Business Ethics

Business EthicsProf. Mahajan Samant

Relation of Justice to Law and Ethics

• Every Legal System oriented towards certain PURPOSES!

• Every Legal System is of necessity, a Purposeful Enterprise!

• (Universal Sense) Justice is also of necessity devoid of “Ideological Content”

Distributive Justice by ARISTOTLE

• Injustice arises when Equals are treated Unequally and also when Unequals are treated Equally

• # of classes e.g. – Free / Slave, Black / White, M/F, National / Foreign

• Note the Case of:– Admissions to 11th standard (Board Vs. Ors)– Dr. Vinayak Sen………. 5th Edition– Power Plants = Sources and Pollutions

• KANT - Aim for University and Postulates must be valid for whole of Human Community

• Scolcs - Universal Reason• Scholastics - Deduce the rightness of human institution

from the will and reason of God

Hence,

Base = Natural Law Philosophy

But, Universality of Audience Impossible. Therefore N.A.!

EHRENZWEIG - Justice Vs. Justness Distinction!

Therefore, Justness will always be flowing from the sense

of morality or justice or value

e.g. - Juvenile Justice Act and definition of Juvenile

Justice

• Formal, in the sense that it is the GOAL to which every legal order aspires as “Purposeful Enterprise”

• Procedural, in the sense that the Aristotelian Notion of Equity for Equals implies a minimum machinery of justice and third party determination

Beyond this:Necessary to turn to the fields of “Ethics and Morality”

Ethics and Social Morality

• Ethics - is the sphere of ideal forms of life set by individuals for themselves. These ideal images - called VALVES = Conflict and gives multiplicity of conflicting pictures

Ethics and Social Morality

• Morality - rules of principles governing human behavior while apply universally within a community / class. – A “Minimum Conception of Morality” limits

itself to those rules which are ‘a condition of the existence of the society’ whereas more comprehensive morality embraces entire body of rules

Illumination of the Tripartite Relation

• Tripartite Relation between:– The values that individuals, as conscientious and

responsible human beings set to themselves– The moral norms governing a society - which reflect a

social balance and choice between conflicting individual values

– The legal order, which must reflect the current social morality but is far from identical with it

Read:

Hurley’s Brave New World

Orwell’s 1984

Illumination of the Tripartite RelationBut, Tension between given three continues

• Liberty to Individual - Picture of Life• But Constrains of Social Morality flowing from necessity

of social life and ideological restraints imposed by society

• And active reciprocal interrelationship between the legal order and the moral order

e.g. - a) Gay / Lesbian Marriage b) RTI to S/C Judges

c) Anti Reproduction Techniques

Ethical Theories and Valuations

• According to the sources of knowledge of ethical values into:– Naturalism– Intuitionism– Non Cognitive


• Naturalism - term coined by G. E. Moore - Principia Ethica denotes any view that holds that ethical properties can be analysed into or defined in terms of natural ones.


• Intuitionism - holds that ethics is an autonomous discipline with its own peculiar subject matter. Basic proportions of normative ethics are intuitive or self - evident insights of unique mind, which can not be inferred from any other discipline.


• Non Cognitive - Theories regard ethical values as incapable of any objective analysis, because they are purely emotive, or at least not verifiable.

Ethical and Legal Theory

• The perspective from which ethical theories are best considered in the light of legal theory is that of VALIDITY. Thus, (a) objective validity {and therefore denial of objective validity}


• Objective Validity - Ethical theory based on Metapositive values, either of a religious or non - religious order. In Legal Theory, this type of ethical approach is reflected in main body of Natural Law Philosophy, whether of a theological or a rationalistic character.


• Those that postulate ethical values of an objective, and therefore compelling, but instinctively felt character. Therefore, Krabbe + Del Vecchio + Edmond Chan = Sense of Injustice. Also Geny’s creative intuition + Henri Bergson.


