestos, party constitutions and campaigning skills.
Capitalism
Capitalism is an economic system based on private ownership of the means of production and
their operation for profit. Characteristics central to capitalism include private property, capital
accumulation, wage labor, voluntary exchange, a price system, and competitive markets. In a
capitalist market economy, decision-making and investment is determined by the owners of the
factors of production in financial and capital markets, and prices and the distribution of goods are
mainly determined by competition in the market. Economists, political economists, and
historians have adopted different perspectives in their analyses of capitalism and have recognized
various forms of it in practice. These include laissez-faire or free market capitalism, welfare
capitalism, and state capitalism. Different forms of capitalism feature varying degrees of free
markets, public ownership,[8] obstacles to free competition, and state-sanctioned social policies.
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The degree of competition in markets, the role of intervention and regulation, and the scope of
state ownership vary across different models of capitalism;[9] the extent to which different
markets are free, as well as the rules defining private property, are matters of politics and of
policy. Most existing capitalist economies are mixed economies, which combine elements of free
markets with state intervention, and in some cases, with economic planning. Capitalism has
existed under many forms of government, in many different times, places, and cultures.
Following the decline of mercantilism, mixed capitalist systems became dominant in the Western
world and continue to spread.
Modern Capitalism
The gold standard formed the financial basis of the international economy from 1870–
1914.Capitalism was carried across the world by broader processes of globalization and, by the
end of the 18th century, became the dominant global economic system, in turn intensifying
processes of economic and other globalization. Later, in the 20th century, capitalism overcame a
challenge by centrally-planned economies and is now the encompassing system worldwide, with
the mixed economy being its dominant form in the industrialized Western world.Industrialization
allowed cheap production of household items using economies of scale, while rapid population
growth created sustained demand for commodities. Globalization in this period was decisively
shaped by 18th-century imperialism.After the First and Second Opium Wars and the completion
of British conquest of India, vast populations of these regions became ready consumers of
European exports. Also in this period, areas of sub-Saharan Africa and the Pacific islands were
incorporated into the world system. Meanwhile, the conquest of new parts of the globe, notably
sub-Saharan Africa, by Europeans yielded valuable natural resources such as rubber, diamonds
and coal and helped fuel trade and investment between the European imperial powers, their
colonies, and the United States.The inhabitant of London could order by telephone, sipping his
morning tea, the various products of the whole earth, and reasonably expect their early delivery
upon his doorstep. Militarism and imperialism of racial and cultural rivalries were little more
than the amusements of his daily newspaper. What an extraordinary episode in the economic
progress of man was that age which came to an end in August 1914.In this period, the global
financial system was mainly tied to the gold standard. The United Kingdom first formally
adopted this standard in 1821. Soon to follow were Canada in 1853, Newfoundland in 1865, the
United States and Germany (de jure) in 1873. New technologies, such as the telegraph, the
transatlantic cable, the radiotelephone, the steamship and railway allowed goods and information
to move around the world at an unprecedented degree.
In the period following the global depression of the 1930s, the state played an increasingly
prominent role in the capitalistic system throughout much of the world. The postwar boom ended
in the late 1960s and early 1970s, and the situation was worsened by the rise of stagflation.[59]
Monetarism, a modification of Keynesianism that is more compatible with laissez-faire, gained
increasing prominence in the capitalist world, especially under the leadership of Ronald Reagan
in the US and Margaret Thatcher in the UK in the 1980s. Public and political interest began
shifting away from the so-called collectivist concerns of Keynes's managed capitalism to a focus
on individual choice, called "remarketized capitalism".
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Relationship to democracy
Many analysts assert that China is one of the main examples of state capitalism in the 21st
century.The relationship between democracy and capitalism is a contentious area in theory and in
popular political movements. The extension of universal adult male suffrage in 19th century
Britain occurred along with the development of industrial capitalism, and democracy became
widespread at the same time as capitalism, leading capitalists to posit a causal or mutual
relationship between them.[61] However, in the 20th century, according to some authors,
capitalism also accompanied a variety of political formations quite distinct from liberal
democracies, including fascist regimes, absolute monarchies, and single-party states.[42]
Democratic peace theory asserts that democracies seldom fight other democracies, but critics of
that theory suggest that this may be because of political similarity or stability rather than because
they are democratic or capitalist.Moderate critics argue that though economic growth under
capitalism has led to democracy in the past, it may not do so in the future, as authoritarian
regimes have been able to manage economic growth without making concessions to greater
political freedom.States with capitalistic economic systems have thrived under authoritarian or
oppressive political regimes. Singapore has an open market economy and attracts a great deal of
foreign investment, but does not protect civil liberties such as freedom of speech and expression.
The private (capitalist) sector in the People's Republic of China has grown exponentially and
thrived since its inception, despite having an authoritarian government. Augusto Pinochet's rule
in Chile led to economic growth and high levels of inequality[64] by using authoritarian means to
create a safe environment for investment and capitalism. In Capital in the Twenty-First Century,
Thomas Piketty of the Paris School of Economics asserts that inequality is the inevitable
consequence of economic growth in a capitalist economy and the resulting concentration of
wealth can destabilize democratic societies and undermine the ideals of social justice upon which
they are built.[65] Marxists, anarchists (except for anarcho-capitalists), and other leftists argue that
capitalism is incompatible with democracy since capitalism according to Marx entails
"dictatorship of the bourgeoisie" (owners of the means of production) while democracy entails
rule by the people.
Characteristics
Capitalism is "production for exchange" driven by the desire for personal accumulation of money
receipts in such exchanges, mediated by free markets. The markets themselves are driven by the
needs and wants of consumers and those of society as a whole. If these wants and needs were (in
the socialist or communist society envisioned by Marx, Engels and others) the driving force, it
would be "production for use". Contemporary mainstream economics, particularly that
associated with the right, holds that an "invisible hand",[66] through little more than the freedom
of the market, is able to match social production to these needs and desires.[67]
Summary
In general, capitalism as an economic system and mode of production can be summarised by the
following: Capital accumulation:[69] Production for profit and accumulation as the implicit
purpose of all or most of production, constriction or elimination of production formerly carried
out on a common social or private household basis.[67]
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• Commodity production: Production for exchange on a market; to maximise exchange-
value instead of use-value.
• Private ownership of the means of production:[9]
• High levels of wage labour.[70]
• The investment of money to make a profit.[71]
• The use of the price mechanism to allocate resources between competing uses.[9]
Composition of the relative surplus population
Marx discusses the army of labor and the reserve army in Capital, Ch. 25, Section IV. The Army
of Labor consists in those working-class people employed in average or better than average jobs.
Not every one in the working class gets one of these jobs. There are then four other categories
where members of the working class might find themselves: the "stagnant pool", the floating
reserves, the latent reserve, and pauperdom. Finally, people may leave the army and the reserve
army by turning to criminality, and Marx refers to such people as "lumpenproletariat." The
stagnant part consists of marginalised people with "extremely irregular employment". Stagnant
pool jobs are characterized by below average pay, dangerous working conditions, they may be
temporary. Those caught in the stagnant pool have jobs, so the modern definition of the
employed would include both the army of labor plus the stagnant pool. However, they are
constantly on the lookout for something better. The modern unemployed would refer primarily to
the floating reserve, people who used to have good jobs, but are now out of work. They certainly
hope that their unemployment is temporary ("conjunctural unemployment"), but they are well
aware that they could fall into the stagnant pool or the pauper class.
• The latent part consists of that segment of the population not yet fully integrated into
capitalist production. In Marx' day, he was referring to people living off of subsistence
agriculture who were looking for monetary employment in industry. In modern times,
people coming from slums in developing countries where they survive largely by non-
monetary means, to developed cities where they work for pay might form the latent.
Housewives who move from unpaid to paid employment for a business could also form a
part of the latent reserve. They are not unemployed, because they are not necessarily
actively looking for a job; but if capital needs extra workers, it can pull them out of the
latent reserve. In this sense, the latent forms a reservoir of potential workers for
industries.
• Pauperdom is where one might end up. The homeless is the modern term for paupers.
Marx calls them people who cannot adapt to capital's never ending change. For Karl
Marx, "the sphere of pauperism", including those still able to work, orphans and pauper
children, and the "demoralised and ragged" or "unable to work".
As a mode of production
In Karl Marx' critique of political economy and subsequent Marxian analyses, the capitalist
mode of production refers to the systems of organising production and distribution within
capitalist societies. Private money-making in various forms (renting, banking, merchant trade,
production for profit, etc.) preceded the development of the capitalist mode of production as
such. The capitalist mode of production proper, based on wage-labour and private ownership of
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the means of production, and on industrial technology, began to grow rapidly in Western Europe
from the industrial revolution, later extending to most of the world.The term capitalist mode of
production is defined by private ownership of the means of production, extraction of surplus
value by the owning class for the purpose of capital accumulation, wage-based labour, and, at
least as far as commodities are concerned, being market-based. “Capitalism” in the form of
money-making activity has existed in the shape of merchants and money-lenders who acted as
intermediaries between consumers and producers engaging in simple commodity production
(hence the reference to “merchant capitalism”) since the beginnings of civilisation. What is
specific about the “capitalist mode of production” is that most of the inputs and outputs of
production are supplied through the market (i.e. they are commodities) and essentially all
production is in this mode.[9] For example, in flourishing Feudalism, most or all of the factors of
production including labour are owned by the feudal ruling class outright and the products may
also be consumed without a market of any kind, it is production for use within the feudal social
unit and for limited trade.[69] This has the important consequence that the whole organisation of
the production process is reshaped and re-organised to conform with economic rationality as
bounded by capitalism, which is expressed in price relationships between inputs and outputs
(wages, non-labour factor costs, sales, profits) rather than the larger rational context faced by
society overall. That is, the whole process is organised and re-shaped in order to conform to
“commercial logic”. Essentially, capital accumulation comes to define economic rationality in
capitalist production. A society, region or nation is “capitalist” if the predominant source of
incomes and products being distributed is capitalist activity; even so, this does not yet mean
necessarily that the capitalist mode of production is dominant in that society.
Wage labour
An industrial worker amidst heavy steel semi-products (KINEX BEARINGS, Bytča, Slovakia, c.
1995–2000)
Wage labour refers to the sale of labour under a formal or informal employment contract to an
employer.[94] These transactions usually occur in a labour market where wages are market
determined.[95] Individuals who possess and supply financial capital or labor to productive
ventures often become owners, either jointly (as shareholders) or individually. In Marxian
economics these owners of the means of production and suppliers of capital are generally called
capitalists. The description of the role of the capitalist has shifted, first referring to a useless
intermediary between producers to an employer of producers, and eventually came to refer to
owners of the means of production.[96] Labor includes all physical and mental human resources,
including entrepreneurial capacity and management skills, which are needed to produce products
and services. Production is the act of making goods or services by applying labor power. Critics
of the capitalist mode of production see wage labour as a major, if not defining, aspect of
hierarchical industrial systems. Most opponents of the institution support worker self-
management and economic democracy as alternatives to both wage labour and to capitalism.
While most opponents of wage labour blame the capitalist owners of the means of production for
its existence, most anarchists and other libertarian socialists also hold the state as equally
responsible as it exists as a tool utilised by capitalists to subsidise themselves and protect the
institution of private ownership of the means of production. As some opponents of wage labour
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take influence from Marxist propositions, many are opposed to private property, but maintain
respect for personal property.
Types
The most common form of wage labour currently is ordinary direct, or "full-time", employment
in which a free worker sells his or her labour for an indeterminate time (from a few years to the
entire career of the worker), in return for a money-wage or salary and a continuing relationship
with the employer which it does not in general offer contractors or other irregular staff.
However, wage labour takes many other forms, and explicit as opposed to implicit (i.e.
conditioned by local labour and tax law) contracts are not uncommon. Economic history shows a
great variety of ways in which labour is traded and exchanged. The differences show up in the
form of:
• Employment status: a worker could be employed full-time, part-time, or on a casual basis.

