Business Ethics

Business Ethics
4/3/2018 1
Business Ethics - Introduction
• Ethics involves systematizing, defending and

recommending concepts of right & wrong behavior
• Ethics is a mass of moral principles or set of
values about what is right or wrong, true or
false, fair or unfair, proper or improper
• What is right is ethical and what is wrong is
unethical
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Business Ethics - Definitions
• There is only one ethics, one set of

rules of morality, one code that of
individual behavior in which the same
rule apply to everyone alike ….. Peter
Drucker
• Ethics is a branch of philosophy which
is the systematic study of selective
choice, of the standards of right &
wrong and by which it may ultimately
be directed ….Phillip Wheel Wright
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Business Ethics - Definitions
• Supreme oneness is the rationale of all

ethics and morality. Ethics cannot be
derived from the mere sanction to any
personage. Some eternal principle of truth
has the sanction of ethics. Where is the
eternal sanction to be found except in the
only infinite reality that exists in you & us
and in all ,in the self, in the soul
…. Swami Vivekananda
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Business Ethics: What Does It Really Mean?
Business Ethics:Today vs. Earlier Period
Society’s
Expectations
of Business
Ethics
Ethical
Problem
Actual
Ethical Problem Business
Ethics
1950s Time Early 2000s
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Ethics: Objectives
• Define the greatest good of man & establish a standard
for the same
• Set / Establish moral standards / norms of behavior
• An overall study of human behavior – what is moral /
immoral should be assessed
• Apply judgement upon human behavior based on these
standards and norms
• Suggest moral behavior, prescribe recommendations
about Do’s & Don’ts
• One’s opinion or attitude about human conduct is
expressed
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Ethics & Related Terms
• Ethics & Morality: Morality is a set of rules to guide the
actions of individuals
• Ethics & Religion: Ethics gets ideas from religion &
through experiments it approves them as Code of
conduct
• Ethics & Law: Law is a code of conduct which the
authority in power prescribes for society. It differs
from Ethics in its option to use force when necessary
• Ethics & Values: Values are deep-seated ideas & feelings
that manifest themselves as behavior or conduct
Law + Knowledge = Ethics
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Business Ethics
• Business ethics are the application of

general ethical rules to Business Behavior
• Business ethics are rules of business by
which propriety of business activity may be
judged
• Business ethics is a form of applied ethics
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Business Ethics
• The 3 C’s of Business Ethics are

– Compliance of laws, principles of morality &
policies of the company
– Contribution to society in terms of Quality of
products / services, employment etc
– Consequence of business activity towards
environment, social responsibility towards
shareholders, bankers, customers, employees &
good public image
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Business Ethics – Case Study 1
Sanjay Verma was an MBA, specialized in Marketing & Advertising. He has
just joined ABC Ad Agency. He was a competent & intelligent person with
outstanding performance during his MBA period at the institute. Yet he
got this job with great difficulty due to recession in the job market. He
had somehow managed to find this job through a contact of his uncle. The
chairman of the company wanted him to somehow persuade a well known
newspaper to avoid reporting on a controversial corruption charge against
him & instead write a favorable editorial. Verma was not convinced that his
chairman was clean in the case. On the other hand the newspaper was
willing to accommodate the chairman, if the organization was willing to give
a large size advertisement. Recently Verma lost his father leaving Verma
to take care of his mother & three sisters. What should Verma do?
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Business Ethics – Case Study 2
Amit was a young & dynamic manager at XYZ Pvt Ltd and was recently
married. Due to the nature of his job, he had to do lot of travelling and
therefore unable to devote his time for his wife. At one time he was
away for 25 days tour only to return for a day and again go for 10 days
tour. This situation led to differences in his married life, turning to
serious note. Once he took his wife along with him to tour and found
that he and his wife could stay in hotel within the permissible limits of
his lodging & boarding allowance with no extra burden on his company.
Thus he was away for work for a good part of the day but could spend
time with his wife in the evenings. This situation worked out perfectly for
himself & his wife and their relations became good. Therefore he
started taking his wife along with him on his tours.
Is it ethical on the part of Amit.
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Business Ethics - Significance
• Good business ethics promotes good business
• Good business ethics always leads to positive consequences
• Good ethical behavior will increase goodwill of both business as well as
the businessman. If the business image is tarnished it would have a
direct consequences on sales, profits, morale & day to day functioning of
the business
• Good B. ethics protects both sides of the business
• Good ethics promotes self satisfaction, mental relief, free from anxiety
• Good B. ethics encourages & motivates others to follow and sets
example
• Good B. ethics breeds success
• Good B. ethics has ushered in an era of New Management that has laid
down a ‘code of conduct’ based on good ethical practices
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Concept of New Ethics
• New economy has brought in greater transparency /

flexibility but also greater complexity & risks
• This has resulted in a change in the ethical dimension by
raising new ethical issues
• Varied dimension of the new economy like globalization,
technology, assets, framework, recruiting & talent retention
has lead to the need for a new definition of ethic
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Concept of New Ethics – Ethical Dimension
• A good code of conduct should include certain
managerial & employee guideline for making ethical
decisions.
• A typical code of ethics would include
– Do not use abusive language
– Manage personal finance well
– Demonstrate courtesy, respect, honesty & fairness
– Exhibit good attendance
– Conduct business in compliance with law
– Follow all accounting rules & control
– Make true claims in product advertisements
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• Globalization: Growing integration of economies & societies around the

world has lead to globalization – faster communication, improved
infrastructure, technology, changed regulations, free trade & free
movement of people. Ethics, morality & globalization are connected with
each other.
• Technology: is the driving force helping business face challenges of
today's competitive business environment. All functional areas of the
organization – marketing, finance, HR, manufacturing, are being
facilitated by technology
• Intangible assets: Everything that can be counted does not necessarily
count; everything that counts cannot be necessarily counted .... Albert
Einstein . All intangible assets like customer, intellectual property,
employee, leadership, culture, strategy, brand, innovation , knowledge,
are future oriented so they create future value. Intangible assets are
difficult to manage & control and hence risky. Intangibles cannot be
directly measured.
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War for Talent :
• This is a critical driver for corporate performance. Good talent
management is required for hot economic times.
• Talented, skilled, knowledgeable people with innovative ideas are
amongst the most valuable intangible assets of a company. Recruitment,
selection, as well as retaining talented people is a big challenge to
companies today.
• Many companies offer attractive financial incentives to recruit / retain
talent. However these are inadequate.
• Companies who do a better job of addressing the needs of the Genx’ers
will be the most successful in this war for talent. Some of the steps
required to address this war for talent are
– Discover the needs/wants of the talented people
– Offer a good package in line with the competition
– Assessment of gaps based on expectations of employees / realities
– Address the root cause on why people want to leave the organization
– Healthy work life balance
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Factors Causing Unethical behavior
• Competition
• High expectation of the stakeholders of the business like
shareholders, employees, customers etc
• Ambiguous situations creates ethical dilemma leading the
manager to take decision on an alternative which gives
higher return at the cost of losing integrity.
• Political corruption
• Social values & customs are not followed by the new
generation
• Money & success becomes the important motivator behind
any activity
• People neglecting social responsibility, integrity & discipline
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Unethical conduct
• Encourage corrupt practices
• False representations of returns & income statements
• Exploitation of scarce natural resources
• Ignoring social interest
• Unhealthy competition
• Political donations
• Exploitation of common consumer
• Illegal trade with enemy country
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Factors for building an Ethical Infrastructure