• Empirical Theories - assumes that we have a certain criteria of evidence, or that we can identify a certain source of knowledge, and then to apply these criteria, or to refer to this source, and thus determine what it is that we can know {source: CHISHOLM in philosophy}

Ethical EmpiricismThree Major Types:• Derives Ethical MAXIMS from historical and social

experience.• Tests Ethical Values in the light of social facts and realities

called as PRAGMATISM - American ContributionAuthors: Charles Saunders Peirce & John Dewey

• LOGICAL POSITIVISM – (Leading to non cognitivism)– The approach to philosophical statements which

excludes from scientific study anything that is not verifiable, by either logical deduction or experimental observation.

Legal Theories based on Objective Ethical Criteria

• They regard certain basic principles of conduct as essential to a satisfactory legal order, not as matter of a priori postulates set by God or Reason (Natural Law) but as a matter of Social Experience. Therefore Social Contract Theory!

• These are predicated on the assumption that – “Men need to restrain their appetite for

violence, greed and domination, in order to achieve a minimum of mutual protection and security”

Legal Theories based on Objective Ethical Criteria

• Natural Law Theory (Since Natural Rights = H.R.) – Hence 5 Principles of minimum content of Natural Law!

• Human Vulnerability - Restricts Violence• Approximate Equality - Rules of Mutual Compromise• Limited Altruism - Restrains Aggression Tendencies• Limited Resources - Joint Planning of Goods and

Services• Limited Understanding and Strength of Will - From

which follows need for System of Voluntary Co-Operation.

Pragmatism in Ethics and Law

• Method of Enquiry! - John Dewey (and William James)– Start with formulation of Value Hypothesis– But it is only Professional!– To be Tested by means of its possible realizations.– Legal + Social + Economic + ----- Environment may

influence.– e.g. - PROHIBITION OF ALCOHOL after WWI for over a

decade!– Thus, chain of events after Legal Prohibition and then back

to original value postulate.– Therefore Alternative Solution - State Controlled Liquor

Boards as in CANADA!

Ethical and Legal Theories Denying Objective Validity

• ‘Ethical Values are a matter of conviction. They must be believed in but can not be proved.’ Hence NON OBJECTIVE Theories deny ‘E-Value can be objectively ascertained.’

Thus:• RELATIVISM • NON COGNITIVISM

Both Say “NON PROVABLE”

Ethical and Legal Theories Denying Objective Validity

• Relativism – Believe that rational argument can and must support the choice of a particular value, by comparison with, and often in opposition to, another value.

• Non Cognitivists – Rejects all study of Ethical Values as purely emotive, and therefore not within the realm of science.

RELATIVISM

1. Max Weber + His Disciple Gustav Radbruch2. Dewey – Value = prescriptions of actions!3. Bertrand Russel – Truth discovered by use of reason!

In “Science and Religion”4. Ginsberg – Survey good or values and norms of

injunction and thus, Principle of Action!5. Henry Sidgwich – In his Methods of Ethics. Moral

values – Principle – Aim at High Pleasure!6. S.E.Toulmin – Valid Reason, therefore – Worthy of

Approval!7. Perelman………………………..

NON COGNITIVE

1. David Hume – Regarded as a FATHER!• ‘Reason is servant of emotion’• “Reason is ought only to be the slave of the passions and can

never pretend to any other office than to serve and obey them.”• Thus, “Morality is maintained by sentiments.”

2. A.G. Ayer – “Language, Truth and Logic.”• Genuine Concept must be either empirical or logical!

3. Charles Stevenson – Attitude distinguished from Beliefse.g. – Mr. X is good person. Therefore Partly Cognitive + Emotive!

4. Alf Ross – Terms Just or Unjust are entirely devoid of MEANINGS5. Kelsen – Denies Prescriptions of Values of any kind6. OXFORD’s Ordinary Language Philosophers – H.A.L. HART!

