Ethical issues in business

Ethical Issues and Dilemmas in BusinessG NarasimhanDirector, Bumblebee AcademyAgenda Perception SurveyIndia is one of the Least Corrupt Countries in the World

Agree / Disagree

Perception SurveyIndia is one of the Highly Corrupt Countries in the World

Agree / Disagree

Perception SurveyArrange the following in the Order of More Corrupt to Less Corrupt :IndiaNigeriaJapanChinaUSASweden 123456Perception SurveyArrange the following Less Corrupt to More Corrupt :IndiaNigeriaJapanChinaUSASweden

Most CorruptLeast CorruptSource : Transparency International http://cpi.transparency.org/cpi2013/results/Corruption Perception Index Transparency Intl 2013 Survey Results

Source : Transparency International http://cpi.transparency.org/cpi2013/results/Perception Survey Ethical CompaniesWhich of the following Indian companies do you think should be part of the Worlds Most Ethical Companies

SaharaIndiaWiproSatyam (old) Tata Power

Perception SurveyEthical Companies

Introspection and ReflectionSelf-assessmentHow ethical I am

How ethical I want to be

Do I know what are my Core Values and Do I live by those values

Do I know what is ethical and what is not ethical

Is there a Knowing Doing Gap

How do I feel when I have done something unethical

AlwaysMostlySeldom MostlyAlwaysUnethicalEthical12345678910Creating Virtuous and Vicious CircleChoice is Yours!

Therefore.... Being Ethical is a Good BusinessBeing Ethical is a Good Business

Being Ethical Strengthens Our Position and Improves Our Competitiveness

Business Stakeholders expect Companies to behave EthicallyBut .. Being Ethical Poses ChallengesAnd, . We have reasons and excuses to rationalizeemBecauseNo universal principles on what is right or wrongWhat is right in one situation is wrong in anotherHow do we know what is right or wrong? And who decides? Cut throat Competition; Often competition wins deals by unethical means; Others getting promoted .It is common in our business and it is not wrongTo win business contracts, people expect bribesMy boss asked me to do this

Rationalizations ???

I thinkMy Behavior Isnt Really that Illegal Or ImmoralMy Action Is In the Interest of my companyNo One Will Find Out What Ive DoneThe Company or Boss Will Condone My Action And Protect MeWhat Would You Do?

How do you respond to real-life Ethical Dilemmas?

Source and Courtesy : http://abcnews.go.com/WhatWouldYouDo/page?id=10614513

Source and Courtesy : http://abcnews.go.com/WhatWouldYouDo/page?id=10614513 Ethical Dilemmas at WorkplaceEthical Dilemmas arise in business becausemultiple stakeholdersmake conflicting demands.3-2020Ethical Dilemmas at Workplace(1) You are the Marketing Head of a large firm. You have employed an agency to prepare market and competitive strategy. They have searched the trash of competitor and got a very important strategy document and they share that with you as part of the overall strategy. WWYD?

(2) You are the Head of Alliances and Strategic Partnerships of a Global Corporation. You get an information that one of your large partners in Indonesia is entertaining the Government officials by paying their trips to exotic locations. WWYD?

(3) As a Procurement and Purchase Manager, youve made a verbal agreement with a supplier. A competitor offers you a deal for 50% less. Do you take it the deal? WWYD?

Ethical Dilemmas at Work Place (2)(4) Youre traveling in Elbonia on business when youre invited to a feast by shepherds. Youre given the sheeps eyeball, the greatest Elbonian delicacy. To refuse it is the greatest insult. Everyones watching. Do you gulp it down? WWYD?(5) A close friend will be interviewed for a job with your employer. He asks you for a list of the questions in advance. Do you supply it? WWYD?(6) After closing a big deal, your manager surprises you with a warm, lingering hug. Do you tell your manager youre not comfortable with this? WWYD?(7) You decide not to hire a deserving candidate because hes wearing a nose ring. When he asks why he didnt make it, do you give the real reason? WWYD?

Ethical Dilemmas at Work Place (3)(8) You have a struggling young company. You have to choose between two equal candidates for a job, a man and a woman. The woman will work for 20% less than the man. Do you hire her for that reason? WWYD?(9) The customer wants a refund. You agree that a refund is called for but company policy says No. If you go to Corporate, the customers refund will be denied. If you act on your own authority, the customer will be satisfied, but you may get in trouble. What would you do? WWYD?(10) Youre reviewing the results of an employee survey and accidentally discover a way to see individual responses and comments. Do you keep reading or report the problem? WWYD?