• Commitment from Top Management: Ethical behavior should
be fully supported by top management by setting examples.
• Setting up of an ethics committee: which looks into
– Holding meetings to discuss ethical issues
– Dealing with grey areas
– Communicating/enforcing the code of conduct to all employees
– Tracking violations of the codes
– Rewards / punishment for compliance / violation
– Reporting to top management on the ethics activities.
Code of Ethics:
• To encourage ethical conduct, formal codes of ethics are
framed
• A4/3/2018
code of ethics states an organization’s basic & primary19
values and rules of conduct
Communicating Ethics
• The best ethics program is one which is communicated well
and easily understood by all
• Both written and verbal form of communication needs to be
adopted
• Communication needs to clear & crisp without any ambiguity
Ethics Training: Effective ethics training should have
• Employee participation to exchange views
• Clarify ethical values & enhance awareness of ethics
• Define criteria for ethical decision making
• Focus on ethical issues of the organization
• Investigate ethical environment of the organization,
analysis, strategies, resources & goals an upgrade them
continuously.
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Response & Enforcement

• Implementing an ethical program is one of the biggest
challenges for an organization
• Reward systems, incentives & penalties form a part of
enforcement
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Case Study 3
An airplane manufacturer has spent great deal of money to
develop a new state of the art airplane. The company needs
cash badly as it is financially over extended. If it does not
get some large orders soon, it will have to close down some
part of its operation. Doing that will put several thousand
workers out of job. The result will be disastrous not only
for the workers but also for the town in which they live.
The President of the company has been trying to influence
the government of a foreign country in a large purchase. He
learns that one of the key government minister in charge of
making the final decision is heavily in debt because of
gambling. He quietly contacts gthe minister & offers him
one million rupees in cash if he awards the contract for 10
planes to his firm. The money is paid and the contract is
awarded.
Comment on the ethics issue involved in tha above case
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Values & Ethics
Value: What we choose as worthwhile or believe to have merit in a general

or broad sense. Issues of right or wrong are related to ones ‘Values’.
Values are the standards of right & wrong. Whether something is right
or wrong is not a matter of fact. It is a matter of opinion. An action may
be upheld by some as right while others might have a contrary view.
Values represent
• A specific mode of conduct or end state of existence is personally or
socially preferable to an opposite or converse mode of conduct or end
state of existence
…… Stephen Robbins
Edward Spranger defines Values as the constellation of likes, dislikes,

viewpoints, inner inclinations, rational / irrational judgments, prejudices,
and association pattern that determines a persons view of the world.
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Values & Ethics
Characteristics of Values
• Values tend to be relatively stable & enduring. A significant portion of
our values are established in our early years from parents, teachers &
others
• Values constitute the foundation of one’s character. They are the core
of our personality and a powerful force affecting / influencing behavior
• They are abstract representation of what people believe as right,
proper & worth while to pursue
• Some values are not fixed, but change over time & situation
• Values have intensity and content attributes in which the content
attribute says that a mode of conduct is important and the intensity
attribute explains how important
• Values which are internalized by an individual, becomes a part of his
personality, then go beyond the zone of choice for the person
concerned. His actions based on these values then become spontaneous
& continuous, automatic and instinctive.
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Values & Ethics
Value Formation in Society: The values in an individuals value

system are introduced and later reinforced over a life
time of experiences, particularly during growing up or
formative years. During this period the major influences
are from
1. Family one is born into
2. School / educational institutions one goes through
3. Religion
4. Society / community one belongs to
Values are fostered by each of the above institutions &
together form the value system of the individual.
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Values & Ethics
Types of Values
Instrument Values: The values which concerns the way we
approach the end states. These relates to means of achieving the
desired results. Examples are
• Hard work & achievement
• Education & intellectual pursuits
• Self sufficiency, independence
• Truthfulness, honesty
• Assertiveness- standing up for yourself
• Being well mannered & courteous towards others
• Open-mindedness – open to new ideas
• Caring towards others
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Values & Ethics
Terminal Values: They are those end state goals that we praise such as
comfortable life, a sense of accomplishment, equality among all people.
Some of them are
1. Happiness; satisfaction in life
2. Peace & harmony in the world
3. Knowledge & wisdom
4. Pride in accomplishment
5. Security; freedom from threat
Ethical Value System: Everything that we see, hear, say, imagine or do
can be divided into two main categories
1. The way situations are
2. The way situations ought to be
How situations ought to be is what gives rise to values. These values are
not easy to measure or express in words. If we know the consequences of
our actions, we can convert values into rules of behavior that can be
described as ethics.
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Values & Ethics
Any initiation of action begins with an inventory of values.
These get converted to intentions for actions, which then get
articulated as actual behavior.
Values Intentions Behavior Consequences
One of the important lessons to learn in ethics is to see life as
it is, without our perceptions and attitudes distorting it to fit
in with what we want to see. All of us react not to reality
itself, but to our own interpretation of reality. Our behavior is
affected by not by a particular situation, but by how we see
and what we see in that situation. When we describe the world
around us or people in it, we in effect describe ourselves, our
perception, attitudes, our morality and our ethical value
system
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Values & Ethics
Ethics & Value Maximization
When ethics & values are taken together, we should do the
analysis of ethics in relation to value maximization to find out
the values of ethics for people working in any organization
Ethics & Trust
Trust is one of the most important ethical complements, they
are compatible with each other as ethical behavior leads to
trust
Ethical Build trust Higher

behavior of among productivity of
employees the organization
employees
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Ethics in Organization
Development of Ethical Corporate Behavior
Organization
Employees
towards
towards
Employees
Organization
Ethics
Domain
Organization
towards other
Economic
Institution
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• Organization towards employees: It covers areas of

wages & working conditions, hiring & firing and employee
privacy
• Employee towards organization: Covers how employees
treat the organization. Whether employees maintain
honesty & confidentiality with regard to company matters
when dealing with outsiders
• Organization towards other economic institutions: Deals
with how organizations treats other institutions like
share holders, suppliers, customers, competition &
dealers
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Methods for Developing Ethical Corporate Behavior

1. Ethics training: To achieve corporate excellence across the organization
covering all functions. Many companies have started regular ethics
training. Carefully designed ethics training programme can make a
positive contribution. Ethics training has a long lasting effect unlike other
training programmes. Some of the objectives addressed through the
ethics training programmes are
a) Creates awareness of companies ethical policies
b) How to apply & where to apply ethical principles on a day to day basis
c) Covers all in the organization with simulated case studies based on actual
events in the company
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2. Code of ethics : This reflects the organizations primary
values, norms, beliefs & ethical rules of operations.
Generally framed to encourage ethical behavior duly
supported by top management. When managing complex
issues, having a code of ethics helps in continued
dialogue & reflection around ethical values produces
ethical sensitivity & consensus. Continuous feedback,
review, modification & updation needs to be done. Each
function can have its own code of ethics like for
Marketing, Purchasing, Design, Accounts &
manufacturing
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3. Organizational Ethics Development System (OEDS)