Ethical Theories & Solution of Legal Problems

1. Nazi Regime – Transport of Jews Extermination Camp!• {Wife with 4 walls, utterances against Nazi

by his Husband & Wife willing to disclose. Hence Legal Authority}


1. Approach 1 = Supernatural Ethics or Transcendental Ethics. Hence Offended Higher (Natural) Law and Obeyed Positive Law.


1. Approach 2 = Intuitionist Ethics • Rightness or Wrongness of a conduct would

be determined by an objectively, but intuitively known feelings of right or wrong but intuitive. Therefore Variations!


1. Approach 3 = Realistic Approach• (Say) Dewey – Programmatic Logic of enquiry,

directed to the exploration of a given value. Therefore Murder = Evil!

• {Great majority of Germans obeying the Positive authority of state at expense of principles of dignity, compassion and clarity}

• Therefore Realistic Ethics = Discrimination. Therefore Equality N.A.!

Q – Do Legally Compelling Solutions Exists?

Social Morality and Legal Order

• Strawson distinguished individual ethics from social morality (But note that it is obvious that no complete seperation)

• Character of the society is the base– e.g.

• In pre democratic era – Small Group Leaders were important!• Up to Common Man era – Progressively widens Impact!!

– {Recall the KARTA concept in HUF system}

Read: Huxley’s Brave New World! = GENETICS!

Social Morality and Legal Order

Thus, we recall

1. AUSTIN – Habitual Obedience2. KELSEN – Minimum at Effectiveness3. OLIVE CRONA – Rules which contains patterns of

conduct for the exercise of the force4. LUNDSTEDT – Peaceful Co-existence of masses of

individuals in social groups and their co-operation for other ends than mere existence and propagation.

• All above 4 incorporate into the Law, a certain body of social norms!

Law, Morality and Social Change

• Minimum Conformity between Legal Order Social Effectiveness

OTHERWISE• A revolution will destroy existing legal order! Therefore

New Order!!– {Recall Address of Russian Presidents and Russian

Jokes}Examples – 1. Peasant Serfs tied to land. Therefore fled to free cities

and Feudal order collapsed!2. Negros V. White Minority and now New ORDER!3. Sometimes destroyed by external forces….NAZI Regime!

Law, Morality and Social Change

• But at Times, background of underdeveloped and slow moving societies

• Therefore, SAVIGNY + EHRLICH……. Custom (against Law making !)

• Thus in India….. Caste System + Polygamous Marriage Laws!!

Law and Enforcement of Morals

• A. Shaw vs. Director of Public Prosecution [1962], A. C. 220, Hse of Lords. Defendant had composed and procured the publication of a magazine called the Ladies Directory which gave the name and addresses awa nude photographs, of prostitutes, supplemented by a coded indication of the sexual practices.


Therefore:• Offence 1 – Publishing an obscene libel and• Offence 2 – Living on the earning on the prostitutes• Also 0 to 3 – Conspiracy to corrupt Public Morals!Professor Hart – Liberty and Morality (1963)Lord Devlin – Enforcement of Morals (1965)Both say how far the law should go in legislatingOn morality!


• B. Wolferden committee report 1957 – Recommended that the homosexual behavior between consenting adults in private should no longer be treated as a criminal offence.

Therefore recall, • John S. Mill – Purpose of power to prevent harm to others!• Lord Devlin -

– State to promote virtue among citizens.– Hence – Duty to declare standards of moralityTherefore, ‘society may legislate to preserve itself.’

Also, Spartans encouraged since promotes courage inbattles!Therefore, Individual Ethics Social Morality and Social Morality Legal Order TUSSLE!

Sources of Ethics

• Genetic Inheritance – The qualities of goodness is the product of genetic traits strengthened over a time by evolutionary process.

Sources of Ethics

• Religious Morality – Christian (Bible), Muslim (Koran), Jew (Torah = First Five Books of Old Testament by Talmud), Hindu (Bhagwat Gita) – Divine Command Theory.

