MBAVC101: INDIAN ETHOS AND BUSINESS ETHICS

UNIT 4

Business Ethics
Business ethics studies appropriate business policies and practices
regarding potentially controversial subjects, including corporate
governance, insider trading, bribery, discrimination,
corporate social responsibility, fiduciary responsibilities, and
much more. The law often guides business ethics, but at other
times business ethics provide a basic guideline that businesses can
follow to gain public approval
• Business ethics refers to implementing appropriate business
policies and practices with regard to arguably controversial
subjects.
• Some issues that come up in a discussion of ethics include
corporate governance, insider trading, bribery,
discrimination, social responsibility, and fiduciary
responsibilities.
• The law usually sets the tone for business ethics, providing a
basic guideline that businesses can choose to follow to gain
public approval.
CHARACTERISTIC OF BUSINESS ETHICS
Here are some of the key characteristics of business ethics:
• Integrity: Businesses should be honest and trustworthy in their
dealings with all stakeholders, including
customers, employees, investors, and the community.
• Fairness: Businesses should treat all stakeholders fairly and
justly. This means avoiding discrimination, providing equal
opportunities, and paying fair wages.
• Accountability: Businesses should be accountable for their
actions and decisions. This means taking responsibility for mistakes
and taking steps to prevent them from happening
• Transparency: Businesses should be transparent in their
operations and disclose information that is relevant to
stakeholders. This includes information about
finances, products, and environmental practices.
• Sustainability: Businesses should consider the long-term impact
of their decisions on the environment and society. This means
making choices that are not only profitable in the short term, but
also sustainable in the long term.
These are just some of the key characteristics of business ethics. It is important
to note that there is no one-size-fits-all approach to business ethics, and what is
considered ethical may vary depending on the specific situation. However, by
following these principles, businesses can make decisions that are not only good
for their bottom line, but also good for society as a whole.
Types of Business Ethics
There are several theories regarding business ethics, and many
different types can be found, but what makes a business stand
out are its corporate social responsibility practices, transparency
and trustworthiness, fairness, and technological practices.

Why Is Business Ethics Important?