This involves
• Development of ethics policy handwork & manual for self
governance and integrity.
• Top management commitment which is very important to
corporate ethics should be effectively communicated.
• Assessment of ongoing improvements of ethics
• Sound ethics reporting & conflict resolution process for
non-compliance
• Assessment of individual / organization’s integrity system
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4. Ethics Committee: Formation of an ethics committee is a new

concept. Some of the salient features are
a) Periodical assessment
b) Frequent meetings about ethical issues
c) Proper communication about code of ethics from top to bottom
d) Establish reward & punishment system
e) Enforcing the codes
f) Timely reporting to BOD’s
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5. Ethics Advocate : An ethics specialist or officer is a member of the
Board of Directors who plays a key role to guide ethical conduct & a
good and wide contribution in board’s decision making. He shows the
correct path to the board members as well as other decision makers
in the light of ethics.
6. Integrate Ethical Concepts :Senior level executives have
responsibility to apply & integrate ethical concept in day to day
actions. They have to build a kind of structure that supports ethical
behavior like proper information to new employees about ethics
standards, annual performance appraisals, ethical guidance and very
important system of internal whistle blowing which makes higher
management aware of violations in time.
7. Checklist Method :By using a checklist, employees can avoid situations
wherein people do unethical behavior & justify it as saying that its not
illegal
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7. Rewards & Punishment system :Motivation has a great
impact on employees behavior. So the best way to get
people on ethical path is establishment of a fair reward
system. So when people behave in an unethical manner,
they do it for some hidden rewards. Hence the
organization must develop a system to reward ethical
behavior & punish unethical behavior. This will motivate
people to conduct themselves ethically.
8. Whistle Blowing :Whistle blowing is when an employee
tells the employer, who is breaking the law. This was first
used for Government employees who made complaints to
public about corruption. In a true sense whistle blowing
involves telling somebody outside the company about the
illegal activities being carried out within the company.
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Whistle Blowing
Internal External
Reports the unethical behavior to Reports about unethical
higher authorities in the same behavior to external agencies
organization like media, newspaper or
public interest groups
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10. Other Guidelines :

• Establish audit agency reporting to outside directors
• ‘Practice what you preach’ – should be followed by the
leadership team
• Surprise & unpredictable audits
• Ethics must be evaluated for long-term impact on the
individual as well as the organization
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A company ‘X’ listed on NSE supplies components to company ‘Y’. Y markets
the components in the global market. Since the company ‘Y’ has a stand in
the global competitive market, it has signed certain agreements with
company ‘X’ which specifies that company ‘X’ will use raw materials from
well known companies ‘A’ & ‘B’.
Instead of buying the raw materials from ‘A’ & ‘B’ as per the agreement,
company ‘X’ buys from elsewhere with bills & certificates identical to ‘A’ &
‘B’. Suresh who is a manager with ‘X’ came to know about the companies
unethical practice regarding printed fake bills & certificates providing
substandard products to company ‘Y’
He tried to expose the fraud internally and approached to the head of the
Deptt. As there was little protection to whistle blowers, Suresh has been
fired by his boss. But he did not give up that easily. He approached to an
external agency ‘POLO’ services to expose the fraud. As the proof of the
mischief, he showed the fake bills & test certificates including the invoice from
where they were printed.
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Some experts from POLO services approached company A. The CEO of
company A scrutinized the bills and confirmed that they were fake. After
this Suresh with personnel from POLO visited company Y and convinced
company Y’s top management about the fraud. Company Y set up a
committee to go through the entire case in detail.
One month later Suresh again approached company Y to find the progress
of the case because of which he had lost his job. He talked to the CEO of
the company and was very much disappointed to see that the case was all
over. The CEO tried to make up the things by merely saying that as far as
Quality was concerned they found everything perfectly alright and as
company X was facing some problems of excise evasion, law would take its
due course. Suresh regretted about company Y’s response and was very
confused about why no action was initiated against the proven fraud.
List your comments on the case
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Ethical Leadership
Leadership:
The ability to influence a group towards the achievement of goals.
Leadership plays a significant role towards goal attainment. Leadership is
different from Management. Good Management brings about order &
consistency by drawing up formal plans, designing & monitoring results
against plans. Leadership deals with coping with change. Leadership
develops a vision of the future, align people by communicating this vision
& motivate, inspiring them to overcome hurdles.
Leaders in the 21st century are facing a conflicting situation where on the
one side there is a pressure to show excellent results by exploiting
opportunities taking into account new economy, and on the other side there
is pressure to discharge social responsibilities, respond to growing
expectations from customers.
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Ethical Leadership
To operate a business companies need to have social approval &
an implicit license from a number of stakeholders. This social
approval demands from leaders & their companies to follow
processes which are consistent with ethical & moral values.
Customers Suppliers
Industry reputation
Employees
Politics
Company Investors
Public Opinion
Competitors
Law
Industries & Mkt Std
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Ethical Leadership
Leadership – Ethics & Values:
• Leaders who are able to keep a balance between entrepreneurial skills &
corporate citizenship are the effective leaders of the new economy
• Effective leadership is about laying the foundations for the efficient &
ethical conduct of business
• Long term survival as well as growth starts from ethical leadership
• Integrating ethics into the organization needs true effective leaders
• Organization mission & objectives can be reflected by their vision
• To take an organization on the excellence path, a blend of strategic &
culture is required which can be achieved by effective leadership
• Strategic thinking & cultural building can be achieved by a leader's
moral principles & integrity
• Leadership makes real difference between success & failure, whether in
war, business, sports, family & society
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Ethical Leadership
Establish An Ethical Framework:
The Co-operative Bank, UK aims to deliver value to all its
Partners in a balanced fashion over time, where value is
defined by partners & not the Bank. In 2000, the Bank
produced a pre-tax profit of 90.3 million pounds, an increase
of 9% compared to 1999. The after tax return on equity was
22%. The outstanding commitment of the staff was the single
most important reason for the success. In every staff survey
conducted it was found that extra ordinary levels of pride in
the Bank as the leading promoter of ethical business practice.
Mervyn Pedelty, CEO
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Ethical Leadership
The example in the previous slide clearly states that ethical framework
which takes an inclusive approach starts with “ Leadership Philosophy “.
The interpretation of ethical value system may vary for different
organizations. It is far more important that values are acceptable to
employees rather than being enforced by top management. Therefore it is
quite important that top level management & leaders demonstrate the
values they preach. Leaders have an important role to establish the culture
in which ethical behavior can be nourished. By setting clearly the purposes
& values, achieving universality in diversity, identifying success, measuring
performance objectively and providing appropriate rewards & further
communicating with all stakeholders, leaders can contribute effectively in
the set of ethical infrastructure.
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Ethical Leadership
To show how a leader can influence his followers to follow ethics, here is a
good example about IBM.
As early as 1961, I circulated a standard of ethics about what our people
could & could not do. These were rules against bare-Knuckle selling
practices, such as disparaging other companies products or leaking
information about machines we hadn’t yet announced in order to block a
competitor from making sale. Perhaps the most important, I told the
salesman that in fighting for orders, they had to show a sense of fair play.
Tom Walton Jr, President IBM
Mr. Walton's 1961 note to salesman includes the words ‘Turn the situation
around. Suppose that you were a Competitor – small, precariously financed,
without large support organization and without a big reputation in the field,
but with a good product. How would you feel it if the big IBM company took
the action which you propose to take’
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Ethical Decision Making
The very speed of change introduces a new element into

management, forcing managers to make more & more decisions
at a faster pace. ‘Alvin Toffler’
Management
Planning Goals &
Decision
Organizing Achievement
Making
Leading s
Controlling
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Ethical decision making is a very complex & difficult task.

