The term ‘ETHICS’ originates from the Greek word ‘Ethikos,’ meaning character.
Morality is derived from the Latin word ‘moralis,’ which means behavior.
Ethico-moral actions are actions determined by character and expressed through behavior.
Ethics is a philosophical subject; business ethics is applied ethics.
Ethics vs. Morals
Morals are personal beliefs; ethics are actions.
Morals are often based on religion or culture, while ethics are based on logic and reason.
Ethical systems can differ even when morals are shared.
Morals relate to personal conduct; ethics relate to professional conduct.
Example: Euthanasia may be morally acceptable but ethically unacceptable for a doctor.
Ethics are based on logical reasoning and shared values; morality on gut instinct or religious beliefs.
Principles of Professional Ethics
Impartiality: Objectivity
Openness: Full disclosure
Confidentiality
Due Diligence
Fidelity of professional responsibilities
Avoiding potential or apparent conflict of interest
Ethical Business Behavior
Ethics is a conception of right and wrong behavior, defining moral and immoral actions.
Ethical business behavior promotes:
Good to society
Improved profitability
Fostered business relations
Employee productivity
Reduced criminal penalties
Protection against unscrupulous employees and competitors
Protection of employees from harmful employer actions
Code of Conduct & Ethics for Managers
Integrity
Impartiality
Responsiveness to public interest
Accountability
Honesty
Transparency
Code of Ethics – McDonnell Douglas
Honest & Trustworthy in all relationships.
Reliable in carrying out assignments & Responsibilities.
Truthful and accurate in what we say and write.
Cooperative and constructive in all work undertaken.
Fair & considerate in our treatment of fellow employees, customers, all other persons.
Law abiding in all our activities.
Committed to accomplishing all tasks in a superior way.
Economical in utilizing company resources.
Dedicated in service to our company and to improvement of the quality of life in the world in which we live.
Objectives of Ethics
Ethics studies human conduct and evaluates it as moral or immoral, right or wrong.
Ethics sets moral standards and norms for human behavior.
Ethics evaluates past behavior against standards and norms and makes judgments upon human behaviors as right or wrong.
Ethics prescribes moral standard behavior and provides solutions on how to behave in a specific situation.
Principles of Business Ethics
Standardization
Workable
Driven from Top
Scope of Ethics
Systematic Issues
Corporate issues
Individual issues
Ethics Sources
Religion
Culture
Law
Ethical Instances: Company Vehicle Use
Scenario: A company vehicle has been rented for the day. Can it be used for pressing domestic errands?
Abide strictly by the official routine.
Attend to those errands which are en route.
Do both official and domestic work.
Seek supervisor’s permission to run domestic errands as well.
Use the vehicle for domestic works and tip the driver.
Make an exception only when the domestic work is very important.
Any other, please specify.
Defining Business Ethics
Business ethics encompasses the moral principles and values that guide behavior in the business world.
It involves analyzing and evaluating ethical issues arising from business practices, relationships, and decision-making.
It is the application of our understanding of what is good or bad and right or wrong to the activities within the realm of business.
Importance of Business Ethics
Business ethics is vital for establishing trust with stakeholders, fostering a positive reputation, and ensuring sustainable and responsible business practices.
Nature of Business Ethics
Principles: Grounded in honesty, fairness, responsibility, respect, and transparency.
Values: Reflected in integrity, accountability, and social responsibility.
Stakeholder Expectations: Encompasses expectations of customers, employees, investors, and the community; crucial for maintaining trust and legitimacy.
Importance of Ethics in Business
To develop trust: Leads to predictability and efficiency of business.
Ethical practices create high returns for the company.
Sustainability of business.
Ethical Theories in Relation to Business
Normative Theories:
(Teleological) Consequentialists
Egoism
Utilitarianism
Eudaimonism
(Deontological) Non-Consequentialist
Kantian theories
Teleological Theories
Telo’s in Greek means ‘an end.’
The rightness of an action is determined solely by the amount of good consequences produced by that action.
Action can be morally right or wrong depending on the good or evil generated by that action.
Three forms of this theory:
EGOISM
View that associates morality with self-interest.
This theory treats self-interest as the foundation of morality.