Key Ethical Issues in Business

24Bribes vs. GiftsCost, TypeTimingConnectionCheck Company Policy

Conflicts Of InterestPromotePersonal InterestAbove OthersInterferes With Best Interest of Company StakeholdersUse of Private InformationConflicts Of LoyaltyLoyalty To?EmployerBoss

Family/Friend

Issues OfHonesty & Integrity

WhistleblowingApplauded or ShunnedCareer Suicide3-25

Loyalty To?ShareholderManagementEmployeesCustomerCommunityConflicts Of Loyalty25

Ethical Business PracticesConsumerRespect Consumer RightsAvoid exploitation of consumersQuality of products promote wellness and product safelyEmployeesRespect the employeesFair treatment of employeesNon-discriminationShareholderTransparency and governanceDisclosures and Information accessCorporate CitizenPrinciple and value based businessAvoid payment of bribesBehave as a responsible corporate citizenFair trade practices and Healthy competition

Unethical Business PracticesNon-compliance with code of conductAbusive behaviour, coercion, bullying, harassment of co-workersDivulging confidentialityTaking credit for co-workers ideasBribery and corruptionFinancial irregularities, false accountsCovering up incidents Lying to colleagues, customers and authoritiesUnfair DiscriminationSexual harassmentFiring whistle blowersMisappropriation of fundsMisuse of facilities for personal gainInsider tradingStealingConflict of interestQuestionable Payments

Ethical Business PracticesConsumerRespect Consumer RightsAvoid exploitation of consumersQuality of products promote wellness and product safelyEmployeesRespect the employeesFair treatment of employeesNon-discriminationShareholderTransparency and governanceDisclosures and Information accessCorporate CitizenPrinciple and value based businessAvoid payment of bribesBehave as a responsible corporate citizenFair trade practices and Healthy competition

Ethics and Business Ethics

What is ethicsIs Ethics following your Feelings? Relatives and strangers, Friends vs. foes, Prejudices and biases Is Ethics following your Religion? Animal rights (vegetarian & vegan), Euthanasia, Family planning, Gay What does the Religion say? Is Ethics following the Law? Apartheid laws of SA, No voting or property rights for women, Death penalty, Drugs Laws vary from country to countryIs Ethics following whatever the Society accepts? Entire society can become ethically corrupt Nazi Germany, no social consensus on many issues (abortion, gay rights, drugs, prostitution)Ethics is a Moral PhilosophyEthics - Discipline dealing with what is good and bad and with moral duty and obligation,A set of moral principles or valueA theory or system of moral valuesEthics assists individuals in deciding when an act is moral or immoral, right or wrongEthics can be grounded in natural law, religious tenets, parental and family influence, educational experiences, life experiences, and cultural and societal expectations. Business Ethics - Application of the discipline, principles, and theories of ethics to the organizational context. Business ethics - Principles and standards that guide behavior in the world of business Corporate Governance, Compliance, Ethics and Social Responsibility

Business Ethics - Themes for Discussion

Major theories or Moral Philosophies Applied to Business Ethics

Teleology Consequentialism Action EthicsThinking about doingTeleological theories Focus on the consequences caused by an action Often referred to as "consequentalist" theoriesBy far the most common teleological theories are egoism and utilitarianismEgoism Driven by Self interests Core of free market economy - profit centric business model Need checks and balancesUtilitarianismOverall good; e.g., companies decide to move their production facilities from one country to another. How much good and how much harm from the move? If the good appears to outweigh the harm, the decision to move may be deemed an ethical one, by the utilitarian yardstickBenefit cost analysis; Social benefit-cost analysisIssues of measurement and minority interest getting overlookedAcks that many actions benefit some and harm some; Dominant Business Philosophy

Deontology Agent EthicsThinking about being DeontologyFocus on the fairness of means irrespective ends / consequencesNo action to harm some for the benefit of othersEach treated with same respect and no one should be treated as means to an endPrinciples are permanent and unchangingJusticeFairness of action; Treat all fairly; Distributive fairness is based on the outcomes received by individuals and their perceptions of these outcomes. Procedural fairness is based on the processes (policies, procedures, rules) employed to reach decisions. Individuals evaluate the fairness of these processes in addition to (or instead of) the outcomes received. Interpersonal Fairness and Information FairnessRelativismNo universal principles ; right and wrong is determined by individual or groupsThe relativist believes that standards of right and wrong change over time and are different across culturesand does not accept that some ethical standards or values are superior to others. The concept of relativism can probably be summarized as "What's right for one may not be right for another," or "When in Rome, do as the Romans do."Ethical Dilemmas and Ethical DecisionsTheory, Practice and Outcome - CaseletsAs you watch the following video, note down your views, considerations and decision.