There cannot be a single standard or process which can be
followed by all persons in the organization. People who work in
an organization are the moral agents. They make collective
decisions and act on them. They follow certain rules which are
explicit / implicit, codes of conduct & regulations. Actions
based on the followed behavior can be subjected to ethical
appraisals.
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Structure of Ethical Decision Making

Identify problem
Generate alternate solutions
Evaluate alternatives using cost-

benefit approach
Select the best solution
Implement the chosen solution
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How to Use Ethical Reasoning :

1. Utilitarian Criteria: This is used to provide the greatest good
for the greatest number which is guided by the value ‘UTILITY’.
Decisions are made on the basis of outcomes or consequences. It
attempts to make ethical evaluation precise by aggregating the
happiness of everyone affected and deducting their unhappiness. To
be on the safer side decision makers choose utilitarian criteria for
important decisions like ‘termination’, closing down plants, laying off
large number of employees, raising prices in the best interest of the
organization.
Many people have contradictory views and they argue that the perspective
needs to change. Hence some more criteria has been developed to guide
decision makers using non-utilitarian criteria
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2. Rights Criteria: Decision making based on Rights Decision
which is consistent with the fundamental rights and
liberties as laid down in the constitution like the right to
speech
Example: As whistle blowing is the latest phenomenon
occurring in the modern corporate world of the 21st century.
So if decision makers use rights criteria, a good protection
can be given to the whistle blowers when they blow the whistle
against wrong doers
3. Distributive Justice Criteria :This ethical reasoning sees
justice value as a most likely outcome of an ethical
process of decision making. The essential feature of this
concept is Transparency & full participation of those
affected. This requires individuals to impose & enforce
rules fairly & impartially so there is equal distribution of
benefits & costs
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4. Social Contract Criteria: It suggests that empirical & normative –
what is and what ought to be must be combined. It integrates two
contracts
a) General social contract among economic participants that defines the ground
rules for doing business
b) A more specific contract among specific members of a community that covers
acceptable ways of behavior
Studies have shown that Utilitarian is consistent with objectives such as
efficiency, productivity & high profits. But because of the changing world
of management, this opinion, perspective should also be changed. New
society demands to follow non-utilitarian criteria, managers must fix some
ethical standards. Commonly accepted virtues such as happiness,
lawfulness, consistency, integrity, & loyalty may be in specific situations
conflict one another. Thus managers typically face moral dilemmas in their
decision making. The two approaches to moral questions are
a) Natural Law: This approach considers that certain ultimate values are
matters of natural law. Under this view, certain actions are always
4/3/2018 53
wrong because they break some basic intuitive law.
b) Situational law: To determine that an action is right or

wrong, it totally depends on the situation in which the
action occurs. This view holds that an action under one set
of circumstances and one environment would be right.
Where as the same action under another set of
circumstances and in another environment would be
considered wrong.
Decision Making
Foreseeable
Ends Means Motives Outcomes
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Ethical & unethical actions are largely a function of both the
individual’s characteristics and the environment in which he
Works. The following model explains the ethical/unethical
decision making behavior.
Organization Locus of
Moral Development
Environment control
Ethical/unethica
l decision
making behavior
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Moral Development : General belief is that a persons values
are formed during his childhood and do not change
subsequently. The ability to deal with moral issues develops as
they move through their lives. The process of examining ones
moral standards and applying them to concrete situations
includes two parts
1. A persons ability to use and evaluate his/her moral standards, which
develops in the course of a person’s life.
2. Reasoning processes through which these moral standards are
employed and evaluated. The highest one’s moral development is, the
less dependent he is on outside influence.
Example: Managers with high moral development place
increased values on the rights of others and regardless of majority’s
opinion. They are likely to challenge organization practices which they
believe are personally wrong.
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Organization Environment: Whether the work/organization
ethics align with personal ethics. Does the organization
support / encourage ethical behavior by rewarding it or
discourage unethical behavior by punishing it. An individual
with high ethical behavior gets demotivated if the
organization does not recognize the same. The converse – a
new comer in an ethical organization, though not so ethical
personally, slowly moulds in the morally strong environment.
Locus of control: Locus of control is a personality trait which
measures the extent to which people believe they are self-
responsible for the happenings and events in their life.
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Locus of Control
Internal External
Meaning – believes what Meaning – believes that what
happens to them in life is fully happens to them is because of
because of their own actions luck or chance.
Consequences – believe in Consequences – rely on