It contends that an act is morally right if and only if it best promotes an agent’s long-term interests.
Any decision taken based on the theory of egoism gives great importance to the party’s interests and does not take into consideration the interest of any other party.
Utilitarianism- Jerry Bentham & John Stuart Mill
According to this theory, a decision is ethical if it provides a greater net utility than any other alternative decision.
It is not merely the agent’s own happiness but happiness to all those who are concerned with these actions.
An act is morally right if it produces the greatest happiness to the greatest number of people, and morally wrong if it produces more pain than happiness.
Eudaimonism
Eudaimonism implies performing one’s distinctive function well.
Aristotle argued that the distinctive function of humans is reasoning, and so the life “worth living” is one in which we reason well.
An action is good if it results in the fulfillment of goals along with the welfare of human beings.
Actions are said to be fruitful if they promote or tend to promote the fulfillment of goals constitutive of human nature and its happiness.
In The Eudemian Ethics, Aristotle considers the role of happiness, and what happiness consists of.
Deontological Theories
Deontology has its origin from the Greek word ‘deon,’ which means duty or obligation.
Actions are morally right independent of their consequences.
This theory focuses on certain fundamental duties that people have as human beings.
The end or consequences of our action are not important; our intentions are not important, but our actions or duties are important to judge them as ethically right.
Kantianism (Deontological duty-based)
Our actions should come from a sense of duty and not from any other purpose.
According to Kant, ethics is based on reason alone and not on human nature.
Telling the truth is always ‘right’ in itself, even if doing so produces some unfavorable results.
Criticism of Deontological Theories
Actions either pass or fail with no allowance for a ‘gray area.’
Moral dilemmas emerge when duties come in sharp conflict with each other.
Ethical Dilemmas in Business
A situation putting oneself in conflict to decide what to do is called a dilemma.
Conflicts of interest arise when an individual's personal interests clash with their professional obligations.
Employee rights and responsibilities encompass issues like fair treatment, workplace safety, and privacy.
An ethical dilemma is a situation in which one has to make a choice between two equally undesirable choices, each of which leads to unacceptable or unwanted consequences.
An ethical dilemma is a situation that often involves an apparent conflict between moral imperatives, in which to obey one would result in transgressing another.
According to Doug Wallace: An ethical dilemma exists when one is faced with having to make a choice among alternatives like:
Significant value conflict among different interests
Real alternatives that are equally justifiable
Significant consequences on stakeholders in the situations
Salient Features of Ethical Dilemma
Ethical dilemma involves multiple choices to be followed.
Ethical dilemma involves uncertain consequences in both the nature and extent resulting from choices.
Ethical dilemmas produce mixed consequences.
People might be directly or indirectly involved in ethical dilemmas.
Major Types of Ethical Dilemma in Business
Organizational Goals Vs Personal Values
Organizational Goals Vs Social Values
Organizational Practices Vs Personal Belief
Organizational Profit Vs Production and Sale of Hazardous Products
Work time Vs Personal Business
Resolving Ethical dilemmas at Workplace
Rushworth Kidder’s Nine-step procedure of resolving Ethical Dilemma
Define the problem and identify the moral issues involved in it
Determine who will be affected by your decision
Collect the relevant information, facts, and figures relating to the problem
Use the right vs. wrong method to isolate the illegal issues involved in the problem
Make choices between justice vs. mercy, truth vs. loyalty, individual v community, and short term vs. long term
Select a particular approach based on care, rule, and end to resolve the dilemma
Finally, decide the most suitable approach and take action without delay
Review the decision and, if required, take necessary measures to make the decision more effective
Kenneth Blanchard & Norman Vincent Peale – Book “The Power of Ethical Management”
Is it legal - Will I be violating either civil law or company policy?
Is it balanced? – Is it fair to all concerned in the short term as well as the long term? Does it prompt a win-win situation?
How will it make me feel about myself? - Would I feel good if my decision was published in the newspaper? Would I feel good if my family knew about it?
Ethical Decision-Making Frameworks
Identify the Problem
Gather Information
Consider Alternatives
Evaluate Options
Make a Decision
Ethical decision-making frameworks provide a structured approach to navigating moral dilemmas. These frameworks help individuals and organizations make informed and responsible choices.