He or she could be employed for example temporarily for a specific project only, or on a
permanent basis. Part-time wage labour could combine with part-time self-employment.
The worker could be employed also as an apprentice.
• Civil (legal) status: the worker could for example be a free citizen, an indentured
labourer, the subject of forced labour (including some prison or army labour); a worker
could be assigned by the political authorities to a task, they could be a semi-slave or a
serf bound to the land who is hired out part of the time. So the labour might be performed
on a more or less voluntary basis, or on a more or less involuntary basis, in which there
are many gradations.
• Method of payment (remuneration or compensation). The work done could be paid "in
cash" (a money-wage) or "in kind" (through receiving goods and/or services), or in the
form of "piece rates" where the wage is directly dependent on how much the worker
produces. In some cases, the worker might be paid in the form of credit used to buy
goods and services, or in the form of stock options or shares in an enterprise.
• Method of hiring: the worker might engage in a labour-contract on his or her own
initiative, or he or she might hire out their labour as part of a group. But he or she may
also hire out their labour via an intermediary (such as an employment agency) to a third
party. In this case, he or she is paid by the intermediary, but works for a third party which
pays the intermediary. In some cases, labour is subcontracted several times, with several
intermediaries. Another possibility is that the worker is assigned or posted to a job by a
political authority, or that an agency hires out a worker to an enterprise together with
means of production.
Comparison to slavery
Pinkerton guards escort strikebreakers in Buchtel, Ohio, 1884.Wage labour has long been
compared to slavery. As a result, the phrase “wage slavery” is often utilised as a pejorative for
wage labour. Similarly, advocates of slavery looked upon the "comparative evils of Slave
Society and of Free Society, of slavery to human Masters and slavery to Capital", and proceeded
to argue that wage slavery was actually worse than chattel slavery. Slavery apologists like
George Fitzhugh contended that workers only accepted wage labour with the passage of time, as
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they became "familiarised and inattentive to the infected social atmosphere they continually
inhale". Scholars have debated the exact relationship between wage labor, slavery, and
capitalism at length, especially for the antebellum United States.
Similarities between wage labour and slavery were noted as early as Cicero in Ancient Rome.
With the advent of the industrial revolution, thinkers such as Proudhon and Marx elaborated the
comparison between wage labour and slavery in the context of a critique of societal property not
intended for active personal use, while Luddites emphasised the dehumanisation brought about
by machines. Before the American Civil War, Southern defenders of African American slavery
invoked the concept of wage slavery to favorably compare the condition of their slaves to
workers in the North. The United States abolished slavery during the Civil War, but labor union
activists found the metaphor useful. According to Lawrence Glickman, in the Gilded Age,
"References abounded in the labor press, and it is hard to find a speech by a labour leader
without the phrase."
According to Noam Chomsky, analysis of the psychological implications of wage slavery goes
back to the Enlightenment era. In his 1791 book On the Limits of State Action, classical liberal
thinker Wilhelm von Humboldt explained how "whatever does not spring from a man's free
choice, or is only the result of instruction and guidance, does not enter into his very nature; he
does not perform it with truly human energies, but merely with mechanical exactness" and so
when the labourer works under external control, "we may admire what he does, but we despise
what he is". Both the Milgram and Stanford experiments have been found useful in the
psychological study of wage-based workplace relations. Additionally, as per anthropologist
David Graeber, the earliest wage labour contracts we know about were in fact contracts for the
rental of chattel slaves (usually the owner would receive a share of the money, and the slave,
another, with which to maintain his or her living expenses.) Such arrangements, according to
Graeber, were quite common in New World slavery as well, whether in the United States or
Brazil. C. L. R. James argued in The Black Jacobins that most of the techniques of human
organisation employed on factory workers during the industrial revolution were first developed
on slave plantations.
Girl pulling a coal tub in mine. From official report of the British parliamentary commission in
the mid 19th century.Some anti-capitalist thinkers claim that the elite maintain wage slavery and
a divided working class through their influence over the media and entertainment industry,
educational institutions, unjust laws, nationalist and corporate propaganda, pressures and
incentives to internalise values serviceable to the power structure, state violence, fear of
unemployment[121] and a historical legacy of exploitation and profit accumulation/transfer under
prior systems, which shaped the development of economic theory:
Adam Smith noted that employers often conspire together to keep wages low: The interest of the
dealers... in any particular branch of trade or manufactures, is always in some respects different
from, and even opposite to, that of the public… [They] have generally an interest to deceive and
even to oppress the public… We rarely hear, it has been said, of the combinations of masters,
though frequently of those of workmen. But whoever imagines, upon this account, that masters
rarely combine, is as ignorant of the world as of the subject. Masters are always and everywhere
in a sort of tacit, but constant and uniform combination, not to raise the wages of labor above
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their actual rate… It is not, however, difficult to foresee which of the two parties must, upon all
ordinary occasions, have the advantage in the dispute, and force the other into a compliance with
their terms.Aristotle made the statement "...the citizens must not live a mechanic or a mercantile
life (for such a life is ignoble and inimical to virtue), nor yet must those who are to be citizens in
the best state be tillers of the soil (for leisure is needed both for the development of virtue and for
active participation in politics)", often paraphrased as "all paid jobs absorb and degrade the
mind." Cicero wrote in 44 BC that "…vulgar are the means of livelihood of all hired workmen
whom we pay for mere manual labour, not for artistic skill; for in their case the very wage they
receive is a pledge of their slavery". Somewhat similar criticisms have also been expressed by
some proponents of liberalism, like Henry George, Silvio Gesell and Thomas Paine as well as
the Distributist school of thought within the Roman Catholic Church.To Marxist and anarchist
thinkers like Bakunin and Kropotkin, wage slavery was a class condition in place due to the
existence of private property and the state. This class situation rested primarily on:
1. the existence of property not intended for active use,