themselves; follow their own external influence, less likely to
internal standards of right / take responsibilities
wrong to guide their behavior
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Problems in Ethical Decision Making
1. Due to globalization, as companies deal with other countries where
cross culture diversity issue arise. Managers working in MNC’s find it
very difficult to standardize ethical standards as they do change as
society changes
2. Sometimes decision makers do not follow what they must follow as
they have conflict in individual values vs. organizational goals.
3. Individual moral standards affect whole organization decisions if they
are morally strong, ethical decisions would be the outcome
4. If the decision makers / managers / policy makers are greedy, look
for short cut routes to earn in the shortest possible time, they have
an upper hand on the moral values and therefore ethically the decision
process would be corrupt.
5. Competitive pressure would also be one of the main causes which
forces decision makers to choose such path where they have to kill
their morals, values and move on unethical path just to cope with the
competition.
6. Poor decisions without deep thinking of consequences
7. Ambiguous situations create problem which put the manager in
dilemma as to which decision they should make & follow
8. 4/3/2018
Pressure of budget systems 60
Guidelines for Manager for Ethical Decision Making
1. Have individual codes of conduct (personal code of ethics
– moral, right & ethical)
2. Industrial codes of ethics - list of Do Not’s / Do’s
a) Non deceptive ad's
b) Fair dealing with customers
c) Safety measures
d) Quality products
3. Professional managers who are more ethical do not go for
compromises
4. Sometimes Govt. rules, values & beliefs guide managers to
follow ethics path in decision making.
5. Corporate Code of ethics
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Ethical Dilemmas
Ethical Dilemmas in Organization
Ethical dilemmas are situations where business men face lots
of choices and no clear cut right answer. Business men find
dilemmas out of the eternal conflict between ends & means.
Ethical dilemmas are complex judgments on the balance
between the economic performance & the social performance
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Ethical Dilemmas
Salient Features of Ethical Dilemmas
• Uncertain outcomes: One cant be sure about the consequences that
result from most ethical choices.
• Multiple choices and alternatives: These are situations where we find
more than two alternates which have to be considered.
• Mixed Consequences: Ethical dilemmas in management when solved,
the outcome oppose each other. One decision considered as favorable
by one party and unfavorable by another party. Example – a decision
to terminate 10% of the workforce & increment in the salaries of the
remaining 90% workforce.
• Direct/Indirect involvement: Ethical dilemmas are more prominent
when one is directly involved as against a person who has an indirect
involvement. Example-What do you do when your boss wants you to
make false TA / DA bills and transfer the benefits to him.
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Ethical Dilemmas
Approaches / Method for Resolving Ethical Dilemmas.
There are no easy approaches to resolve ethical dilemmas. As
the degree of complexity increases, the risk to choose and
Apply the approaches & methods will become more. Some of
the approaches are listed below.
Approaches to Resolve Ethical Dilemmas
Utilitarian Universalism
(End-based) Care-based Virtue ethics
(Rule-based)
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Ethical Dilemmas
1. Utilitarian (end-based) approach: This was originated by the British thinker
Jeremy Bentham. It aims at creating the greatest degree of benefits for
the largest number of people. According to this system, a human conduct
is considered as good if it results in benefits for society and bad if it
generates harm to society.
2. Universalism (rule-based): This is based on the duties & obligations of an
individual. The moral worth on individual action should be judged by the
intention of the person and not by the outcome of the action. It assumes
that good intentions always result in good outcomes, ultimately if not
immediately.
3. Care-based approach: You have to reserve the dilemma keeping in mind
that you have obligation to care for those you have a close relationship or
who care for you. You must care for them just to maintain a strong bond in
relationship. But some men argue that this would create favoritism while
working with those you have valuable relationship as well as it can
degenerate into unjust favoritism & sacrifice of own needs to care for
children, parents, spouse & friends with whom you have a close
relationship.
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Ethical Dilemmas
4. Virtue Ethics : Virtue ethics can be represented as a
mental construction with prudence.. This mental
construction has two ceilings – one is crowned by private
prudence and the other by public prudence. In general we
say that when a person follows virtue ethics, that means
while performing any action, he / she should develop a
morally virtuous character.
Methods of resolving ethical dilemmas : Ethical dilemmas occur
in organizations in different forms, framework and
structure. Hence a single unique /standard method can not
be applied to resolve them. Each organization has its own
strategies, planned procedures for dealing with ethical
dilemma. Some of the methods / steps adopted by
different organizations are
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Ethical Dilemmas
1. Define the problem and clearly recognize the moral issue in it
2. Determine who will be affected by the decisions? What would be your
role?
3. Until the ethical dilemmas can be reduced to common issues which are
manageable, it is hard to resolve them. Collect information & facts about
the problem.
4. Isolate the illegal issues involved in the problem by testing right versus
wrong.
5. Identify right v/s right paradigm such as
a. Justice v/s mercy
b. Short term v/s long term
c. Truth v/s loyalty
d. Individual v/s community
6. At this stage you can select any one appropriate approach to resolve
dilemma like
a. Care based
b. Rule based
c.
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d. Virtue based
Ethical Dilemmas
7. Find out if there are any other way out of the situation
8. Decide & act – use approach that is most suitable and take action
9. Review the decision.
Platinum Standard of Ethics : Scoft Ventrella provided a platinum standard of
ethics for dealing with ethical dilemmas as listed below.
I. Ask yourself – whose problem it is? Is it a case of conflicting interests or a
question of right and fairness? Legal /illegal
II. Does the decision accurately reflects the kind of person you are? Does your
character match your decision? Do you follow – Practice what you preach?
III. Be careful and aware of what actions you show and try to imagine the
situations that if all your deals, actions, phone calls being observed,
recorded and further reported, what would be the outcomes?
IV. Keep your words – How firmly you fulfill your commitment?
V. Develop & sustain integrity – the most powerful value is integrity which is
a. Courage (telling the truth)
b. Self discipline
c. Goodness - honesty, morality, kindness, fairness, generosity
d. Centering power
e. Living by inner truth and inner mind to remain incorruptible ie. Let your mind be guided by
conscience
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Ethical Dilemmas
Case study A:
Amith Mishra, GM (HR) for a manufacturing firm ABC. The
firm is undergoing a major change in direction. The rapid
Changes in industries as well as competitors dynamic
policies and plans, puts a big pressure over the firm to
adapt in the new environment. Mr.Mishra is thinking
of hiring some young & energetic person to cope with the
changing dynamic situation. ABC has organized a walk in
interview for the new recruitments. Ms. Isha Patil, well
qualified as well as experienced in similar field has
appeared for the interview. She has just left one of the
competitor’s company because of some personal reasons.
Meanwhile in the interview she indirectly gave hints that
she4/3/2018
would be happier to tell you all the competitors plans
69
&
policies. What should Mishra do?
Ethical Dilemmas
Case study B:
Mr.Murthy was working as an officer in the excise dept of a reputed steel
company. He was from a very reputed & good family. The steel company was
reportedly involved in excise evasion of its goods. Excise evasion resulted
in the dealers selling steel which was not excise paid. Mr.Murthy along with
his boss were directly involved in excise evasion. Their philosophy being
that they are doing it for the good of the company and not for themselves.
The govt. had recently raided a few companies practicing excise evasion in
the vicinity of the steel company. Therefore Mr.Murthy was under
tremendous stress these days. Even he knew that he his name would come
in the list as one of the company’s executive to be interrogated.
Mr.Murthy wife, knowing about the entire situation advised him to get out
of such activity or else quit the company. Mr.Murthy was in a dilemma.
What should he do?
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Corporate Social Responsibilities
Why business should be socially responsible?
1. Long term survival: If an organization wants to survive in the long run, it has
to establish a loyal brand of customers etc. If the business does harm to
society by their irresponsible acts, society will not allow them to exist in the
future.
2. Public Expectation: General public expects certain behavior from
organizations apart from quality products, fair prices, good services etc.
While doing business they should not disturb any balance of society like
pollution, crime, corruption etc.
3. Goodwill: As we know that goodwill needs to be earned by firms understanding
& discharging their social responsibilities
4. Govt.Laws & Regulations: Some times govt. laws force the business to behave
in a socially responsible manner to survive in the long run.
5. Better Environment to Operate: If an organization can improve the quality of
life of customers, try to integrate private good & public good, more focused
on solving a particular problem of society, the better it will be able to solve
its own problems and in a better environment to operate.
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6. Keep the balance (give & take relationship): Business
organization exists & operates within society. As it takes so much from
society, it should owe something back. When businessmen understand the fact
that they are social entities and without society’s approval they wouldn't
exist, they accept their responsibilities towards society and attempt to fulfill
them.
Social Responsibilities Model :
Inputs Processing Outputs

Human Resources •Utilization of all •Employment generation
Raw Material kinds of inputs •Goods & services to
Machinery •Processing of satisfy customers needs
Money information to •Work as a corporate
Infrastructure manufacture citizen to meet society’s
Information products & services expectations
Market •Spread education
Material
Feedback
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To understand social responsibility technically some models
have been developed
1. Ackerman’s Model: The basic goal of any corporate entity
should be social responsiveness. All firms in order to be
socially responsible pass through some development stages
» Awareness stage
» Planning & action stage
» Implementation stage
– Top managers & decision makers learn of an existing social
problem.
– Planning stage to address the problem (hiring a specialist or
consultant if required)
– Implementation stage – must be integral part of daily operations
– True commitments at all levels of the organization must be
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obtained
2. Carroll's Model: According Carroll’s, there are four
categories of social responsibilities
i. Economic responsibilities – the primary responsibility of any
business is to be economic. Producing goods & services to meet
needs / wants of society and generate profit by selling them
ii. Legal responsibilities – Each & every business must operate within
the law and legal framework which are considered as legal
responsibilities
iii. Ethical responsibilities – Meeting the ethical expectations of
society
iv. Discretionary responsibilities – are steps forward of ethical
responsibilities, in which firms go for voluntary actions to serve
society. There is no demand from society. The firm willingly
contributes to the welfare of society.
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3. Approaches to Social Responsibility –
Social
Contribution
Social
Response
Level of Social
Responsibility
Social
Obligation
Social
Opposition
a) Social Opposition: When businesses opposes society by

