Business Ethics

Trainer: Dr. Sein Min

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 What is “Ethics”?
• Merriam-Webster Definition
– “The principles of conduct governing an individual or a
group; a guiding philosophy.”
• Developing need to better define and regulate
ethics
– Laws
– Statutes
– Codes

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Recent and Continuing Erosion
of Ethical Standards
• BUSINESS
– WorldCom
• $11Billion Accounting Fraud
– Enron
• Loss of thousands of jobs
• $60 Billion in market value
• $2 Billion in pension plans
– Tyco International
• CEO and CFO convicted of Grand Larceny and Fraud,
total losses of $550 Million.

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 Singapore’s Case
• NKF Saga
– July 2005
– Collapse of defamation trial against Susan
Long and SPH
– a massive backlash and fallout of donors to
the charity, and
– subsequently resulted in the resignation of
CEO (T.T. Durai) and its board of directors.
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 Singapore’s Case (contd.)
• Allegations
– the false declarations on how long NKF's
reserves could last
– its number of patients
– installation of a golden tap in Durai's private
office suite, his salary, use of company cars
and first-class air travel

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 In a recent Wall Street Journal
article, Psychology professor
Steven Davis says that cheating by high school
students has increased from about 20 percent
in the 1940’s to 75 percent today.
“Students say cheating in high school is for
grades, cheating in college is for a career.”

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When evaluating one’s goals and
When objectives,
evaluating one’sagoals
vitaland
question
objectives, a
vital question must be asked: What is your
must behighest
asked: What
aspiration?
is your
highest aspiration?
A. Wealth
A. Wealth
B. Fame
C. Knowledge
B.D.Fame
Popularity
C.
E. Knowledge
Integrity
D. Popularity
E. Integrity 7
 If integrity is second to any of the
alternatives, then it is subject to sacrifice
in situations where a choice must be
made. Such situations will inevitably
occur in every person’s life.

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What is Business
Ethics?

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 Business Ethics

• The application of general ethical concepts

to the unique situations confronted in
business. It asks what is right or wrong
behavior in business and what principles
or rules can be used as guidance in
business situations.

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 Two Characteristics
• Tells people what they ought to do
• Set of principles or rules

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Business ethics is an opportunity to
differentiate yourself and your
company

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The reputation of a thousand years may be
determined by the conduct of one hour.
Japanese proverb

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Be sure you are
right, then go
ahead.
Davy Crockett
1786-1836

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 Relativism Egoism

The 4
Concepts of
Ethics
Utilitarianism Deontologism
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 Concepts of Ethics
• Developed by moral philosophers over
generations
• Used to distinguish ethical from unethical
behavior
• Each has problems

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 Relativism
• There is no universal standard by which
morality can be judged
• What is correct for one society may be
wrong for another
• Ethics and morality are relative
• What do you think of this?

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 Relativism - Problems
• There are no absolutes - murder, slavery,
torture, rape OK
• What is meant by a society?
Sub-societies
• Leads to conclusion - each person’s
opinion is correct
• Nothing that anyone does is morally wrong

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 Egoism
• One ought to act in his or her own self
interest
• Ethical behavior is that which promotes
one’s own self interest
• Does not mean should not obey laws -
only do so if in self interest

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 Egoism
• What do you think of this concept?

• Problem - Externalities associated with

private actions - OK to dump toxic wastes
as long as don’t get caught

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 Utilitarianism
• The morality of an action can be
determined by its consequences
• An action is ethical if it promotes the
greatest good for the greatest number

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Benefits and Costs of an Action
to Whomsoever They Accrue
B1 + B2 + B3 + . .+Bn> C1 + C2 + C3 + . . .+Cn
Then the Action is Ethical

B1 + B2 + B3 + . .+Bn< C1 + C2 + C3 + . . .+Cn
Then the Action is Unethical

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 Utilitarianism Example

• Harry Truman and Decision to Drop Bomb

on Japan

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 What do you think of this
concept?
• How do you quantify benefits and costs?
• How do you value benefits and costs?
• Can lead to unjust consequences
• Restrictions against the majority to protect
a minority is not utilitarian

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 Deontologism
• Derived from the Greek word for Duty
• Actions are not justified by their
consequences. Factors other than good
outcomes determine the rightness of
actions

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 Utilitarianism Vs. Deontologism
• Utilitarianism - The ends justify the means

• Deontologism - It is the means which are

important

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 Catagorical Imperative
• Developed by Immuel Kant
• “I ought never to act except in such a way
that I can also will that my maxim should
become a universal law”
• Are you willing to permit everyone to adopt
the action?
• Yes - Moral No - Immoral

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Guidance in Dealing with People
• People should never be treated as a means to
an end, but as ends in themselves
• To treat people as ends requires respect for
persons
• Reject slavery
• Deals with murder, rape, etc
• How to deal with employees

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 General Ethical Behavior
• Builds security, friendliness, cooperation
and trust in a society
• These are public goods created by
generally ethical behavior

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 What are Characteristics of
Public Goods?
• Not subject to exclusion - cannot exclude
people from consumption even if they do
not contribute
• Joint Supply - Provide for one individual,
provide for all
• Free Rider Problem

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 Catagorical Imperative and
Public Goods
• Security, Friendliness, Cooperation and
Trust
• Not Subject to Exclusion
• Joint Supply
• Free Rider Problem

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 Examples
• Is it Ethical to Rob Banks?

• Is it Ethical to Give Everyone in this Class

an A?

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 What Do You Think of
Deontologism?
• Conflicts between duties
• Utilitarians argue that secretly appeal to
consequences to demonstrate the
rightness of actions

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Ethical Tests

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 Is It Legal Test?
Ethical

Quadrant II Quadrant I
Codification
Ethical and Illegal Ethical and Legal
Manifestation

Corporate
Illegal Legal
Decisions

Quadrant IV Quadrant III

Unethical and Illegal Unethical and Legal

Unethical

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 Ethical Tests
1. Is It Legal? I
Ethical - Legal II
Ethical - Illegal III
Unethical - Legal IV
Unethical - Illegal
I and IV Easy
II and III Difficult

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 Ethical Tests
2. Benefit Cost Test
Do the benefits exceed the costs to
whomsoever they accrue?
3. Categorical Imperative
Are you willing to allow everyone to practice
the proposed action or do you want to be a
special case?

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 Ethical Tests
4. Light of Day Test
What would be your reaction if the
action were brought out into the open for
public scrutiny?
5. Do Unto Others Test
Golden Rule - If you would like others
to do the same to you - passes the test

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 Ethical Tests

6. Ventilation Test
Seek out others views. Discuss the 5
tests with them. If others feel it is OK -
passes the test

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 Examples
• Robbing a Bank
• Driving Above the Speed Limit
• Cheating on an Exam
• Having Sex with an Intern

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 Ethical Dilemmas in Business
• Conflict of Interest
Have two interests - cannot purse one
without having negative impact on
other
• Two Types
Private Interest Conflicts with corporate
Business Interest Conflicts with Public

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 Conflict of Interest Mini Case
• Personnel Director
• Brother - in - law out of work
• Lackluster performer
• Unemployment about to run out - will loose
house
• Sister asks you to recommend him for job
• What would you do?

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