Ethical Dilemma.mp4

Business Ethics Resolving an Unethical Situation.mp4

Discussions Topics

What was your initial decision?Dis that decision consider the various factors that were brought out in the later part Do you think a structured approach to decision with guidelines based on the theories (discussed in previous section) would have helped you to take better decisions?

Ethical Decision making Framework for Individuals Four Stage Model

Factors Affecting Ethical Decision Making

Factors Affecting Ethical Decision MakingEthical Issues and Challenges in International BusinessBig Corporate Scandals: High Flying Cos Crumbled like Pack of CardsAIG Lehman BrothersWorldComSatyamEnronArthur Anderson

Corporate World, Capitalism and Free Markets Importance of Ethics, Governance and Social Responsibility

Ethical Issues - Timeline

Ethical ClimateSocial unrest. Anti-war sentiment. Employees have an adversarial relationship with management. Values shift away from loyalty to an employer to loyalty to ideals. Old values are cast aside.Major Ethical DilemmasEnvironmental issuesIncreased employee -employer tensionCivil rights issues dominateHonestyThe work ethic changesDrug use escalatesBusiness Ethics DevelopmentsCompanies begin establishing codes of conduct and values statementsBirth of social responsibility movementCorporations address ethics issues through legal or personnel departments

Ethical CultureDefense contractors and other major industries riddled by scandal. The economy suffers through recession. Unemployment escalates. There are heightened environmental concerns. The public pushes to make businesses accountable for ethical shortcomings.Major Ethical DilemmasEmployee militancy (employee versus management mentality)Human rights issues surface (forced labor, sub-standard wages, unsafe practices)Some firms choose to cover rather than correct dilemmasBusiness Ethics DevelopmentsCompliance with laws high-lightedForeign Corrupt Practices Act of 1977Values movement begins to move ethics from compliance orientation to being "values centered"

Ethical CultureThe social contract between employers and employees is redefined. Defense contractors are required to conform to stringent rules. Corporations downsize and employees' attitudes about loyalty to the employer are eroded. Health care ethics emphasized.Major Ethical DilemmasBribes and illegal contracting practicesInfluence peddlingDeceptive advertisingFinancial fraud (savings and loan scandal)Transparency issues ariseBusiness Ethics DevelopmentsERC develops the U.S. Code of Ethics for Government Service (1980)ERC forms first business ethics office at General Dynamics (1985)Defense Industry Initiative established (1986)Some companies create ombudsman positions in addition to ethics officer rolesFalse Claims Act (government contracting)

Ethical ClimateGlobal expansion brings new ethical challenges. There are major concerns about child labor, facilitation payments (bribes), and environmental issues. The emergence of the Internet challenges cultural borders. What was forbidden becomes common.Major Ethical DilemmasUnsafe work practices in third world countriesIncreased corporate liability for personal damage (cigarette companies, Dow Chemical, etc.)Financial mismanagement and fraud.Business Ethics DevelopmentsFederal Sentencing Guidelines for Organizations (1991)Class action lawsuitsGlobal Sullivan Principles (1999)In re Caremark (Delaware Chancery Court ruling re Board responsibility for ethics)IGs requiring voluntary disclosureERC establishes international business ethics centersRoyal Dutch Shell International begins issuing annual reports on their ethical performance

Source : ERC http://www.ethics.org/resource/business-ethics-timeline1960 s1970 s1980 s1990 sEthical Issues and Importance - TimelineEthical Climate 2000s Ethical CultureUnprecedented economic growth is followed by financial failures. Ethics issues destroy some high profile firms. Personal data is collected and sold openly. Hackers and data thieves plague businesses and government agencies. Acts of terror and aggression occur internationally.Major Ethical DilemmasCyber crimePrivacy issues (data mining)Financial mismanagementInternational corruption.IP theftRole of business in promoting sustainable developmentBusiness Ethics DevelopmentsBusiness regulations mandate stronger ethical safeguards (Federal Sentencing Guidelines for Organizations; Sarbanes-Oxley Act of 2002)Anticorruption efforts grow.Stronger emphasis on Corporate Social Responsibility and Integrity ManagementOECD Convention on Bribery (1997-2000)UN Convention Against Corruption (2003); UN Global Compact adopts 10th principle against corruption (2004)Revised Federal Sentencing Guidelines for Organizations (2004)Increased emphasis on evaluating ethics program effectivenessGlobal Business Ethical Issues and ChallengesChallenges to Global Business in Implementing Ethical StandardsEthical Issues are more complex than in home country due to considerable variation across countries in laws, culture, business practices, political, economic and social development (human rights, education, poverty, equality, etc.)Institutional and regulatory frameworks to implement ethical practices varyFacts of situations encountered internationally difficult to uncover