2. the concentration of ownership in few hands,
3. the lack of direct access by workers to the means of production and consumption goods
4. the perpetuation of a reserve army of unemployed workers.
For Marxists, labour-as-commodity, which is how they regard wage labour, provides a
fundamental point of attack against capitalism.[130] "It can be persuasively argued", noted one
concerned philosopher, "that the conception of the worker's labour as a commodity confirms
Marx's stigmatization of the wage system of private capitalism as 'wage-slavery;' that is, as an
instrument of the capitalist's for reducing the worker's condition to that of a slave, if not below
it."[131] That this objection is fundamental follows immediately from Marx' conclusion that wage
labour is the very foundation of capitalism: "Without a class dependent on wages, the moment
individuals confront each other as free persons, there can be no production of surplus value;
without the production of surplus-value there can be no capitalist production, and hence no
capital and no capitalist!"
Systemic weaknesses
Market failure occurs when an externality is present and a market will often either under-produce
a product with a positive externalisation or overproduce a product that generates a negative
externalisation. Air pollution, for instance, is a negative externalisation that cannot be easily
incorporated into markets as the world's air is not owned and then sold for use to polluters. So,
too much pollution could be emitted and people not involved in the production pay the cost of
the pollution instead of the firm that initially emitted the air pollution. Critics of market failure
theory, like Ronald Coase, Harold Demsetz, and James M. Buchanan argue that government
programs and policies also fall short of absolute perfection. Market failures are often small, and
government failures are sometimes large. It is therefore the case that imperfect markets are often
better than imperfect governmental alternatives. While all nations currently have some kind of
market regulations, the desirable degree of regulation is disputed.
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CHAPTER -16- ANTI COMPETITIVE PRACTICES
Anti-competitive practices
The doctrine of free competition is essential to the functioning of a capitalist economy, and as
such, anti-competitive behaviour in the market poses a crucial weakness in capitalist economics.
Issues such as monopolistic behaviour on the part of corporations, and aspects of intellectual
property laws pose problems to capitalist economies. A prime example in the United States was
Standard Oil.
Capital accumulation
The accumulation of capital refers to the process of "making money", or growing an initial sum
of money through investment in production. Capitalism is based around the accumulation of
capital, whereby financial capital is invested in order to make a profit and then reinvested into
further production in a continuous process of accumulation. In Marxian economic theory, this
dynamic is called the law of value. Capital accumulation forms the basis of capitalism, where
economic activity is structured around the accumulation of capital, defined as investment in
order to realize a financial profit.[133] In this context, "capital" is defined as money or a financial
asset invested for the purpose of making more money (whether in the form of profit, rent,
interest, royalties, capital gain or some other kind of return). In economics, accounting and
Marxian economics, capital accumulation is often equated with investment of profit income or
savings, especially in real capital goods. The concentration and centralisation of capital are two
of the results of such accumulation. In modern macroeconomics and econometrics the phrase
capital formation is often used in preference to "accumulation", though the United Nations
Conference on Trade and Development (UNCTAD) refers nowadays to "accumulation".
Accumulation can be measured as the monetary value of investments, the amount of income that
is reinvested, or as the change in the value of assets owned (the increase in the value of the
capital stock). Using company balance sheets, tax data and direct surveys as a basis, government
statisticians estimate total investments and assets for the purpose of national accounts, national
balance of payments and flow of funds statistics. Usually the Reserve Banks and the Treasury
provide interpretations and analysis of this data. Standard indicators include Capital formation,
Gross fixed capital formation, fixed capital, household asset wealth, and foreign direct
investment.
Organisations such as the International Monetary Fund, the UNCTAD, the World Bank Group,
the OECD, and the Bank for International Settlements used national investment data to estimate
world trends. The Bureau of Economic Analysis, Eurostat and the Japan Statistical Office
provide data on the USA, Europe and Japan respectively. Other useful sources of investment
information are business magazines such as Fortune, Forbes, The Economist, Business Week,
etc., and various corporate "watchdog" organisations and non-governmental organisation
publications. A reputable scientific journal is the Review of Income & Wealth. In the case of the
USA, the "Analytical Perspectives" document (an annex to the yearly budget) provides useful
wealth and capital estimates applying to the whole country.
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In Karl Marx' economic theory, capital accumulation refers to the operation whereby profits are
reinvested increasing the total quantity of capital. Capital is viewed by Marx as expanding value,
that is, in other terms, as a sum of capital, usually expressed in money, that is transformed
through human labor into a larger value, extracted as profits and expressed as money. Here,
capital is defined essentially as economic or commercial asset value in search of additional value
or surplus-value. This requires property relations which enable objects of value to be
appropriated and owned, and trading rights to be established. Capital accumulation has a double
origin, namely in trade and in expropriation, both of a legal or illegal kind. The reason is that a
stock of capital can be increased through a process of exchange or "trading up" but also through
directly taking an asset or resource from someone else, without compensation. David Harvey
calls this accumulation by dispossession.
The continuation and progress of capital accumulation depends on the removal of obstacles to
the expansion of trade, and this has historically often been a violent process. As markets expand,
more and more new opportunities develop for accumulating capital, because more and more
types of goods and services can be traded in. But capital accumulation may also confront
resistance, when people refuse to sell, or refuse to buy (for example a strike by investors or
workers, or consumer resistance).
Concentration and centralisation
According to Marx, capital has the tendency for concentration and centralisation in the hands of
the wealthy. Marx explains:
"It is concentration of capitals already formed, destruction of their individual independence,