Various Approaches
Consequentialist Approach
Focus is given on the practical consequences of action or decision taken.
No harm no foul
Answer the questions:
Who will be helped by your action?
Who will be a sufferer?
What kind of benefits and harms are involved, and what are their relative value?
What are the likely short-term and long-term implications?
Based on your answers, which one produces the best combination of maximum benefit and minimum harm?
Deontological Approach:
Focus only on action
Find an answer to the questions:
Is an action itself just and right?
Does an action demonstrate loyalty?
Common Approach for Resolving Ethical Dilemma in Business
Consult the code of ethics of your organization
Share the dilemma with your supervisor/Leader
Discuss your dilemma with other executives in the organization
Discuss your dilemma with peers and colleagues
Acquaint with the related past happenings
Ethical Business: A Sustainable Future
Ethical business practices contribute to a more sustainable and just world.
By integrating ethical principles into their operations, organizations can create a positive social and environmental impact, fostering a brighter future for all.
Ethics In Marketing
To influence the behavior of customers, marketers use various tools like:
Design of a product
Price
Message used to describe it
Place in which it is made
Why We Need Ethics in Marketing?
Customers develop more positive attitudes about the firm, its products, and services.
To create values or trust with key stakeholders
To build a good image about the organization in the minds of customers, employees, shareholders, and society.
Elements Influencing Ethical Behavior of Marketers
Individual Factors
Reference Groups
Opportunity
Rights of Marketers
Right to take decisions regarding the products to be offered in the market
Right to determine & Set prices
Right to make decisions how products will be made available to customers located at different places
Right to promote products in any ways
Marketing Executive Challenges
Marketing executives face the challenges of balancing their own best interests in the form of recognition, pay, and promotion with the best interests of consumers, their organizations, and society
Competition Act 2002
UN Guideline for consumer policy:
Physical safety
Economic Interest
Standards
Essential Goods and services
Redress
Education & Information
Specific areas concerning health
Sustainable consumption
Eight Customer Rights
Right to basic needs
Right to safety: Right to be protected against the marketing of goods and services, which are hazardous to life and property.
Right to choice
Right to redress: To seek redressal against unfair trade practices or unscrupulous exploitation of consumers. It also includes the right to fair settlement of the genuine grievances of the consumer
Right to information: Right to be informed about the quality, quantity, potency, purity, standard, and price of goods so as to protect the consumer against unfair trade practices. Consumers should insist on getting all the information about the product or service before making a choice or a decision.
Right to consumer education
Right to representation
Right to a healthy environment
Some Unethical Practices
False Advertising: Promoting products or services with deceptive or false claims, such as exaggerating benefits, features, or results that the product cannot actually deliver.
Bait-and-Switch: Attracting customers with an enticing offer and then trying to sell them a different, often more expensive product or service.
Hidden Fees and Charges: Not disclosing all costs associated with a product or service upfront, leading consumers to pay more than they initially expected.
Data Privacy Violations: Collecting and using consumer data without proper consent, or sharing personal information with third parties without transparency
Plagiarism and Intellectual Property Theft
Astroturfing: Collecting and using consumer data without proper consent, or sharing personal information with third parties without transparency
Manipulative Pricing
Exploitative Marketing
Unfair Competition
Cultural Insensitivity
Deceptive Social Media Engagement: Purchasing fake followers, likes, comments, or shares to artificially inflate social media metrics and appear more popular than you actually are.
Environmental Misrepresentation: Misleading consumers about a product’s environmental impact or sustainability practices to gain their trust and business
Unsubstantiated Claims: Making claims about a product’s effectiveness without proper scientific evidence or data to support those claims.
Unfair Pricing
Price Discrimination
Surrogate Advertising
A substitute to keep customers reminding of the brands.