The complex task of formulating ethical policies guided by a combination of Laws, Ethical Principles, and Culture

Key Ethical Issues in Global BusinessEthical Issues in International BusinessInternational Law and InstitutionsHome Country law, Host Country Law and International Law from Intl. Institutions (ICC,WTO, UN, WIPO, etc)Enforceability of international law weak and also not uniformHome Country laws may not be enforceable in Host Country (e.g, US Sanctions against North Korea or Cuba, Product safety standards of EU CE Mark)Home and Host country laws may be in conflict (questionable payments FCPA of USA)Cultural RelativismSignificant cultural variation across countries (e.g., Fundamental religious states womens rights, Human rights in countries that are not democratic North Korea, China, Cuba)To aim for Universal Principles and Standards while respecting Local traditions Key Questions to answer when there is a Conflict of Cultural TraditionIs it possible to conduct business in host country without undertaking the practice?And is the practice violation of a core human value? (Human dignity, respect for basic rights)

Ethical Issues in International BusinessOperating in Developing CountriesReasons like poverty, lack of education, and inadequate healthcare create situations in which individuals cannot be expected to take the same decisions that would be made in a developed country; Consume ignorance, inadequate regulatory framework in many developing countriesLiability system in developed countries incentivize product safety and quality (e.g., prohibited drugs)AIDS and Sub-Saharan African Countries, Other Developing CountriesPatented and expensive AIDS drugsCompulsory licensing (Brazil), Indian Patent laws (no product patent until recently)

Ethical Issues in International BusinessResponsibilities for Working Conditions in Suppliers Factories SweatshopsSourcing from low cost countries to derive cost advantageIssues of Working conditions, Workhours, Minimum age (Child Labor), WagesPopular case of Nike in Southeast Asia (Vietnam)Questionable Foreign Payments and CorruptionExchange of gifts and favors is customary in number of countries may go beyond ethical standardsUS Response Foreign Corrupt Practices Act (FCPA)Covers the use of agents, intermediaries and third parties also

Ethical OrganizationsFramework for Ethically Acceptable Behaviour

Ethical OrganizationsOrganizations should display Ethical BehaviourFramework to Judge Ethical Nature of BusinessTheory of Corporate ExcellenceEthics and Shareholder ValueEthics and Corporate Governance

Leadership Ethical Role Model BehaviourOrganizational DNA and CultureCode of ConductPolicies, Guidelines, and Rules to guide behaviour and decisionsA code is an open disclosure of the way an organization operatesidentity Code of conduct offer an invaluable opportunity for responsible organizations to create a positive public for themselvesTool to encourage discussions of ethics and to improve how employees deal with the ethical dilemmas, prejudices and grey areas

Jack Welch on GE ValuesEthics Framework for Structure, Processes and Performance

Closing Note We face Ethical Dilemmas often big and small and our decisions shape our Life and Career

Let us create Awareness, Understanding and a Conscious Effort to Make Right Choices

Real Integrity is Doing the Right Thing, knowing that nobodys going to know whether you did it or not

Our Vision, Mission and ValuesTo Inspire and influence with Integrity and Innovation, Our Customers (Professionals and Students) to Explore Infinite Possibilities, Enhance their Capabilities and Accomplish More in their Personal and Professional Life.To make a difference to our Customers and Community by spreading traditional Values through Modern Methods and TechnologyTo build a community of lifelong learners with a shared purpose of Accomplishing More, Celebrating Life, by supporting one another and the community

Bumblebee PhilosophyBumblebees defy the Principles of Aerodynamics and Fly, as they are unaware of their Limitations.Believe in Yourself and You can explore Infinite Possibilities too.

G NarasimhanDirector, Bumblebee Academy

Ph +91 9845025586gnsimha@gmail.com

Thank You.