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INTRODUCTION TO ETHICS

WHAT IS ETHICS?
Ethics originated from the word ethos character or manners Ethics can be defined as the rules or standards governing the conduct of a person or the members of a profession Ethics is concerned with distinguishing between
good and evil in the world, right and wrong human actions, and virtuous and non virtuous characteristics of people.

When more than 100 business people were asked by a sociologist what does ehtical mean to you
More than 50percent defined it as what my feelings tell me is right 25 percent defined it in religious terms as what is in accord with my religious beliefs 18 percent conforms to the golden rule

As per dictionary several definitions are available


Principles of conduct governing an individual or a group A set of principles of right conduct theory or a system of moral values

Personal ethics
referring to the rules by which an individual lives his or her personal life

Professional ethics
the code that guides the professional conduct of people

Ethics is the discipline that examines ones moral standards or the moral standards of the society It questions the applicability of these standards to our lives and whether these standards are reasonable or unreasonable i.e. whether they are supported by good reasons or poor ones

Ethical conduct is grounded in principles embracing


Honesty Fairness Respect for others Honouring commitments and obligations Compassion Integrity Taking responsibilities for our actions Striving excellence in performance Complying with laws and regulations

OBJECTIVES OF ETHICS
The primary objective is to define the highest good of man and set a standard for the same Diagnostic goal
Makes evaluative assessment about human behaviour as moral or immoral

Establishes moral standards/norms of behaviour Makes judgment upon human behaviour based on these standards and norms Therapeutic goal
Prescribes moral behaviour, makes recommendations about how to or how not to behave

Expresses an opinion or attitude about human conduct in general

NATURE OF ETHICS
Deals with human behaviour only The science of ethics is normative science Ethics deals with human conduct which is voluntary and not forced or coerced Ethics is basically an area of dealing with moral judgement regarding voluntary human conduct

SOURCE OF ETHICS
Genetic inheritance Religion Philosophical systems Cultural experience The legal system Codes of conduct

BUSINESS ETHICS

WHAT IS BUSINESS ETHICS ?


Business ethics are moral principles that define right and wrong behaviour of the business world The right or wrong is decided by the
Public interest groups Business organisations Individuals personal morals and values

Ethical business performance adhering to societys basic rules that define right and wrong behaviour Major challenges in business balance ethics and economics Should be ethical and economically profitable The ethics of management goes beyond simple acts like bribery, theft and collusions The three terms used to define ethics are
Right Proper Just

Ethical adherence gives rise to efficient economy Government and law can protect to an extent In the long run, Ethics and profits go together Ethics is the conscious appeal to norms and values, we hold ourselves obliged People in business often face ethical questions where balance has to be found between the different and often conflicting rights and interests at stake

Ethics conflicts with profits Business always chooses profits over ethics Ethical behaviour creates the kind of goodwill and reputation that will expand opportunities for profit The first and foremost ethical obligation is to make profits for the shareholders and stakeholders Also to discharge social responsibilities and welfare commitments

NEED FOR BUSINESS ETHICS


Business operates within the society
Must contribute to the welfare of the society To survive, develop and excel must earn social sanctions Without social sanctions, businesses cannot get loyal customers It will collapse and die away in the long run Maintenance of proper image Assumption of greater responsibilities

Every business exists more on ethical means or in total regard to its social concern to survive long Business needs to function as responsible corporate citizen in the country
The organ of the society that creates wealth

IMPORTANCE OF BUSINESS ETHICS


Positive benefits of good ethical practices
High morale Improved productivity

Ethical problems occur for the following reasons


Personal gain/dubious character Individual values widely differ with organisational goals Managers values and attitudes Competitive pressures Cross-cultural contradictions

MANAGERS VALUES AND ATTITUDES


Ethical guidance will be usually provided by the top level to the employees down below The value held by top managers are important in promoting ethical activities Three questions that every manager should ask before making a decision
Will it work? Is it right? Is it pleasant?