expropriation of capitalist by capitalist, transformation of many small into few large capitals....
Capital grows in one place to a huge mass in a single hand, because it has in another place been
lost by many.... The battle of competition is fought by cheapening of commodities. The
cheapness of commodities demands, caeteris paribus, on the productiveness of labour, and this
again on the scale of production. Therefore, the larger capitals beat the smaller. It will further be
remembered that, with the development of the capitalist mode of production, there is an increase
in the minimum amount of individual capital necessary to carry on a business under its normal
conditions. The smaller capitals, therefore, crowd into spheres of production which Modern
Industry has only sporadically or incompletely got hold of. Here competition rages.... It always
ends in the ruin of many small capitalists, whose capitals partly pass into the hands of their
conquerors, partly vanish."
The rate of accumulation
In Marxian economics, the rate of accumulation is defined as (1) the value of the real net
increase in the stock of capital in an accounting period, (2) the proportion of realised surplus-
value or profit-income which is reinvested, rather than consumed. This rate can be expressed by
means of various ratios between the original capital outlay, the realised turnover, surplus-value
or profit and reinvestments (see, e.g., the writings of the economist Michał Kalecki).
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Other things being equal, the greater the amount of profit-income that is disbursed as personal
earnings and used for consumptive purposes, the lower the savings rate and the lower the rate of
accumulation is likely to be. However, earnings spent on consumption can also stimulate market
demand and higher investment. This is the cause of endless controversies in economic theory
about "how much to spend, and how much to save". In a boom period of capitalism, the growth
of investments is cumulative, i.e. one investment leads to another, leading to a constantly
expanding market, an expanding labor force, and an increase in the standard of living for the
majority of the people. In a stagnating, decadent capitalism, the accumulation process is
increasingly oriented towards investment on military and security forces, real estate, financial
speculation, and luxury consumption. In that case, income from value-adding production will
decline in favour of interest, rent and tax income, with as a corollary an increase in the level of
permanent unemployment. The more capital one owns, the more capital one can also borrow.
The inverse is also true, and this is one factor in the widening gap between the rich and the poor.
Ernest Mandel emphasised that the rhythm of capital accumulation and growth depended
critically on (1) the division of a society's social product between "necessary product" and
"surplus product", and (2) the division of the surplus product between investment and
consumption. In turn, this allocation pattern reflected the outcome of competition among
capitalists, competition between capitalists and workers, and competition between workers. The
pattern of capital accumulation can therefore never be simply explained by commercial factors, it
also involved social factors and power relationships. Strictly speaking, capital has accumulated
only when realised profit income has been reinvested in capital assets. But the process of capital
accumulation in production has, as suggested in the first volume of Marx' Das Kapital, at least 7
distinct but linked moments:
• The initial investment of capital (which could be borrowed capital) in means of