In Latin – Religion = I Bind, Tilak – I wear!!

Sources of Ethics

• Philosophical Systems – Epicure, Stoic– Epicure (341 to 270 BC) – Pleasure was the chief

good!– Stoic (340 to 260 BC) – Disciple of philosopher

Zeno. Their school is called as Stoa Poikite (Painted Porch) states one in different to pleasure or pain!!

– But Narendra (Vivekananda) – Have you seen God?

Sources of Ethics

• Legal System – – Law is an ever changing approximation of current

perception of right and wrong. – Laws represent a rough approximation of society’s

ethical standards. – Law serves to educate us about ethical course in

life.– But not a vehicle for expressing society’s ethical

performance

Sources of Ethics

• Cultural Experience – John Steiner refers to the rules, customs and standards transmitted from generation to generation as guidelines for approximate conduct. Individual values are shaped in large major by the norms of the society

Sources of Ethics

• Code of Conduct – Comprising of 3 categories– Company Codes – Generally brief: Highly

Generalized, Expressed, Broad, Expectations about fit conduct.

– Co-operating policies – Ethical dimensions with respect to say gifts, customer complaints, hiring….

– Code of Ethics – It is a growing expression of the business community’s sincere concern for ethics.• Example – Affirmative ethical principles of American

Institute of Certified Public Accountants!

CULTURE Edward Taylor

• Culture is that complete whole which includes knowledge, belief, art, morals, law, customs and other capabilities and habits acquired by individuals as members of the society.

• Three Major Characteristics of Culture1. All Pervasive and inter-related2. Inborn but learned and passed onto the next

generation3. Shared by all members of the group

e.g. – British , Chinese, Indian, Japanese, Western, etc.

CULTURE Edward TaylorH

L LLow Culture Content

JapaneseArab

GreekSpanish

Italian

EnglishFrench

AmericanScandinavian

GermanGerman - Swiss

HCC = High Culture Content – Word Oral

LCC = Low Culture Content – Written Must!!

Also different legal systems in different nationsTherefore, UNCITRAL – United Nations Commission on International Trade Laws

Code of Ethics: AMA: American Marketing Association

• Subscribing to COE embracing the following topics:

– Responsibilities of the marketer – Honesty and Fairness– Rights and Duties of the parties


• Responsibilities of the marketer– Basic rules of professional ethics not

knowingly to do harm!– Adherence to all applicable laws and

regulations– Accurate representation of their education,

training and experience (intellectual honesty)

– The active support, practice and promotion of this code or ethics


• Honesty and Fairness– Marketers shall uphold and advance the

integrity, honor and dignity of the Marketing profession by:• Being honest in serving consumers, clients,

employees, suppliers, distributors and public• No knowingly participating in conflict of interest

without prior notice to all parties involved.• Establishing equitable free schedules including

the payment of receipt of usual, customary and / or legal compensation for marketing exchanges.


• Rights and Duties of Parties– Participants in the marketing exchange process

should be able to expect that:• Products and Services offered are same and fit

for their intended uses• Communications about offered products and

services are not deceptive • All parties intend to discharge their obligations,

financial and otherwise, in good faith.• Approximate internal methods exists for equitable

adjustments and / or redressed of grievances concerning purchases


• In India – – The Consumer Protection Act, 1986– The Environment Protection Act, 1986– The Right to Information Act, 2005

A few examples amongst many acts!!!