Factors which might cause the managers to make unethical decisions


Behaviour of the supervisors Peers Industrys ethical climate Societys moral climate Formal company policy Personal financial need

Values and attitudes of managers are a critical element in a companys ethical performance

NATURE OF BUSINESS ETHICS


Most ethical questions could be of two types
Overt covert

Ethical issues commonly occur in management


Areas of corporate acquisitions & Merger of firms Marketing policies Capital investments

Ethics expects a manager to be honest within himself and also in the society

The characteristics of an ethical decision


Morally correct and due (Right) Justice is not only done; but also seen to have been done (just) Appropriate and acceptable (Proper) Just and equal (just) Honest and due (Right) Highest good for all concerned

Ethics is unstructured Does not have a standard format or framework Is abstract in concept Does not have universal concept If a decision helps in benefiting only to oneself, then it is not an ethical decision

FACTORS INFLUENCING BUSINESS ETHICS Leadership Strategy and Performance Environment Corporate Culture Individual Characteristics

LEADERSHIP
Character is the most crucial and elusive element of leadership Leaders rule us, wield power hence we should be careful whom we choose as leaders Leaders should serve as models and mentors Teaching is one of the primary jobs of leadership

EXECUTIVE & SUPERVISORY LEADERSHIP


To achieve results, CEO need to be openly and strongly committed to ethical conduct Executives play a crucial role in creating, maintaining and changing ethical culture Supervisors are responsible for rewards and punishments Ethical climate or culture in an organisation is more important than specific ethics

The elements of ethical culture that guide employee thought and action covers:
Leadership Fairness Employee authority structure Reward systems Ethics as a topic of conversation in the organisation Organisational focus that communicates care for the employees and the community

STRATEGY AND PERFORMANCE


In order to act with integrity, a firm must articulate its values and priorities The most widely used form of values articulated are:
Corporate mission Code of conduct Code of ethics

Defining its value structure provides guidance to individual decision makers with the firm, when facing difficult dilemmas

Three types of strategies formed in firms:


Corporate strategy
The patterns of entrepreneurial actions and intents underlying the organisations strategic interests in different business, divisions, products lines, technologies, customer groups and customer needs

Business strategy
The managerial plan for directing and running a particular business unit

Functional strategy
Plan to manage a principal subordinate activity within a business

ETHICAL BUSINESS PERFORMANCE


Adhering to societys basic rules that define right and wrong behaviour Law and ethics are not identical ethical rules are broader and more basic than laws Business is ethical when it meets
Public expectations Prevents social harm Protects itself from abuses by employees and other firms Preserves the dignity and integrity of individuals who work in business

IMPROVEMENT OF ETHICAL PERFORMANCE IN BUSINESS


Requires
Top management attitudes Opening up corporate culture to broad ethical standards Organisational changes that help employees at all levels Building ethical safeguards into the company
Codes of ethics Ethics committees Ethics training programmes Ethics audits

CORPORATE CULTURE
Appearance of propriety An ethical decision does not always lead to the highest profits possible It engages in ethical decision making because it is the right thing to do What contributes to the internal culture of the firm as well as to the external stakeholders perception of the firm?
Engaging in ethical behaviour, implementing ethics programs or instituting code of conduct

ENVIRONMENT
Warnings of eco-catastrophe
Burning rivers Dying lakes Oil fouled oceans Air is highly contaminated

We need to find limits to our growth and changes in our life style

OBJECTIVES OF BUSINESS ETHICS


Analysis and Evaluation (Normative)
prescribing a norm or standard Clarifying standards and lines of arguments It is useful to make one aware of moral values Develops rational methods for answering the present and future issues Balanced judgements are based after careful assessment of the relevant information

Therapeutic (curative) Advice


Suggests solutions and policies when facing
The present dilemmas Future dangers

Requires an identification of relevant stakeholder and a clear understanding of the vital issues at stake

OBJECTIVES OF BUSINESS ETHICS Evaluates human practices by calling upon moral standards
Analysis and evaluation
Clarifying standards and lines of argument Balanced judgements based on careful assessment of relevant information

Gives prescriptive advice on how to act morally in a specific kind of situation