production and labor power.
• The command over surplus-labour and its appropriation.
• The valorisation (increase in value) of capital through production of new outputs.
• The appropriation of the new output produced by employees, containing the added value.
• The realisation of surplus-value through output sales.
• The appropriation of realised surplus-value as (profit) income after deduction of costs.
• The reinvestment of profit income in production.
All of these moments do not refer simply to an "economic" or commercial process. Rather, they
assume the existence of legal, social, cultural and economic power conditions, without which
creation, distribution and circulation of the new wealth could not occur. This becomes especially
clear when the attempt is made to create a market where none exists, or where people refuse to
trade.
In volume 2 of Das Kapital, Marx continues the story and shows that, with the aid of bank credit,
capital in search of growth can more or less smoothly mutate from one form to another,
alternately taking the form of money capital (liquid deposits, securities, etc.), commodity capital
(tradable products, real estate etc.), or production capital (means of production and labor power).
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His discussion of the simple and expanded reproduction of the conditions of production offers a
more sophisticated model of the parameters of the accumulation process as a whole. At simple
reproduction, a sufficient amount is produced to sustain society at the given living standard; the
stock of capital stays constant. At expanded reproduction, more product-value is produced than
is necessary to sustain society at a given living standard (a surplus product); the additional
product-value is available for investments which enlarge the scale and variety of production.
Balanced economic growth requires that different factors in the accumulation process expand in
appropriate proportions. But markets themselves cannot spontaneously create that balance, in
fact what drives business activity is precisely the imbalances between supply and demand:
inequality is the motor of growth. This partly explains why the worldwide pattern of economic
growth is very uneven and unequal, even although markets have existed almost everywhere for a
very long-time. Some people argue that it also explains government regulation of market trade
and protectionism.
Advanced capitalism
Advanced capitalism is the situation that pertains to a society in which the capitalist model has
been integrated and developed deeply and extensively for a prolonged period. Various writers
identify Antonio Gramsci as an influential early theorist of advanced capitalism, even if he did
not use the term himself. In his writings Gramsci sought to explain how capitalism had adapted
to avoid the revolutionary overthrow that had seemed inevitable in the 19th century. At the heart
of his explanation was the decline of raw coercion as a tool of class power, replaced by use of
civil society institutions to manipulate public ideology in the capitalists' favour. Jürgen
Habermas has been a major contributor to the analysis of advanced-capitalistic societies.
Habermas observed four general features that characterise advanced capitalism:
• Concentration of industrial activity in a few large firms