Need and Importance of Business Ethics

1. Business operates within society :Hence welfare thus must earn social sanction !

2. Every business exits on ethical means :Degrees vary but non-ethical conduct = disaster !

3. Business needs to function as responsible corporate citizens in the country : An organ which produces wealth!

4. Personal gains : (Dubious character)Hence Chester Barnard (o/w embezzler, sick leaver)

5. Individual values vis a vis organisational goals whistle blowing : employee blows public with complaints on a/c of his failure to convince management

6. Managers (decision maker) values and attitudesBenevolence V Termination {LEP : Vinod Mestry Case}

7. Competitive Tressures : Intense rivalry motivates UN-Ethics! e.s. Delhi Development Tenders : Street Lights and P.A!

8. Cross-cultural contradictions : Multinationals also Mersers / Acquisitions e.g McDonald’s in India, Vijay Mahajan!

Nature of Business Ethics: Consolidation of the List• Bribe ---- Theft ----- Sabotage ----- Collusion ----- Swindle ----- Mergers ---- Tie-

ups ------- Acquisitions ----- Policies ----- Investments

• Ethics – Manager in organization and society is same! e.g. Honesty!– But ethics are unstructured, no universal concept!– Hence, Ethics should express some obligations to others!!– Influencing factors: Leadership!

{Reading Reference – Gail Sheehy: US Search for Leadership}– Character is fundamental and prophetic since character of yesterday and tomorrow

is same!– Issues of Leadership do change with time!

• e.g. NIXON: Watergate; GE: Jack Welsh (CEO : Person)

• Many “Leaders of India” and “Ethics”

– Power Corrupts, absolute power = Absolutely! – Hence, Vision – Mission – Creed – Code of Conduct – Corporate + Business + Functional Strategies!

Fundamental Principles

• Sir Blackstone – “Rests entirely upon general reception and usage, and the only method of proving that this or that maxim is a rule of common law, is by showing that it hath been always the custom to observe it-------”.

• There is now wrong without a remedy ----- UBI JVS IBI REMEDIUM.

VBI JVS IBI REMEDIUM

There is no wrong without remedy!

• JVS signifies the legal authority to door demand something

• REMEDIUM – “the right of action, or the means given by law, for the recovery or assertion of a right.”

• HOLT C.J. – If a man has a right, he must have means to vindicate and maintain it, and a remedy, if he is injured in the exercise and enjoyment of it, and indeed it is a vain thing to imagine a right without a remedy, for want of right and want of remedy are reciprocal.

1. Gloucester Grammar School – School Master sets up a rival school next to first school, Boys flock to new school.

2. Chasemore Richards – Owner of ancient water mill for 60 years, enjoying river flow, Local Health Board sank a well.

3. Ashby White – Officer at voting booth refused to register a duly tendered vote of a qualified voter. That Candidate Won!

VBI JVS IBI REMEDIUM4. Morningstar Fafayette Hotel – Guest, Fed up with B/F, Purchase RM,

gives to chef to cook, $1 bill, next day no B/F!5. Film Jai Santoshi Ma – Certain scenes in the film would hurt the

religious feelings of persons i.e. Hindu!6. Earl. Countess Cowley – Miss married and earned the title of

COUNTNESS, Marriage dissolved yet the TITLE!7. Day Browning – Ashford Lodge for 60 years and adjoining house

Ashford village for 40 years, change to A.L.8. Jay Lt. – Firm, Ladies clothes, A was a manageress, A known to

customers as Miss Jay, leaves, rival firm Miss Jay9. Banaras Hindu University 1924 – University oversights passed student

in the list of successful not included.10. Dickson Reuter’s Telegraph – A telegrams B to ship goods, Telegraph

company mistaken, delivers to C, C ships goods, A refuses!• INJVIRA SINE DAMNU – Legal Injury suffered without actual damage• DAMNUM SINE (or ABSQUE) INJURIA – Actual damage suffered

without legal injury

VBI JVS IBI REMEDIUM

B. The act of God shall not, by the instrumentality of the law, work an injury.

C. The Law does not compel the performance of that which is impossible to be done.

D. Ignorance of Law does not afford and excuse, although ignorance of facts does.

E. A party shall not convert that which was done by himself, or with his assent, into a wrong.

F. A man shall not take advantage of his own tortuous Act.G. A man shall not be twice vexed in respect of the same

cause of action.H. The Law looks at the immediate cause of damage, not at

the remote cause.

Business Ethics

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