feeling or showing no obligations towards it is called social
opposition. If while doing any unethical act they are caught,
they play safe by denying it or some other practices like
bribery.
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b) Social Obligation – The firm in this category believe that
as they are operating in society so it is their duty to do
business in the legal boundaries.
c) Social Response – The firm in this degree do more than
their social obligations. They realize that merely fulfilling
legal requirements are not sufficient. So they go beyond
towards ethical conduct of business.
d) Social Contribution – The firms which contribute
themselves to social development fall in this category. It
is the top most step on the ladder of social
responsiveness. The do business with full dedication &
commitment to society.
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Main Social Responsibilities of Business Organization
1. Responsibility to make profit – The basic objective of any
business is to make profit. As a loss making firm, it cannot
produce quality products, cannot fulfill commitments and
therefore cannot generate revenues/profits to its
shareholders. Hence organizations have a social
responsibility to be profitable and only then it can meet
its social obligations / commitments.
2. Responsibility to generate employment – All businesses
must provide fair opportunities to all people. The must
create the conditions / situations which help the
employees to put forward their best efforts achieve
organizational goals.
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3. Responsibility of Optimum Utilization of Resources -
Each organization must understand that it has some moral obligations to
utilize the scarce national resources of the country in an optimum way,
without wasting, avoid damages or mis-utilize the resources.
4. Responsibility to Provide Quality Products – Providing quality products at fair
prices is one of the most important social responsibilities.
5. Responsibility to Protect the Environment – Protection of environment is
equally important as other responsibilities. Business organization as
responsible corporate citizens must take serious steps to protect
environment and keep it in a healthy condition.
6. Responsibility to Provide Quality of Life – Quality of life is ones internal
growth, growth of character, mind & soul and enriched life. Hence business
organization should provide opportunity to its employees as well as society to
enrich their lives and better quality of life.
7. Responsibility to Safeguard the health – Safeguard the health & physical
safety of consumers as well as employees become a vital area to be cared by
organizations. This becomes more serious with drug & other chemical
companies. They must take adequate care to check & safeguard consumers
health & well being.
8. Fair Trade Practices – If business firms are showing socially responsible
behavior they must go for fair trade practices, some of which are – not
making false advertisements, avoid monopolistic trade practices, not go for
artificial scarcity, not bribing public servants, providing quality products &
services, fair prices & provide timely & accurate information to its
stakeholders.
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9. Responsibility to Development of Nation – If companies
are involved in international business, they must
contribute their efforts towards development of their
country by earning foreign currency, earning goodwill, and
reputation in global market, make good relationship among
nations.
10. Responsibility to fulfill all duties & national obligation – As
a corporate citizen, business firms are required to fulfill
certain obligations under various laws and to perform
certain duties. They must operate their business within
the boundaries of legal framework provided by govt. They
must contribute to national prosperity & try to reduce
some national problems like corruption, unemployment etc.
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Corporate Social Responsibility and India - CSR activities are now an
integral part of organizational objectives in India. Post liberalization
Indian companies have come to term with CSR and its wider ramifications.
Both Public & Private sectors have accepted CSR as a part & parcel of their
economic activities. Some Public sector companies have been more active in
CSR. Examples being Oil India, NTPC etc.
NTPC is the first PSU to have developed a comprehensive Resettlement &
Rehabilitation policy. The main CSR policies of NTPC are
1. To lead the sector in the areas of resettlement & rehabilitation and
environment protection including effective ash utilization, peripheral
development & energy conservation practices
2. To continuously attract & develop competent & committed human
resources to match standards
3. 0.5% of its profits are set aside for community development
measures under the umbrella of CSR
4. 4/3/2018
To contribute to sustainable power development by discharging CSR 80
Indian private sector have also shown their good efforts at CSR activities
The TATA group whose belief is shaping a society with social purposes.
Jamshedji Tata, the founder of TATA group and his sons believed that the
real purpose of Industry was to go beyond the creation of wealth to the
building of a new society through proper allocation of wealth. It was from
this vision that Tata Institute of Social Science was born. JRD Tata
conducted his business in a very socially responsible way. He wanted to
bring an industrial revolution to an economically backward India. The
specific goals of JRD Tata was to establish a hydro electric power project
at Bombay as a cheap source of energy, the steel industry at Jamshedpur
and the Indian Institute of Science at Bangalore to provide Scientific
& Technical education.
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Corporate Governance
Corporate means legally united into a body so as to act as an individual and
Governance means control. So Corporate Governance is nothing but the way
by which corporations are controlled & directed. CG refers to guidelines,
procedures, rules for decision making. It is means of achieving targets on
corporate affairs. It also deals with how to measure performance.
The origin of CG took place in UK in 1990. Some of the factors that drives
CG are
a. The majority of shares were from Institutions rather than ndividuals.
Institutional investors like pension funds owned big amount of capital
which represents the savings and pensions of lakhs of people so if the
company is not being managed well the needy people would be in
trouble.
b. As global operations were speeded up, it came up as a tool for
attracting foreign investment.
c. Due to competitive pressure, the no of false documentation, fraud
cases and unethical practices were increasing.
d. It was thought that the companies would undermine the social, ethical
& environmental concerns in the era of privatization
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Factors Behind the Origin of Corporate Governance –
1. In this era of globalization, when expansion, innovation,
diversification of the business is happening at a rapid
rate, foreign investors have become very careful about
investing their money. So in order to attract foreign
capital, you need to practice CG
2. Government of India has also implemented strict rules /
laws to be followed.
3. The no of institutional investors has increased so there is
a need felt to safeguard their interest.
4. Increase in investigative journalism in business
5. No of international events like joint ventures, mergers,
takeovers have lead to the mandatory practice CG.
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Important Issues of Corporate Governance -
1. Social responsibility
2. Multiple divergent expectations of shareholders
3. Economic, Social & Environment obligations are also
important for organizations.
4. Fair business deals & corruption
Corporate Governance in India
The corporate world in India comprises of two parts
1. Public Sector
2. Private sector
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Private Sector –
In India the broad categories of shareholder for private
sectors are
• Promoters
• Financial Institutions
• Individual investors
Any private sector board consists of three types of directors
• Promoter director
• Professional director
• Institutional nominee
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Public Sector –
The firms where equity shares are owned wholly(51% or more)
by Govt of India ( in the name of the President of India) are in
the category of Public Sectors. The board of Public Sectors
would comprise of
• Functional directors
• Govt. directors
• Outside directors
Professionalization of Corporate Governance
In order to bring about reforms to CG the following have been
developed.
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• Distinguish Management from Control: It means that control
needs to be separated from management. Some of the
components of Management & Control are
Control Management
Ratification – Proposals developed in Initiation – Proposals for managing the
the initial stages are evaluated and if resources of the firm are developed
found suitable they are approved Implementation – Execution of the
Monitoring – Assessment of executive’s approved proposals.
performance and implementation of
proper reward systems
•Active role of institutional investors: Institutional investors can

contribute effectively towards improvement in CG as they have a
higher stake.
•Expand role of non-executive directors: To improve the quality of CG,
the role of non-executive directors must be enlarged since they can
provide rich experience & good objectivity in monitoring corporate
behavior.
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CII has recommended a code of CG which are related to non-
87
– Non E.D should occupy at least 30% board seats