• Constant reliance on the state to stabilise the economic system
• A formally democratic government that legitimises the activities of the state and
dissipates opposition to the system
• The use of nominal wage increases to pacify the most restless segments of the work
force.
Finance capitalism
In their critique of capitalism, Marxism and Leninism both emphasise the role of "Finance
Capital" as the determining and ruling class interest in capitalist society, particularly in the latter
stages. Rudolf Hilferding is credited with first bringing the term finance capitalism into
prominence, with his 1910 study of the links between German trusts, banks, and monopolies
before World War I – a study subsumed by Lenin into his wartime analysis of the imperialist
relations of the great world powers. Lenin concluded of the banks at that time that they were “the
chief nerve centres of the whole capitalist system of national economy”: for the Comintern, the
phrase "dictatorship of finance capitalism" became a regular one.Braudel would later point to
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two earlier periods when finance capitalism had emerged in human history – with the Genoese in
the 16th century and the Dutch in the 17th and 18th centuries – although at those points it was
from commercial capitalism that it developed. Giovanni Arrighi extended Braudel's analysis to
suggest that a predominance of finance capitalism is a recurring, long-term phenomenon,
whenever a previous phase of commercial/industrial capitalist expansion reaches a plateau.
Mercantilism
Mercantilism is a nationalist form of early capitalism that came into existence approximately in
the late 16th century. It is characterized by the intertwining of national business interests to state-
interest and imperialism, and consequently, the state apparatus is utilized to advance national
business interests abroad. An example of this is colonists living in America who were only
allowed to trade with and purchase goods from their respective mother countries (e. g. Britain,
Portugal, France). Mercantilism was driven by the belief that the wealth of a nation is increased
through a positive balance of trade with other nations; it corresponds to the phase of capitalist
development sometimes called the Primitive accumulation of capital.
Free-market economy
Free-market economy refers to a capitalist economic system where prices for goods and services
are set freely by the forces of supply and demand and are allowed to reach their point of
equilibrium without intervention by government policy. It typically entails support for highly
competitive markets and private ownership of productive enterprises. Laissez-faire is a more
extensive form of free-market economy where the role of the state is limited to protecting
property rights.
Social-market economy
A social-market economy is a nominally free-market system where government intervention in

price formation is kept to a minimum but the state provides significant services in the area of
social security, unemployment benefits and recognition of labor rights through national
collective bargaining arrangements. This model is prominent in Western and Northern European
countries, and Japan, albeit in slightly different configurations. The vast majority of enterprises
are privately owned in this economic model.Rhine capitalism refers to the contemporary model
of capitalism and adaptation of the social market model that exists in continental Western Europe
today.
State capitalism
State capitalism is a capitalist market economy dominated by state-owned enterprises, where the
state enterprises are organized as commercial, profit-seeking businesses. The designation has
been used broadly throughout the 20th century to designate a number of different economic
forms, ranging from state-ownership in market economies to the command economies of the
former Eastern Bloc. According to Aldo Musacchio, a professor at Harvard Business School,
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state capitalism is a system in which governments, whether democratic or autocratic, exercise a
widespread influence on the economy either through direct ownership or various subsidies.
Musacchio notes a number of differences between today's state capitalism and its predecessors.
In his opinion, gone are the days when governments appointed bureaucrats to run companies: the
world's largest state-owned enterprises are now traded on the public markets and kept in good
health by large institutional investors. Contemporary state capitalism is associated with the East
Asian model of capitalism, dirigisme and the economy of Norway.[162] Alternatively, Merriam-
Webster defines state capitalism as "an economic system in which private capitalism is modified
by a varying degree of government ownership and control".Friedrich Engels, in Socialism:
Utopian and Scientific, argued that state-owned enterprises would characterize the final stage of
capitalism, consisting of ownership and management of large-scale production and
communication by the bourgeois state. In his writings, Vladimir Lenin characterized the
economy of Soviet Russia as state capitalist, believing state capitalism to be an early step toward
the development of socialism. Some economists and left-wing academics including Richard D.
Wolff and Noam Chomsky argue that the economies of the former Soviet Union and Eastern
bloc represented a form of state capitalism because their internal organization within enterprises
and the system of wage labor remained intact. The term is not used by Austrian school
economists to describe state ownership of the means of production. The economist Ludwig von
Mises argued that the designation of "state capitalism" was simply a new label for the old labels
of "state socialism" and "planned economy", and differed only in non-essentials from these
earlier designations. The debate between proponents of private versus state capitalism is centered
around questions of managerial efficacy, productive efficiency, and fair distribution of wealth.
Corporate capitalism
Corporate capitalism is a free or mixed-market economy characterized by the dominance of

hierarchical, bureaucratic corporations.
Mixed economy
A mixed economy is a largely market-based economy consisting of both private and public
ownership of the means of production and economic interventionism through macroeconomic
policies intended to correct market failures, reduce unemployment and keep inflation low. The
degree of intervention in markets varies among different countries. Some mixed economies, such
as France under dirigisme, also featured a degree of indirect economic planning over a largely
capitalist-based economy.Most modern capitalist economies are defined as "mixed economies"
to some degree.
Role of government
In a capitalist system, the government does not prohibit private property or prevent individuals
from working where they please. The government does not prevent firms from determining what
wages they will pay and what prices they will charge for their products. Many countries,
however, have minimum wage laws and minimum safety standards.Under some versions of
capitalism, the government carries out a number of economic functions, such as issuing money,
supervising public utilities and enforcing private contracts. Many countries have competition
274
laws that prohibit monopolies and cartels from forming. Despite anti-monopoly laws, large
corporations can form near-monopolies in some industries. Such firms can temporarily drop
prices and accept losses to prevent competition from entering the market, and then raise them
again once the threat of entry is reduced. In many countries, public utilities (e.g. electricity,
heating fuel, communications) are able to operate as a monopoly under government regulation,
due to high economies of scale. Government agencies regulate the standards of service in many
industries, such as airlines and broadcasting, as well as financing a wide range of programs. In
addition, the government regulates the flow of capital and uses financial tools such as the interest
rate to control factors such as inflation and unemployment.
Adverse characteristics of capitalist governments
Democratic socialists argue that the role of the state in a capitalist society is to defend the
interests of the bourgeoisie. These governments take actions to implement such things as unified
national markets, national currencies, and customs system. Capitalist governments have also
been criticised as oligarchic in nature due to the inevitable inequalitycharacteristic of economic
progress.
Environmental concerns
Threat of climate change and the depletion of resources has grown, so investors have to factor
sustainability issues into their investment choices. The issues often represent externalities, such
as influences on the functioning and revenues of the company that are not exclusively affected
by market mechanisms.] As with all areas of ESG the breadth of possible concerns is vast, but
some of the chief areas are listed below:
Climate change
The body of research providing evidence of global trends in climate change has led investors –
pension funds, holders of insurance reserves – to begin to screen investments in terms of their
impact on the perceived factors of climate change. Fossil fuel reliant industries are less attractive.
In the UK, investment policies were particularly affected by the conclusions of the Stern Review
in 2006, a report commissioned by the British government to provide an economic analysis of
the issues associated with climate change. Its conclusions pointed towards the necessity of
including considerations of climate change and environmental issues in all financial calculations
and that the benefits of early action on climate change would outweigh its costs.
Nuclear energy
Responsible Investing often chose to deselect firms associated with the construction of nuclear
power plants. The dual concerns of the speed of depletion of fossil fuels and CO2 emissions have
led to a re-examination of the relative evils of nuclear power.
Sustainability
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In every area of the debate from the depletion of resources to the future of industries dependent
upon diminishing raw materials the question of the obsolescence of a company’s product or
service is becoming central to the value ascribed to that company. The Long Term view is
becoming prevalent amongst investors.
Social concerns
Diversity
The level of inclusion in a company’s recruitment policies is becoming a key concern to