To stop surrogate advertisement, the government has passed legislations like:
Cigarette and other Tobacco products (Prohibition of Advertisements and Regulation of Trade and Commerce, production, supply, and Distribution Act 2003)
Framework convention on Tobacco Control (FCTC)
The Advertising Standard Council of India (ASCI)
The cable television Networks (regulation) Act, 1995 (CTNA)
The prohibition of Publication or Telecast of Vulgar, Obscene, and Surrogate Advertisements and Re-Mix songs by Print & Electronic Media Bill, 2004
Ethics in Finance
A finance and Accounting professional may face pressure to:
Act contrary to law or regulation
Act contrary to technical or professional standards
Facilitate unethical or illegal earnings management strategies
Lie to, or otherwise intentionally mislead (including misleading by remaining silent) others in particular
The auditors of employing organization or
Regulators
Issue or otherwise be associated with a financial or nonfinancial report that materially misrepresents the facts, including statements in connection
Common Financial Frauds
Credit Cards
Bank Cheques
Mortgage
Tax
Bankruptcy
Hawala
Insider Trading
Insider Trading
Who is an insider?
A person connected to the company and who can reasonably be expected to have access to UPSI or
A person who receives access to UPSI.
Price-sensitive information:-
According to 2(ha) of the regulations, any information which relates directly or indirectly to a company and which, if published, is likely to materially affect the price of securities of the company
Money Laundering
The conversion or transfer of property, knowing that such property is derived from serious crime
Creating Ethical Environment
Ensuring that employees are aware of their legal and ethical responsibilities
Providing a communication system between management and employees
Ensuring fair treatment for those who act as whistleblowers
Hostile Mergers & Acquisitions
Takeover which goes against the wishes of target companies' Management & Board of directors.
Motives behind M&A:
Economy of scale
Economy of scope
Increased market share
Diversification
Strategies of Hostile takeover:
Tender offer
Proxy fight
Ethics in HRM
Scope:
Acquisition
HR Planning, Recruitment, Selection, Placement
Development
Training, Career Development, Organizational Development
Maintenance
Remuneration, Motivation, Social Security, Industrial Relations, Performance Appraisal
Control
HR Audit, HR Accounting, HR information System
Aspects of HRM in Which Ethical Issues Involved:
Recruitment
Selection
Promotion
Compensation
Discrimination
Sexual Harassment
Employee Privacy
Sexual Harassment
Improper conduct at the workplace by one person to another causing them humiliation and insult.
According to the United Nations Equal Employment Opportunity Commission (EEOC 1980) - “Unwelcome sexual advances, requests for sexual favors, or other verbal or physical conduct of a sexual nature constitutes sexual harassment when:
Submission to such conduct is made either explicitly or implicitly a term or condition of an individual's employment.
Submission to or rejection of such conduct by an individual is used as the basis for employment decisions affecting such individual
Such conduct has the purpose or effect of unreasonably interfering with an individual’s work performance or creating an intimidating, hostile, or offensive working environment
Prevention of Sexual Harassment
Reactive Approach: Steps by government
Proactive Approach: Steps taken by employer
Steps taken by employees:
Employees must freely and openly speak about sexual harassment.
Speak up at the time Set your own boundaries
Be aware of situations or people who may harass or harm you
Trust your own instinct
Create a witness to offensive behavior
Employee Privacy
Employee's right to what not be known about him/her.
Types of Privacy:
Physical privacy
Psychological Privacy
Social Privacy
Informational Privacy
Concept of CSR
Corporate Social Responsibility (CSR) refers to the ethical obligation of businesses to contribute to societal development, addressing social, economic, and environmental issues.
In India, CSR has evolved from voluntary philanthropy to a legally mandated framework under Section 135 of the Companies Act, 2013.
This law requires eligible companies to allocate at least 2% of their average net profits over the preceding three years to CSR activities, focusing on areas like education, healthcare, poverty alleviation, and environmental sustainability. 2%
Evolution of CSR in India
Pre-Independence Era:
Philanthropy and Charity: Early industrialists like Jamsetji Tata engaged in charitable activities, driven by moral obligations and religious traditions like donation (daan) and service (seva).
Support for Independence: During the freedom struggle, industrialists collaborated with leaders like Mahatma Gandhi, adopting his trusteeship model to use wealth for societal benefit.
Post-Independence (1947–1990):
Social Obligation Phase: After independence, CSR was influenced by socialism and protectionism. Corporates supported government-led initiatives like rural development programs but played a secondary role due to the dominant state presence.
Corporate Trusts: Businesses established trusts for social welfare during the