– Limit on the number of boards on which a person can serve
– An audit committee having at least 3 non ED must be set up and
given access to all information
– Degree of accountability must be higher than at present
– All non E.D must be compensated well for their time & effort
• Proper & Timely information to the Board: The board of
directors must get full information about long term plans,
budgets, competitive developments, quarterly results etc
• Size of the board: Lipton & Loesch have done some excellent
research & provided the result with optimum size of the board as
10-12
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• Improve accounting & Reporting Practices: Accounting
reports are important means of information for shareholders,
creditors, & investors of any company. SEBI has brought in
some improvements in corporate accounting & reporting
practices. Further improvements are required like
a) Business line reporting: Financiers should et integrated
information about profitability of different diversions of a
single company.
b) Group Accounting: International accounting standards classify
investor companies in 3 categories.
 Subsidiary companies
 Jointly controlled companies
 Associate companies
Hence it is required that firms prescribe different accounting
reporting treatments for these investments to reflect their financial
Implications.
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c) Tax effect accounting: It eliminates the effects of timing
differences in tax liability while arriving at reported earnings. In
India companies account for taxes as and when they are payable so it
is difficult to calculate reported earnings.
d) Earnings per share reporting: EPS is a very commonly used term in
stock market analysis. In India there are no accounting standards
prescribed for compiling EPS, no uniformity in the ways EPS is
computed. But as we know that the practical significance of EPS is
great, it is essential to formulate sound standards to calculate &
report EPS in India.
How to achieve good corporate governance
In the new millennium big accounting scandals like Enron, Tyco & WorldCom
have shown the failure of financial accounting system, corruption & weak
corporate governance. Corporations are realizing the role of good CG in the
success of their business, they have started taking steps in improving the
balance. According to a recent survey, 70% of companies are using
technology
4/3/2018
tools to get accuracy in financial / accounting matters. 90
ANAO – Australia’s National Audit Office suggests five key operating
principles that demonstrate different dimensions of corporate governance
which are
1. Leadership: The basic fundamentals of CG are leadership & direction.
The CEO / MD & other directors should follow good CG practices
2. Management Environment: Should ensure the following
• Sound business planning with clear objectives
• Yardsticks for performance measures, evaluating performance with
feedback
• Clear cut division of work & responsibilities
• Establish an ethical framework
• Ensure right decision about workforce
3. Risk Management: Effective risk management practices
4. Monitoring: Monitoring of Quality systems, adherence to plans & procedures.
Monitoring helps to ensure best practices by continuous improvements.
5. Accountability: Accountability is measured by effective internal &
external reporting on conformance & performance against set 91
4/3/2018
objectives.
Ethics in Marketing
Marketing is a task of creating, promoting & delivering goods &
services to consumers & businesses.
Common Unethical Practices:
• Duplication of original brands
• Inadequacy of warranty offering
• Poor quality products
• Unsafe products
• Unauthorized mfg of hazardous products
• Products which are not bio-degradable leading to environmental pollution
• Discrimination in pricing
• Differentiation in prices
• Excessive mark up in prices
• Misleading / deceptive advertisement
• False promises
• Lower the dignity of women
• No fairness, transparency in relation with suppliers & retailers
• Artificial scarcity
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Ethics in Marketing
Factors behind Ethical Practices:
1. To Collect the Power by Society: Society gives the power to
marketers, which they earn by their own efforts & influence.
So they should utilize their power in socially responsible &
acceptable manner.
2. Goodwill of the Organization: Goodwill, reputations are big
assets for any organization. As marketing executives represent
the whole organization, they need to build up the image of
company as highly ethical & carry out business in a dignified
manner.
3. Government Regulations: Sometimes government regulations
have an impact on the ethical behavior of organizations.
Therefore to avoid excessive regulations, companies need to
become self regulatory by living up to ethical practices.
4. Build up Transparency: Buyers become more suspicious while
buying dubious products due to lack of transparency. High level
of transparency convinces public that they are aware of their
social responsibilities.
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Ethics in Marketing
Important Issues in Marketing Ethics
1. Product: This is the first & important element in marketing. A
product is anything that can be offered to a market to satisfy
need or want. The manufacturer knows more about the product
than the buyer. Hence they must be careful to not to break the
trust of the buyer. Some of the important factors to be
considered are
a) Idea initiation
b) Planning & screening of product design
c) Product development
d) Marketing strategy
e) Introducing the product in the market
f) Decline stage
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Ethics in Marketing
2. Ethics in Pricing: Price is a critical element in marketing which produces
revenues. It communicates to the market the company’s intended value
propositioning of its product. Companies generally do not go for a single
price but a price structure that has some variations according to
purchase timing, order levels, geographical demands, market segment
requirements like
 Price discounts
 Discriminatory pricing
 Geographical pricing
There are four major areas of unethical pricing practice like
 Price discrimination: It occurs when a company sells a product at two
or more prices that do not reflect a proportional differences in costs
but becomes unethical when sellers offers different price terms to
different people within the same group.
 Predatory pricing: Selling below the cost when just having the
intention to destroy competition
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Ethics in Marketing
• Deceptive pricing: Deceive the customers to show them the wrong
pictures about the prices by
a) Low price offers
b) Inflated price
• Price Fixation: Prices are fixed at certain levels either by
– Horizontal price fixing: price fixing at artificially high levels
– Vertical price fixing Price fixing agreements between manufacturers
& retailers or between manufacturers & distributions. It says that
product will be sold at the manufacturer’s suggested price and will not
be discounted by the retailer or wholesaler
3. Ethical promotion: Promotion plays an important role in marketing of any
product / service. Generally comprises of sales promotion, advertising,
sales force, public relation, direct mail etc.
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Ethics in Marketing
Case Study
Breast milk is a natural, safe & free human product. Breast feeding creates a
strong maternal bond between mother & child and is designed to protect the baby
against a number of conditions such as pneumonia & diabetes. Not only are these,
but women who breastfeed themselves are protected from breast & ovarian
cancers. In this modern world, many women feel awkward in breast feeding and
sometimes the medical staff do not have the time to provide adequate training to
teach new mothers how to breast feed. Now, the infant formula is the obvious
alternative. However this product is derived from cow’s milk, which is not designed
for humans. Though it can supplement the diet of a hungry baby, or help a working
mother during the day, but it should not be marketed as an option, that can replace
breast milk entirely. The working mothers easily get convinced with the formula
manufacturers, as the infant formula is much easier and more convenient to use. In
developing nations, the area of breast feeding is very pathetic, sad and &
uneducated one. The big powerful multinationals that control the world’s infant
formula market take all the advantages of the poor and uneducated in order to
increase their own profits.
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Ethics in Marketing
The World Health Organization has a marketing code, endorsed by UNICEF which
bans all promotion for baby formula milk – both through advertisements and
through health workers and midwives, but these powerful companies pay little more
than lip service to it. As the data says, in the developing world, one baby dies every
30 seconds from unsafe bottle feeding. These MNC’s which enjoys almost 40% of
the world wide infant formula and try to capture more & more. They send their
representative to developing countries who give free samples of formula to
hospitals & health workers. The mother is encouraged by these health workers
along with the medical staff to use infant formula by providing free sample and
therefore discouraging breast feeding obviously promoting their products by free
gifts & incentives to local health officials. Other kind of promotion of their
products is in the form of posters on the walls of clinics, some advertisements in
magazines etc. As the company’s main aim is to encourage mothers to use the
formula, they never provide adequate information about formula feeding. They do
not teach these women about sterilizing the bottles they use. So the uneducated &
unaware mothers use un-sterilized bottles & dirty water mixed with the infant
formula which causes severe diarrhea & dehydration in the babies resulting in
death also.
Very soon, after the infants have become dependant on the formula and the
mother’s milk has dried up, the free samples stop coming.
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Ethics in Marketing
The only option is to buy the infant formula at high prices. The majority of
the families cannot afford this. So either they go without food themselves
and feed their babies or just dilute the powder to make it last longer.
Again the babies will be suffering from malnourishment and often lose
their lives.
These company’s do not follow WHO codes according to which they are
required to put labels on formula products in the appropriate language.
They actively promote the use of infant formula as opposed to breast milk
and always try to make as healthy a profit as possible.
Do you regard these marketing practices as ethical? Explain your view.
------------------------------------------------------------------------------------
Marketing ethics is a sub-set of business ethics and examines the moral
issues relating to marketing decisions made by organizations. Its roots can
be traced to the 1960’s, marketing ethics is believed to have come of age
only in 1990’s.
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Ethics in Finance
• There is a close relationship between ethics & finance.
• High finance is the particular area where most of the
breakdown of ethical norms occur.
• The basic foundation of business is trust
Finance
Financial market Financial operations & services