There are several reasons business ethics are essential for success in
modern business. Most importantly, defined ethics programs establish a
code of conduct that drives employee behavior—from executives to
middle management to the newest and youngest employees. When all
employees make ethical decisions, the company establishes a reputation
for ethical behavior. Its reputation grows, and it begins to experience the
benefits a moral establishment reaps:
• Brand recognition and growth
• Increased ability to negotiate
• Increased trust in products and services
• Customer retention and growth
• Attracts talent
• Attracts investors
When combined, all these factors affect a business' revenues. Those that
fail set ethical standards and enforce them are doomed to eventually find
themselves alongside Enron, Arthur Andersen, Wells Fargo, Lehman
Brothers, Bernie Madoff, and many others.
Principles of Business Ethics
It's essential to understand the underlying principles that drive desired
ethical behavior and how a lack of these moral principles contributes to
the downfall of many otherwise intelligent, talented people and the
businesses they represent.
There are generally 12 business ethics principles:
• Leadership: The conscious effort to adopt, integrate, and emulate
the other 11 principles to guide decisions and behavior in all aspects
of professional and personal life.
• Accountability: Holding yourself and others responsible for their
actions. Commitment to following ethical practices and ensuring
others follow ethics guidelines.
• Integrity: Incorporates other principles—honesty, trustworthiness,
and reliability. Someone with integrity consistently does the right
thing and strives to hold themselves to a higher standard.
• Respect for others: To foster ethical behavior and environments in
the workplace, respecting others is a critical component. Everyone
deserves dignity, privacy, equality, opportunity, compassion, and
empathy.
• Honesty: Truth in all matters is key to fostering an ethical climate.
Partial truths, omissions, and under or overstating don't help a
business improve its performance. Bad news should be
communicated and received in the same manner as good news so
that solutions can be developed.
• Respect for laws: Ethical leadership should include enforcing all
local, state, and federal laws. If there is a legal grey area, leaders
should err on the side of legality rather than exploiting a gap.
• Responsibility: Promote ownership within an organization, allow
employees to be responsible for their work, and be accountable for
yours.
• Transparency: Stakeholders are people with an interest in a
business, such as shareholders, employees, the community a firm
operates in, and the family members of the employees. Without
divulging trade secrets, companies should ensure information about
their financials, price changes, hiring and firing practices, wages and
salaries, and promotions are available to those interested in the
business's success.
• Compassion: Employees, the community surrounding a business, business
partners, and customers should all be treated with concern for their well-
being.
• Fairness: Everyone should have the same opportunities and be treated the
same. If a practice or behavior would make you feel uncomfortable or place
personal or corporate benefit in front of equality, common courtesy, and
respect, it is likely not fair.
• Loyalty: Leadership should demonstrate confidentially and commitment to
their employees and the company. Inspiring loyalty in employees and
management ensures that they are committed to best practices.
• Environmental concern: In a world where resources are limited, ecosystems
have been damaged by past practices, and the climate is changing, it is of
utmost importance to be aware of and concerned about the environmental
impacts a business has. All employees should be encouraged to discover and
report solutions for practices that can add to damages already done
Theories of Business Ethics
Traditional Theories of Business Ethics are stated below.
1.Consequentialism in Business Ethics: Consequentialism
is a moral theory that judges the rightness or wrongness of an action
based on the consequences it produces. In the context of business
ethics, consequentialism evaluates the ethicality of business
decisions by examining the outcomes and impact on various
stakeholders. The central idea is that the morality of an action is
determined by the overall balance of positive and negative
consequences.
Key principles of consequentialism in the realm of business ethics
include:
1. Utility Maximization: Consequentialism often focuses on
maximizing overall utility or happiness. In a business context, this
could mean making decisions that lead to the greatest overall well-
being for stakeholders, such as employees, customers, shareholders,
and the community.
2. Cost-Benefit Analysis: Decision-makers may perform cost-benefit
analyses to assess the potential outcomes of different actions. This
involves weighing the positive and negative consequences of each
option to determine which course of action is ethically preferable.
3. Long-Term vs. Short-Term Consequences: Consequentialist thinking
may involve considering both short-term and long-term
consequences. Ethical decision-making in business often requires a
consideration of the lasting effects on stakeholders and the
sustainability of the business.
4. Stakeholder Consideration: Consequentialism prompts decision-
makers to consider the interests and well-being of all relevant
stakeholders. This includes not only shareholders but also
employees, customers, suppliers, and the broader community.
5. Flexibility: Consequentialism is flexible and doesn't prescribe
specific rules or duties. Instead, it allows for adapting ethical
decisions based on the specific context and potential outcomes.
However, consequentialism is not without its criticisms. Some common
objections include concerns about predicting consequences accurately,
potential for sacrificing individual rights or justice for the sake of
overall happiness, and challenges in comparing and weighing different
types of consequences.
In business ethics, adopting a consequentialist approach requires
careful consideration of the potential impacts of decisions on all
stakeholders, along with a commitment to maximizing overall well-
being and minimizing harm. It's essential to strike a balance between
short-term gains and long-term sustainability, as well as between the
interests of various stakeholders.
2.Utilitarianism:
Utilitarianism is a consequentialist ethical theory that holds
that the right action is the one that maximizes overall
happiness or pleasure and minimizes suffering or pain. In the
context of business ethics, utilitarianism assesses the
morality of business decisions based on the overall utility or
happiness produced for all relevant stakeholders. Here are
some key aspects of utilitarianism in the business ethics
context:
Maximization of Happiness: Utilitarianism in business ethics
emphasizes the goal of maximizing the overall happiness or
well-being of all stakeholders. This includes employees,
customers, shareholders, suppliers, and the broader
community.
Quantifiable Consequences: Utilitarianism often involves
attempting to quantify and compare the positive and
negative consequences of different actions. This could
include conducting cost-benefit analyses to assess the impact
of business decisions.
Impartiality: Utilitarianism requires decision-makers to be
impartial and consider the interests of all stakeholders
equally. This approach contrasts with theories that prioritize
specific individuals or groups over others.
Long-Term Perspective: Utilitarianism encourages a long-
term perspective, considering the enduring consequences of
business decisions. This aligns with the idea that sustainable
and ethical business practices contribute to long-term
happiness.

