Business Ethics

Manish Naik

+91 986 763 6938

manish.canopy@gmail.com

Broad Syllabus

• Evolution of thought of ethics in business

• Culture and ethics • Overview of ethics • Social and economic

values and responsibilities

• Trusteeship • Normative ethics • Ethics and decision

making

• Ethics and corporate excellence

• Ethics in corporate settings

• Institutionalization of ethics • Corporate governance • Disclosures • Variety of ethical situations

– current and future • CSR

Books and Reference Text

• Books – Balachandran S, Business Ethics– Velasquez Manuel, Business Ethics – Concept and

Cases, Pearson – Shaw William, Business Ethics, Wadsworth

Publishing – Raj Rituparna, A Study in Business Ethics, Himalaya

Publishing • Reference Text

– The Ethics of Management by La Rue Hosmer– Ethics in Management by SK Chakraborty, OUP

Some Terms of Reference

Some Terms of Reference (1)

• Business ethics goes hand-in-hand with ethics, which is a major discipline

• Business ethics is applied science like: – Accountancy ethics– Medical ethics – Consumer ethics – Religious ethics – Work (professional) ethics– Personal ethics

Some Terms of Reference (2)

• During the course of these lectures, we’ll discuss and debate over concepts and ideas that may be: – against someone’s religious/personal beliefs; – bold; – need not be appealing to all (may be even

offensive to some participants); or even – hold against someone’s thought orientation

• Note that ours are going to be purely class discussions enabling you to take ethical decisions in your personal & work settings

Our Purpose

1. Give an overview of the likely ethical questions you may face in future

2. Enable you to take ethical decisions in work and personal settings

3. Develop an ability to institutionalize ethical standards in organizations

4. Prepare students for ethical leadership roles

Terminologies and Errors

• Ethical and unethical

• Ethically right and ethically wrong

• Moral, immoral and non-moral

• Mores and folkways

• Morally right and morally wrong

• Ethical dilemmas

• Profiting and profiteering

Ethics

Ethics

• The concept of ethics comes from the Greek word ethos – meaning both an individual’s character and a community’s culture

• Ethics has a distinguishing disposition

Ethics

• Ethics is a set of values and rules that define right and wrong conduct

• What is considered ethical may depend on the perspective from which ethical issues are considered

• Ethics is non-universal – ethics are governed by the environment and the society (religion included)

• What is ethical may not be legal and vice versa

Forces that Shape Ethical Conduct

• Societal norms and culture

• Laws and regulations

• Organizational practices and culture

• Individual perspective

Nature of Ethics

• Ethics deals only with humans

Nature of Ethics

• Ethics deals only with humans• Under what conditions can ethics come into

play? – Only out of freewill– There should be a choice – One needs fully-developed rational faculty and

maturity

• Ethics belongs to the field of social sciences • Ethics is a Normative Science

Business Ethics

Business and Ethics: Some Questions

• Is profit making the only goal of businesses?

• Should an unbridled market mechanism drive an enterprise?

• To what extent corporations should compensate for the hidden costs that are incurred by the society at large?

Consensus in Answers

• A consensus emerged: – that corporate practices cannot bypass the

fundamental demands of ethical behavior, – that administration and policies have to be

transparent and publicly accountable, and – that businesses have to be sensitive to the

community and the environment within which they operate.

• This led to the ethical trilogy.

Business Ethics: Emergence of Ethical Trilogy

* Generally all treated in isolation

Business Ethics: Ethical Trilogy

Why Business Ethics for B-Schools?

• “A business that makes nothing but money is a poor kind of business.” - Henry Ford

Why Business Ethics for B-Schools?

Why Organizations are Vulnerable to Ethics Violations

• Authority structures • Incentive systems • Role of (at times lack of) corporate governance • Role of decision making lapses • Escalation of commitment (a decision making bias

where people commit additional resources to a failing course of action)

• Easier wrong that gives results • Leader behaviour • Non institutionalization of value systems

Some Trivia

• Where was business ethics first introduced?

• Why was ethics introduced in management courses?

• Concepts have undergone change due to internationalization

• Will undergo modifications due to nature of future workplaces, and business relations

Relationship between Business and Ethics

• Unitarian view

• Separatist view

• Integration view

Nature of Business Ethics• Ethical decisions differ with the individual

perspectives of different persons• Ethical decisions are not limited only to themselves,

but affect a wide range of other situations as well • Most ethical decisions involve a tradeoff between

costs incurred and benefits received • The consequences of most ethical decisions are

not clear: they are ambiguous in nature• Every person is individually responsible for the

ethical or unethical decision and action that he or she takes

The Ethics of Action

• Bribery • Coercion • Theft • Unfair discrimination• Adulteration (adultery) • Wrong disclosure • Under disclosure • Evasion of duty• False claims

• Insider trading • Puffery • Deception • Deliberate wrongdoing • Anchoring • Wastage (resources,

food, time, …)• Unfructuous work to

keep people engaged

The Ethics of Action

• Gifting • Lobbying • Canvassing • Solicitation • Taboos • Plagiarism• Ethnocentrism • Stereotyping

Advertising Ethics

• Deceptive advertising • False advertising • Misleading ads • Impression

management • Harmful products • Celebrity

endorsements • Hidden surcharges

• Puffery • Exaggeration• Ambiguity • Psychological effect

Deception: Advertisers Use

• Ambiguity (semantic ambiguity – light desserts or in expression – light snacks)

• Concealing information (lack of transparency) • False claims (300% more oxygen or Volvo ad) • Exaggeration (whiteness in detergents)

(However, Puffery is ethical – use of harmless adjectives and superlatives like:– BMW (the ultimate driving machine) – Aamby Valley (life’s best abode)

• Psychological effects (use of links - Marlboro campaigns relate to machoism)

Volvo Ad

Basis for Ethical Decisions

• Utilitarianism • Justice • Equity • Term concept • Option concept • Systems concept • Reversibility • Intention• Impact