investors. There is a growing perception that the broader the pool of talent open to an employer
the greater the chance of finding the optimum person for the job. Innovation and agility are
seemed as the great benefits of diversity and there is an increasing awareness of what has come
to be known as ‘the power of difference’.
Human rights
In 2006 the US Courts of Appeals ruled that there was a case to answer bringing the area of a
company’s social responsibilities squarely into the financial arena. This area of concern is
widening to include such considerations as the impact on local communities, the health and
welfare of employees and a more thorough examination of a company’s supply chain.
Consumer protection
Until fairly recently, caveat emptor ("buyer beware") was the governing principle of commerce
and trading. In recent times however there has been an increased assumption that the consumer
has a right to a degree of protection and the vast growth in damages litigation has meant that
consumer protection is a central consideration for those seeking to limit a company’s risk and
those examining a company’s credentials with an eye to investing. The collapse of the US Sub-
Prime Mortgage market initiated a growing movement against predatory lending has also
become an important area of concern.
Animal welfare
From the testing of products on animals to the welfare of animals bred for the food market,
concern about the welfare of animals is a large consideration for those investors seeking a
thorough understanding of the company or industry being analyzed.
Corporate governance concerns
Corporate governance covers the area of investigation into the rights and responsibilities of the
management of a company – its board, shareholders and the various stakeholders in that
company.
Management structure
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The system of internal procedures and controls that makes up the management structure of a
company is in the valuation of that company’s equity.[16] Attention has been focused in recent
years on the balance of power between the CEO and the Board of Directors and specifically the
differences between the European model and the US model – in the States studies have found
that 80% of companies have a CEO who is also the Chairman of the Board, in the UK and the
European model it was found that 90% of the largest companies split the roles of CEO and
Chairman.
Employee relations
From diversity to the establishment of corporate behaviours and values, the role that improving
employee relations plays in assessing the value of a company is proving increasingly central. In
the United States Moskowitz’s list of the Fortune 100 Best Companies to Work For has become
not only an important tool for employees but companies are beginning to compete keenly for a
place on the list, as not only does it help to recruit the best workforce, it appears to have a
noticeable impact on company values.
Executive compensation
Companies are now being asked to list the percentage levels of bonus payments and the levels of
remuneration of the highest paid executives are coming under close scrutiny from stock holders
and equity investors alike.
Responsible investment
The three concepts of social, environmental and corporate governance are intimately linked to
the concept of Responsible Investment. RI began as a niche investment area, serving the needs of
those who wished to invest but wanted to do so within ethically defined parameters. In recent
years it has become a much larger proportion of the investment market.
Investment strategies
RI seeks to control the placing of its investments via several methods:
• Positive selection; where the investor actively selects the companies in which to invest;
this can be done either by following a defined set of ESG criteria or by the best-in-class
method where a subset of high performing ESG compliant companies is chosen for
inclusion in an investment portfolio.
• Activism; strategic voting by shareholders in support of a particular issue, or to bring
about change in the governance of the company.
• Engagement; investment funds monitoring the ESG performance of all portfolio
companies and leading constructive shareholder engagement dialogues with each
company to ensure progress.
• Consulting role; the larger institutional investors and shareholders tend to be able to
engage in what is known as ‘quiet diplomacy’, with regular meetings with top
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management in order to exchange information and act as early warning systems for risk
and strategic or governance issues.
• Exclusion; the removal of certain sectors or companies from consideration for
investment, based on ESG specific criteria.
• Integration; the inclusion of ESG risks and opportunities into traditional financial
analysis of equity value.
Institutional investors
One of the defining marks of the modern investment market is the divergence in the relationship
between the firm and its equity investors. Institutional investors have become the key owners of
stock - rising from 35% in 1981 to 58% in 2002 in the US and from 42% in 1963 to 84.7% in
2004 in the UK and institutions tend to work on a long term investment strategy. Insurance
companies, Mutual Funds and Pension Funds with long-term payout obligations are much more
interested in the long term sustainability of their investments than the individual investor looking
for short-term gain. Where a Pension Fund is subject to ERISA, there are legal limitations on the
extent to which investment decisions can be based on factors other than maximizing plan
participants' economic returns.
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CHAPTER 17- PRINCIPLES FOR RESPONSIBLE INVESTMENT
Principles for Responsible Investment
The Principles for Responsible Investment Initiative (PRI) was established in 2005 by the United
Nations Environment Programme Finance Initiative and the UN Global Compact as a framework
for improving the analysis of ESG issues in the investment process and to aid companies in the
exercise of responsible ownership practices.
Equator Principles
The Equator Principles is a risk management framework, adopted by financial institutions, for
determining, assessing and managing environmental and social risk in project finance. It is
primarily intended to provide a minimum standard for due diligence to support responsible risk
decision-making. As at 4 June 2013, 79 adopting financial institutions in 35 countries have
officially adopted the Equator Principles, covering over 70 percent of international Project
Finance debt in emerging markets. Equator Principles Financial Institutions (EPFIs) commit to
not provide loans to projects where the borrower will not or is unable to comply with their
respective social and environmental policies and procedures.The Equator Principles, formally
launched in Washington DC on 4 June 2003, were based on existing environmental and social
policy frameworks established by the International Finance Corporation. These standards have
subsequently been periodically updated into what is commonly known as the International
Finance Corporation Performance Standards on social and environmental sustainability and on
the World Bank Group Environmental, Health, and Safety Guidelines.
Disclosure and regulation
The first ten years of the new century has seen a vast growth in the ESG defined investment
market. Not only do most of the world’s big banks now have departments and divisions
exclusively addressing Responsible Investment but boutique firms specialising in advising and
consulting on environmental, social and governance related investments are proliferating. One of
the major aspects of the ESG side of the insurance market which leads to this tendency to
proliferation is the essentially subjective nature of the information on which investment selection
can be made. By definition ESG data is qualitative; it is non-financial and not readily
quantifiable in monetary terms. The investment market has long dealt with these intangibles –
such variables as Goodwill have been widely accepted as contributing to a company’s value. But
the ESG intangibles are not only highly subjective they are also particularly difficult to quantify
and more importantly verify.One of the major issues in the ESG area is disclosure. The
information on which an investor makes his decisions on a financial level is fairly simply
gathered. The company’s accounts can be examined, and although the accounting practices of
corporate business are coming increasingly into disrepute after a spate of recent financial
scandals, the figures are for the most part externally verifiable. With ESG considerations, the
practice has been for the company under examination to provide its own figures and disclosures.
These have seldom been externally verified and the lack of universal standards and regulation in
the areas of environmental and social practice mean that the measurement of such statistics is
subjective to say the least. As integrating ESG considerations into investment analysis and the
279
calculation of a company’s value become more prevalent it will become more crucial to provide
units of measurement for investment decisions on subjective issues such as degrees of harm to
workers, or how far down the supply chain of the production chain of a cluster bomb do you
go.One of the solutions put forward to the inherent subjectivity of ESG data is the provision of
universally accepted standards for the measurement of ESG factors. Such organisations as the
ISO (International Organisation for Standardisation) provide highly researched and widely
accepted standards for many of the areas covered. Some investment consultancies, such as
Probus-Sigma have created methodologies for calculating the ratings for an ESG based Ratings
Index that is both based on ISO standards and externally verified, but the formalisation of the
acceptance of such standards as the basis for calculating and verifying ESG disclosures is by no
means universal.The corporate governance side of the matter has received rather more in the way
of regulation and standardisation as there is a longer history of regulation in this area. In 1992 the
London Stock Exchange and the Financial Reporting Commission set up the Cadbury
Commission to investigate the series of governance failures that had plagued the City of London
such as the bankruptcies of BCCI, Polly Peck, and Robert Maxwell's Mirror Group. The
conclusions that the commission reached were compiled in 2003 into the Combined Code on
Corporate Governance which has been widely accepted (if patchily applied) by the financial
world as a benchmark for good governance practices. One of the key areas of concern in the
discussion as to the reliability of ESG disclosures is the establishment of credible ratings for
companies as to ESG performance. The world’s financial markets have all leapt to provide ESG
relevant ratings indexes, the Dow Jones Sustainability Index, the FTSE4Good Index (which is
co-owned by the London Stock Exchange and Financial Times) and the MSCI ESG Indices.
There is some movement in the insurance market to find a reliable index of ratings for ESG
issues, with some suggesting that the future lies in the construction of algorithms for calculating
ESG ratings based on ISO standards and third party verification.
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BUSINESS ETHICS TEXT BOOK PROF DR C KARTHIKEYAN PDF