Flexibility and Contextual Consideration: Utilitarianism is a

flexible theory that allows for the consideration of context
and changing circumstances. It doesn't prescribe specific
rules but instead focuses on the overall outcome of actions.

Ethical Decision-Making Framework: Utilitarianism provides

a practical framework for decision-making by offering a clear
criterion—the greatest overall happiness—to evaluate the
ethicality of actions.

While utilitarianism provides a straightforward approach to

evaluating the morality of actions, it is not without criticism. Some
common critiques include concerns about the challenges of
accurately predicting consequences, potential injustices in pursuing
the greater good, and difficulties in comparing and quantifying
different types of happiness or suffering.

In business ethics, a utilitarian approach involves making decisions that lead

to the greatest overall well-being for all stakeholders. This may include
considerations of fair labor practices, environmental sustainability, customer
satisfaction, and other factors that contribute to the happiness of those
affected by business activities.
Kohlberg Six Stage Moral Development
• Lawrence Kohlberg’s stages of moral development,
a comprehensive stage theory of moral development based
on Jean Piaget’s theory of moral judgment for children (1932)
and developed by Lawrence Kohlberg in 1958. Cognitive in
nature, Kohlberg’s theory focuses on the thinking process that
occurs when one decides whether a Behaviour is right or
wrong. Thus, the theoretical emphasis is on how one decides to
respond to a moral dilemma, not what one decides or what one
actually does.
• Kohlberg’s theory, though extremely influential, was based on
research that used only boys as subjects. In the 1980s the
theory was criticized by the American psychologist Carol
Gilligan for universalizing patterns of moral development
exhibited by boys and ignoring the distinct patterns
characteristic of girls.
• The framework of Kohlberg’s theory consists of six stages
arranged sequentially in successive tiers of complexity. He
organized his six stages into three general levels of moral
development.
Level 1: Preconventional level
At the preconvention level, morality is externally controlled. Rules imposed
by authority figures are conformed to in order to avoid punishment or
receive rewards. This perspective involves the idea that what is right is what
one can get away with or what is personally satisfying. Level 1 has two
stages.
Stage 1: Punishment/obedience orientation
Behaviour is determined by consequences. The individual will obey in order
to avoid punishment.
Stage 2: Instrumental purpose orientation
Behaviour is determined again by consequences. The individual focuses on
receiving rewards or satisfying personal needs.

Level 2: Conventional level

At the conventional level, conformity to social rules remains important to the
individual. However, the emphasis shifts from self-interest to relationships
with other people and social systems. The individual strives to support rules
that are set forth by others such as parents, peers, and the government in
order to win their approval or to maintain social order.
Stage 3: Good Boy/Nice Girl orientation
Behaviour is determined by social approval. The individual wants to maintain
or win the affection and approval of others by being a “good person.”
Stage 4: Law and order orientation
Social rules and laws determine Behaviour. The individual now takes into
consideration a larger perspective, that of societal laws. Moral decision
making becomes more than consideration of close ties to others. The
individual believes that rules and laws maintain social order that is worth
preserving.
Level 3: Postconventional or principled level
At the post conventional level, the individual moves beyond the
perspective of his or her own society. Morality is defined in terms of
abstract principles and values that apply to all situations and
societies. The individual attempts to take the perspective of all
individuals.
Stage 5: Social contract orientation
Individual rights determine behaviour. The individual views laws and
rules as flexible tools for improving human purposes. That is, given
the right situation, there are exceptions to rules. When laws are not
consistent with individual rights and the interests of the majority,
they do not bring about good for people and alternatives should be
considered.
Stage 6: Universal ethical principle orientation
According to Kohlberg, this is the highest stage of functioning.
However, he claimed that some individuals will never reach this
level. At this stage, the appropriate action is determined by one’s
self-chosen ethical principles of conscience. These principles are
abstract and universal in application. This type of reasoning involves
taking the perspective of every person or group that could
potentially be affected by the decision.
 Ethics in an Era of Globalization
Ethics in an era of globalization presents a set of challenges
and opportunities that extend beyond national boundaries.
As businesses, technologies, and information flow seamlessly
across borders, ethical considerations become more complex
and interconnected. Here are some key aspects of ethics in
the context of globalization:

1. Cultural Diversity:
• Challenge: Globalization brings together people from
diverse cultural backgrounds, each with its own set of
ethical norms and values. Navigating these cultural
differences can lead to ethical dilemmas.
• Opportunity: A global perspective allows for the exchange
of diverse ideas and practices. Ethical frameworks need to
be inclusive and adaptable to various cultural contexts.
2. Supply Chain Ethics:
• Challenge: Global supply chains can involve multiple countries
with different labor standards, environmental regulations, and
ethical practices. Ensuring ethical behavior throughout the supply
chain becomes a complex task.
• Opportunity: Companies have the opportunity to promote
ethical sourcing, fair labor practices, and sustainability.
Transparency in the supply chain is increasingly seen as an ethical
imperative.
3. Environmental Sustainability:
• Challenge: Globalization has led to increased resource
consumption and environmental impact. Companies may
face ethical questions related to ecological sustainability
and responsible resource management.
• Opportunity: Ethical practices include adopting
environmentally friendly policies, reducing carbon
footprints, and promoting sustainable business practices.
4. Human Rights:
• Challenge: Globalization can be associated with human
rights concerns, particularly in regions with weak
governance structures. Companies may face ethical
dilemmas when operating in areas with a history of human
rights abuses.
• Opportunity: Companies can play a role in promoting
human rights by adopting ethical business practices,
ensuring fair labor conditions, and avoiding complicity in
human rights violations.
5. Information and Technology:
• Challenge: The rapid flow of information and technology across
borders raises ethical issues related to data privacy,
cybersecurity, and the responsible use of emerging technologies.
• Opportunity: Ethical considerations in technology involve
respecting privacy, securing data, and ensuring that technological
advancements benefit society without causing harm.
6. Corporate Social Responsibility (CSR):
• Challenge: Companies operating globally are expected to
demonstrate social responsibility. Balancing profit motives
with social and environmental concerns can be
challenging.
• Opportunity: CSR initiatives allow companies to contribute
positively to the communities in which they operate. This
includes philanthropy, community development, and
environmental stewardship.
7. Global Governance:
• Challenge: The lack of a unified global regulatory
framework can create challenges in enforcing ethical
standards across borders.
• Opportunity: Organizations and governments have the
opportunity to work collaboratively on international
agreements and standards that promote ethical behavior
in a global context.
 Environmental Ethics:-

Environmental ethics is a field of study that seeks to

understand humans’ moral obligations to protect and
preserve the environment. It is a branch of ethics that
recognizes the intrinsic value of nature, the interconnection
of all living things, and the responsibility of humans to act in
accordance with ethical principles

Protecting our natural resources is crucial for the health of our

planet and our own well-being. It's a multifaceted challenge
demanding attention from individuals, communities, businesses,
and governments. Here are some key aspects to consider:

Why Protect Natural Resources?

• Essential for Life: Clean air, water, fertile soil, and biodiversity are
fundamental for survival, providing food, clean water, medicine, and
other vital resources.
• Climate Change and Environmental Degradation: Unsustainable
human activity is causing climate change, deforestation, species
extinction, and pollution, threatening ecosystems and our future.
• Economic and Social Benefits: Healthy ecosystems support
tourism, agriculture, fisheries, and other industries, contributing to
livelihoods and economic prosperity.
Ways to Protect Natural Resources:
• Individual Actions:
o Reduce, Reuse, and Recycle: Minimize waste, choose sustainable
products, and recycle diligently.
o Energy and Water Conservation: Use energy and water efficiently at
home and in your daily life.
o Sustainable Food Choices: Support local and sustainable
agriculture, reduce meat consumption, and avoid food waste.
o Support Conservation Efforts: Volunteer your time or donate to
organizations working to protect natural resources.