• Commodity markets • Financial planner
•Currency markets •Tax adviser
•Option markets •Stock broker
•Insurance agents
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Ethics in Finance
Some common unethical activities in finance
1. Unsuitability : Insurance agents, brokers and other sales
persons cheat innocent investors by recommending
unsuitable securities / financial products
2. Deception : Most common unethical practice by
strengthening the return & minimizing the weakness & risk
factors. Sales person, agents, advisers deceive the public
using the misleading statement like tax free or 0%
interest etc. They make public unable to make rational
choices among so many alternatives.
3. Inappropriate and excessive trading : This situation arises
when broker keeps an intention to generate commission
rather than benefits to client in the standing of having
control over the clients account
4/3/2018 101
Ethics in Finance
4. Fraud & manipulation in markets: By law all the participants in
the financial markets are the same. So fairness in our dealings
is desired. Fraud means when a company fails to report proper
information and manipulation of buying / selling of securities to
misguide investors. Investors have to rely on information
available to them which is hard to verify.
5. Unequal Bargaining Power : The principle of equal bargaining
power says that all parties have relatively equal bargaining
power.
6. Insider Trading : The act of buying / selling a company’s stock
based on inside information about the company is called insider
trading. Insider trading is illegal as well as unethical. A person
who practices Insider trading enjoys the unfair advantages
over the other general public.
Ethics in finance is about far more than trust. Finance would be
impossible
4/3/2018
without ethics since the very act of placing our assets102
in
the hands of other people requires immense trust.
Ethics in Human Resources Management
A. Ethics in Job Design: An understanding of job design can help
executives to design & redesign job in such a way that it positively
affects employee motivation. It includes
1. Work simplification
2. Job rotation
3. Job enlargement
4. Job enrichment
5. Job sharing
6. Independent work teams
7. Dejobbing
8. Empowerment
B. Ethics in Human Resource Planning
C. Ethics in Recruiting & selections
D. Ethics in training & Development
E. Ethics in career development
F. Ethics in performance evaluation
G. Ethics in wages & salary administration
H. Ethics in Layoff’s
4/3/2018 103
Ethics in Human Resources Management
Ethical Guidelines: We have seen how ethics is involved in each
and every corner of HRM. Hence some guidelines have been
evolved to help the HR professional to handle ethical issues in
much better ways.
1. Ethical Leadership
2. Professional responsibility
3. Fairness & Justice
4. Professional development
5. Conflict of Interest
6. Use of Information
4/3/2018 104
Ethics in Information Technology
• Ethics in IT have opened up new issues & dimensions
• IT has no geographical boundaries, but application & usage
of IT may affect differently in different culture /
environment.
Computer Ethics: This was founded by Proff. Norbert Wiener
in early 1940’s during world war 2 when he was helping to
develop an aircraft cannon capable of shooting down fast
Warplanes. He along with his colleagues created a new branch
of science called Cybernetics – the science of information
feedback system. He foresaw revolutionary social & ethical
consequences.
4/3/2018 105
Technology Ethics: This is relatively new and interesting
subject. Some of the ethical issues are
1. Think ethically about human biotechnology
2. Taking responsibility for E-waste
3. Unprofessional emails
4. Use of cloning
5. Cyber smut – from blocking software to legislation,
addressing children’s access to objectionable material on
internet
6. Invasion of privacy on internet
4/3/2018 106
These are various ethical issues involved in IT which can be
categorized into four groups
a) Accessibility
b) Privacy
c) Property
d) Accuracy
4/3/2018 107
Environmental Ethics
ENVIRONMENT
Natural Resources Man-made Resources

Land People
Air Heritage
Water Socio economic
Fuels Structure
Fauna & Flora
Raw materials
Minerals
Environmental ethics: This deals with how to keep a balance

between business & environment. Due to rapid spread of
environment consciousness, the traditional perception about
trade-off’s between environment quality & economic growth is
also4/3/2018
changing. 108
• Pollution:
– air pollution
– water pollution
– noise pollution
– earth warming
– ozone depletion
• Role of ethics in Environmental Protection
– Resolving conflicts in both the visible & invisible areas
– Intergenerational ethics
– Spiritual ethics
Environment Protection in India
•The environment protection act (1986)
•The factories act, 1948 and its amendment in 1987
4/3/2018 109
• Hazardous Wastes
• Public liability Insurance act (PLIA) 1991
• National Environment Tribunal act 1995
• The National Environment Appellate Authority Act, 1997
Examples of Environmental Pollution
1. Bhopal Gas Tragedy
2. Exxon Valdez Disaster
3. Chernobyl Accident
4/3/2018 110
Corruption & Ethics
The dictionary meaning of corruption is the misuse of public

power for private gain.
1. Corruption is the practice of unlawful or improper use of
influence, power or other means for personal gains
2. Corruption is the lack of integrity or honesty
Causes of Corruption
1. Individual’s perspective – motivation by personal greed
2. Society’s Structural perspectives – due to political, social
& cultural needs of society. Corruption develops when the
risk of being caught is far less than the reward of being
corrupt.
4/3/2018 111
Corruption & Ethics
Some of the basic factors behind corruption are
1. Culture
2. Inadequate / low salaries
3. Weak legal framework and absence of rules & regulations
4. Adherence to transparency & accountability
5. Other reasons like
a) Opportunities
b) Circumstances
c) International phenomenon
Impact of corruption:
• Slows economic development
• Reduces investment
• Increases poverty
• Leads to poor administration
• Decline in human development
• Increases discrimination & unfair treatment
• Supports criminal activities
4/3/2018 112
• Distorts incentives & creates uncertainties about expected profits
Gender ethics, Sexual Harassment & Discrimination
• Discrimination – Unfair distinctions leading to unjust
treatment. Not based on merit but on other considerations
like gender, economic status, racial & disability
• Sexual Harassment- a kind of discrimination directed
primarily at women. Difficult to define and hence prevent &
police. It may include
– Remarks
– Looks
– Touching
– Jokes
– Attitudes
– Sexual comments
– Recurring requests for dates
– Use of sexual artifacts
– Use of sexually explicit language
• Gender ethics - Men & women should be treated as equals.
To treat them as different would be unethical. Equality 113
4/3/2018
needs to be reinforced by laws & regulations.
Gender ethics, Sexual Harassment & Discrimination
4/3/2018 114

Business Ethics

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Business Ethics

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Business Ethics

• Ethics involves systematizing, defending and

• There is only one ethics, one set of

• Supreme oneness is the rationale of all

1950s Time Early 2000s

• Business ethics are the application of

• The 3 C’s of Business Ethics are

• New economy has brought in greater transparency /

• Globalization: Growing integration of economies & societies around the

Factors for building an Ethical Infrastructure

Response & Enforcement

Value: What we choose as worthwhile or believe to have merit in a general

Edward Spranger defines Values as the constellation of likes, dislikes,

Value Formation in Society: The values in an individuals value

Ethical Build trust Higher

• Organization towards employees: It covers areas of

Methods for Developing Ethical Corporate Behavior

3. Organizational Ethics Development System (OEDS)

4. Ethics Committee: Formation of an ethics committee is a new

10. Other Guidelines :

The very speed of change introduces a new element into

Ethical decision making is a very complex & difficult task.

Structure of Ethical Decision Making

Generate alternate solutions

Evaluate alternatives using cost-

Select the best solution

Implement the chosen solution

How to Use Ethical Reasoning :

b) Situational law: To determine that an action is right or

Consequences – believe in Consequences – rely on

Approaches to Resolve Ethical Dilemmas

Inputs Processing Outputs

a) Social Opposition: When businesses opposes society by

•Active role of institutional investors: Institutional investors can

– Non E.D should occupy at least 30% board seats

Financial market Financial operations & services

Natural Resources Man-made Resources

Environmental ethics: This deals with how to keep a balance

The dictionary meaning of corruption is the misuse of public

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