Book · October 2019

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Who will benefit from this Book

Organization of the Book

I am indebted to so many persons that a complete acknowledgement would become

Finally, to my radhi and rajieth.

Chapter 1; UNDERSTANDING ETHICAL VALUES

Business ethics Overview

Functional business areas

Human resource management

Sales and marketing

Modern history of property rights

CHAPTER 2- POST MODERN ETHICS

Particular fields of application

Centralism and non-centralism

CHAPTER 3- BUSINESS ETHICS

Functional business areas

Modern history of property rights

Utopianism and pluralism

CHAPTER 4- VIRTUE ETHICS

Virtue ethics as a category

Virtue and politics

Applied virtue ethics

Divine command theory

3 Types of Unethical Behavior in a Business

CHAPTER 5- CODE OF CONDUCT AND CODE OF ETHICS

Code of ethics or a code of conduct? (corporate or business ethics)

Code of practice (professional ethics)

CHAPTER 6- ETHICAL PROBLEMS IN MANAGEMENT

Kant’s Categorical Imperative

What is Ethical Profitability?

10 Myths About Business Ethics

10 Benefits of Managing Ethics in the Workplace

Benefits of Managing Ethics as a Program

About Codes of Ethics

Developing Codes of Ethics

CHAPTER 7- METHODS TO RESOLVE ETHICAL DILEMMAS

Methods to Resolve Ethical Dilemmas

Six Essential Tasks

CHAPTER 8-Compliance and Ethics in Risk Management

The Relationship Between Ethics and Enterprise Management.

Roles within structures

Western legal culture vs non-Western legal culture

Common law comparisons

Provisions of the Indian Constitution

The Political spectrum

International Political System

Good Governance in International Affairs

Good Governance in Local Governments

Worldwide Governance Indicators

International humanitarian funding

Foreign Exchange Regulation Act

CHAPTER 10 -INTERNAL SOCIAL ENVIRONMENT

Diversity and Groupthink

Why undertake a PEST(ELI) Analysis

CHAPTER 11- BUSINESS CULTURAL ETHICS

Doing Business in India: 20 Cultural Norms You Need to Know

CHAPTER 12- ENVIRONMENTAL ETHICS