• Community-Level Actions:
o Advocacy and Policy Change: Lobby for policies that support sustainable

practices and environmental protection.

o Community Gardens and Urban Greening: Create green spaces in cities

and towns to promote biodiversity and environmental awareness.

o Education and Awareness Programs: Educate communities about the

importance of protecting natural resources and inspire sustainable

living.

• Business Practices:
o Sustainable Resource Management: Adopt efficient resource use

practices, reduce pollution, and invest in renewable energy sources.

o Responsible Supply Chains: Source materials from sustainable sources

and ensure ethical labor practices throughout the supply chain.

o Transparency and Accountability: Report on environmental impact and

commit to continuous improvement in sustainability practices.

• Governmental Interventions:
o Strong Environmental Regulations: Implement and enforce

environmental regulations to protect air, water, and land

quality.
o Conservation Areas and Protected Lands: Establish and manage

protected areas to preserve biodiversity and ecological

integrity.
o Financial Incentives and Disincentives: Encourage sustainable

practices through tax breaks for green businesses and penalties

for environmental damage.

Challenges and Solutions:

• Balancing Economic Development and Environmental Protection:

Finding ways to meet human needs while preserving natural
resources requires innovative solutions and long-term planning.

• International Cooperation:
Addressing global environmental challenges like climate change
demands collaboration between countries, businesses, and
individuals.

• Technological Solutions:
Technological advancements can help us monitor environmental
degradation, develop renewable energy sources, and manage
resources more efficiently.
Protecting our natural resources is a collective responsibility. By
working together, we can build a more sustainable future for
ourselves and future generations.
 Prevention of Pollution and Depletion of
Natural Resources.

Preventing pollution and depletion of natural resources demands

action on multiple fronts, from individual choices to international
collaborations. Here are some key strategies:

Pollution Prevention:
• Reduce emissions: Transition to renewable energy sources like
solar, wind, and geothermal to generate clean electricity. Improve energy
efficiency in transportation, buildings, and industries.
• Waste management: Implement robust waste management systems that
prioritize reduction, reuse, and recycling. Promote composting and
responsible disposal of hazardous materials.
• Industrial regulations: Develop and enforce stricter regulations on industrial
waste disposal and emissions, incentivizing pollution control technologies
and cleaner production processes.
• Individual choices: Adopt a conscious lifestyle: use energy-efficient
appliances, reduce car usage, avoid single-use plastics, and choose products
with minimal packaging.
Natural Resource Depletion Prevention:
• Sustainable resource use: Implement principles of circular economy, where
resources are kept in use for as long as possible, minimizing waste and
maximizing resource efficiency
• Conservation and restoration: Protect existing forests, wetlands, and other
ecosystems through conservation efforts. Engage in reforestation and habitat
restoration projects to rebuild depleted resources.
• Resource management: Establish sustainable management practices for
water, fisheries, and other resources, using quotas and monitoring systems
to prevent overexploitation.
• Technology and innovation: Invest in research and development of
technologies that can help us extract resources more efficiently and
responsibly, like renewable energy sources and cleaner mining
techniques.
Beyond individual actions:
• Policy and advocacy: Lobby for policies that incentivize sustainable
practices, penalize polluters, and protect natural resources. Support
organizations working on environmental issues.
• International cooperation: Address global challenges like climate
change and deforestation through international agreements and
collaborative efforts. Share knowledge and best practices across
nations.
• Education and awareness: Raise awareness about the consequences
of pollution and resource depletion through education
programs, public campaigns, and media outreach. Empower
individuals to make informed choices and become responsible
stewards of the environment.

Remember: Prevention is key. By actively reducing our

environmental footprint through individual choices, advocating for
sustainable policies, and supporting innovation, we can make a
significant difference in preventing pollution and depletion of
natural resources.

It's a collective effort, but every small step counts. Let's work
together to protect our planet for future generations.