BUSINESS ETHICS &

CORPORATE
GOVERNACE

10th
December
 Normative ethical theories
 Traditional Ethical theories:
- These theories start with an assumption about the
nature of the world and more specifically assumptions
about the human beings.
In the fig. below, it says the theories are based on the
moral judgment on the outcomes of a certain action. If
these outcomes are desirable then the action in question
is morally right, whereas if the outcome of the action are
not desirable, the action is morally wrong.

Motivation/ Outcomes
Action
Principles

Non-consequentialist ethics Consequentialist ethics

 The moral judgment in the
consequentialist theories is thus based
on the intended outcomes, the aims, or
the goals of a certain action.

 Theories that base the moral judgment on

the underlying principles of the decision-
maker’s motivation are non-
consequentialist approach.
 Consequentialist Theories
 Egoism: It is one of the oldest philosophical ideas. Here, as
action is morally right if the decision maker freely decides in
order to pursue either their short-term desires or long-term
interests.
E.g. – A producer who is manufacturing faulty goods, the
consumers might suffer in the short-term. In the long-term the
customers have alternate choices, the producer’s trade might
suffer in that case.

Egoism based on desire is that it renders different approach

towards life as equivalent.
E.g. – One student who is more focused on sports rather than
another sincere student who is more hard working towards
studies will be equally admirable if they both follow their own
desires.

Egoism based on the pursuits of interests.

Considering the same e.g. there would be a gap created
between desire and what is in ones’ ultimate interests.
 Utilitarianism: An action is morally right, if it
results in the greatest amount of good for the
greatest amount of people affected by the
action.

Here, the principle is greatest happiness

principle is the ultimate consequentialist
principle as it focuses solely on the
consequences of an action and weighs the
good results against the bad results and
finally encourages the action which results in the
greatest amount of good for all people involved.
 Non-consequentialist
theories
 Ethics of duty: It begins with the assignation of the
duty to act in a certain way.
E.g. – As a responsible citizen one would not like to
exploit any child labor from a third world country,
therefore this act would be considered deemed immoral
or unethical.

 Ethics of rights and justice: Rights of life, freedom

and property. Natural rights are certain basic ones.
Basic human rights today would include a right to life,
liberty, justice, education, fair wages, freedom to belief,
expression.
 Contemporary ethical
theories
 Virtue ethics: This contends that morally correct
actions are those undertaken by virtuous
characters. Therefore, the formation of a
virtuous character is the first step towards
morally correct behavior.
 Virtues are a set of acquired traits of character
that enable a person to lead good life.
- Intellectual virtues: Wisdom
- Moral virtues: Honesty, loyalty, modesty.
 Feminist ethics: Men and women have fairly
different attitudes towards organizing social life.

 It is an approach that prioritizes empathy,

harmonious and healthy social relationships,
care for one another and avoidance of harm.

 This shows a particular attitude towards ethical

conflicts that is more within the framework of
what women would allegedly do in a such as
situation.
 Discourse ethics: They contend that the
ultimate goal of ethical issues in business
should be the peaceful settlement of
conflicts.

 Thus it aims to solve ethical conflicts by

providing a process of norm generation
through rational reflection on the real life
experience of all relevant participants.
 What is business ethics
management
 It is direct attempt to formally or informally manage
ethical issues through specific policies, practices and
programs.

 Components of business ethics management:

- Mission & value statements
- Code of ethics
- Reporting channels
- Risk analysis and management
- Ethics managers & committee
- Ethics training
- Ethics education
- Auditing, accounting & reporting
 Mission statement: General statements of
corporate aims, beliefs, and values.
E.g. – Marks & Spencer aims to be “the most
trusted retailer wherever we trade demonstrating a
clear sense of social responsibility and consistency
in our decision-making and behavior”.

 Code of ethics: The type of conduct of an

employee is desired and expected from an ethical
point of view within a certain organization,
profession, industry.

 Reporting channels: Organizations nowadays

have introduced ethics hotlines or other forms of
reporting channels specifically dedicated to
providing a mechanism for employees to notify
management of ethical problems and to seek help.
 Ethics managers, officers and committees:
Organizations have ethics officers, CSR committee.
E.g. – Astrazeneca has a Non-Executive Director position
for CSR, who manages a committee on the same to
work upon future and current activities on CSR.

 Ethics consultant: Initially the environmental

consultants used to render the services and consulting
on the ethical issues, but gradually as the ethical issues
have risen, the market for these kind of consultants
grew. Now, consulting firms like KPMG, PWC also offers
ethical consultancy.

 Ethics education and training: Ethics training has

become the need of the hour, either through external
consultants, corporate training specialists. Organizations
in US and Europe has become serious regarding ethics
education of employees.
 Stakeholder consultation and partnership
program: If GOOD business ethics is about doing
the RIGHT thing, then it is essential that
organizations consult with relevant stakeholders.

 Risk analysis: Managing business ethics by

identifying areas of risk, assessing the likelihood and
scale of risks and putting in place measures to
mitigate or prevent such risks from harming the
business has led more sophisticated ways of
managing business ethics.

 Auditing, accounting: Measuring, evaluating and

communicating the organization’s impacts and
performance on a range of social, ethical and
environmental issues of interests to their
stakeholders.
 Corporate Social
Responsibility
 Corporate social initiatives are major activities
undertaken by a corporation to support social causes
and to fulfill commitments to corporate social
responsibility.

 Causes like:
- Community health
- Education
- Employment
- Environment
- Economic development (low-interest housing loans)
- Basic human needs
 6 Social initiatives by the
Corporate
 Cause Promotions:
- Providing fund, in-kind corporate resources to increase
awareness.
- The corporate may initiate or manage the promotion
on its own.
E.g. – Body Shop promotes a ban on the use of animals
to test chemicals.

 Cause related Marketing:

- Contributing or donating a certain percentage revenues
to a specific cause based on product sales.
E.g. – Websites provide a certain percentage of their
revenues for every forwarded e-mails for several social
causes.
 Corporate Philanthropy:
- Direct contributions for a charitable cause like, cash
grants, donations, in-kinds services. The most traditional
method.

 Community Volunteering:
- An organization supports or encourages its employees,
retail partners to volunteer their time to support some
local community organizations.
E.g. – Shell employees works with The Ocean
Conservancy on a beach clean-up.

 Socially responsible business practices:

- A corporation adopts or conducts discretionary
business practices that support social causes to improve
community well being and protect the environment.