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Business Ethics

Business Ethics. Evolution of Thoughts. First Phase License Quota Permit Raj-(Independence- late 1960’s) Second Phase- Socialistic frenzy (1970- mid 1980’s) Third Phase- Economic Reforms, 1991. Reasons for Evolution of BE. Globalization and Decentralization of business

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Business Ethics

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  1. Business Ethics

  2. Evolution of Thoughts • First Phase License Quota Permit Raj-(Independence- late 1960’s) • Second Phase- Socialistic frenzy (1970- mid 1980’s) • Third Phase- Economic Reforms, 1991

  3. Reasons for Evolution of BE • Globalization and Decentralization of business • Growth of Media- Co. are being held increasingly accountable for their ethical conduct • International Agreements and Actions- to fight against corruption and bribery around the world

  4. Global Initiatives • Global Sullivan Principles-Includes Corporations, Higher Education and Civic Involvement • SA8000- created in 1997, by SAI and CEP is a standard based on commitment to establishing a cross country standard for workplace. Focuses on Labor Rights. • United Nations Global Compact- Kofi Annan (July 31,1999) at Davos, CSR, 9 principles- Human Rights,Labour standards & Environment.

  5. Caux Principles • The Caux Round Table consisted of group Of International Executives. • Shared a belief that business organizations can be powerful force for +ve change • Two basic ethical ideals: KYOSEI and HUMAN DIGNITY

  6. Kyosie and Human Dignity KYOSEI- means “ living and working together for the human good” Human Dignity can be defined as “value of each person as an end” Shared values, including commitment to shared prosperity are important to global as well as communities of smaller scale

  7. Foundation for actions by Business Leaders • Principle 1: The Responsibilities of Business: beyond Shareholders towards Stakeholders • Principle 2: The Economic and Social Impact of Businesses: towards innovation, justice and world community

  8. …cont • Principle 3: Business Behavior: beyond the letter of the Law towards a spirit of Trust • Principle 4: Respect for Rules • Principle 5: Support for Multilateral Trade • Principle 6: Respect for Environment • Principle 7: Avoidance of Illicit Operations

  9. ETHICS AND DECISION MAKING

  10. Ethical Dilemmas • Significant value conflicts among differing interests • Real alternatives that are equally justifiable • Significant consequences on "stakeholders” in the situation

  11. Approaches to Ethical Decision Making • Utilitarian Criteria- Jeremy Benthham,1800. preaches maximum good for maximum no. of people as a result of an action. • Rights Criteria- ‘Right to speech’ ‘Whistle Blowers’ • Justice Criteria – in decisions for wages, retrenchments • Ethics of Care- should exercise care

  12. Resolving Ethical dilemma • Recognize that there is a moral issue and define the problem accordingly • Determine the actor who will be affected by the decision. Also determine your role. • Analyze the facts how events happened. This will reduce dilemmas to common patterns which are ultimately manageable • Test for ‘Right versus Right’ paradigms such as Truth versus Loyalty, self versus community, short term versus long term, justice versus mercy.

  13. Resolving Ethical dilemma • Apply all three approaches to solving the dilemmas-(i) utilitarianism i.e. do whatever produces greatest good for the greatest number; (ii) rule based thinking i.e. follow rules only; (iii) care based i.e. do what you would like to be done to you. • Investigate to find a third way out. • Make decisions and take action. • Revisit and reflect on the decision.

  14. Characteristics of an ethical decision • Right – morally correct • Equitable - Just and equal • Good – Highest good for all concerned • Proper – Appropriate and acceptable • Fair – Honesty • Just - Action

  15. Guiding factors for managers in ethical decision making • A person’s personal code of ethics • The company’s formal policies, values and culture • The ethical climate in the industry • Government regulations. Morality transcends conformity to law • Behaviour of management in the company • Deep belief to abide by the laws • Ethical conduct/Standards tend to rise due to greater public exposure/image

  16. Ethical Dilemmas at Workplace (Donaldson) • Recognizing conflicts of interest and avoiding them • Deciding if the business gift is just a gift or a bribe • Attaining fairness in employee performance appraisals • Initiating disciplinary action against an employee • Executing an order to take action against staff

  17. Ethical Dilemmas at Workplace (Donaldson) • Managing a problem employee • Handling reports of wrong doing on the job • Safeguarding confidential information • Recognizing and balancing the legitimate interest of customers, employees, suppliers, owners and the society in which they live

  18. Sources of Ethical Dilemmas • Face-to-Face Ethics • Corporate Policy Ethics • Functional Area Ethics

  19. Difficulties in Ethical decision making • Face dilemmas in deciding a course of action • Confront a distinction between facts and values • Knowledge about the consequences of an action is limited • Antagonist interests frequently use incompatible ethical arguments to justify their intentions • Some ethical standards vary with the passage of time

  20. Difficulties in Ethical decision making • Competitive pressures • Individual values in conflict with organizational goals • Cross cultural contradictions

  21. Suggestions for Ethical decision making • Top management can improve behavior • Code of Ethics • Interaction with peers and other colleagues • Control System

  22. Stakeholder Analysis for Ethical Decision Making • Identification • Facts • Alternatives • Stakeholders • Impact • Guidance • Constraints • Comfort • Assessment

  23. NASH’S TWELVE POINT PRESCRIPTION – Resolving Ethical Dilemma • Have you defined the problem accurately? • How would you define the problem if you stood on the other side of the fence? • How did this situation occur in the first place? • To whom and to what do you give your loyalty as a person and as a member of the corporation? • What is your intention in making the decision? • How does this intention compare with the probable results?

  24. NASH’S TWELVE POINT PRESCRIPTION – Resolving Ethical Dilemma • Whom could your decision or action injure? • Can you discuss the problem with the affected parties before you make your decision? • Are you confident that your problem will be valid over a long period of time, as it seems now? • Could you discuss without qualm your decision or action with other? • What is the symbolic potential of your action, if understood? If misunderstood? • Under what conditions would you allow exceptions to your stand?

  25. FRAMEWORK FOR ETHICAL THINKING • Do what is best for the greatest number of people [consequence-based thinking] • Follow the applicable universal principle, e.g. do not lie [duty-based thinking] • Do what a good [virtuous] person would do [virtue based thinking].

  26. Four Factors : Ethical Decisions • The end- outcome sought • The means –methods employed • The motive • Foreseeable consequences

  27. Kohlberg’s Moral Development Theory Punishment and Obedience orientation Level 1 Pre-conventional Stages Instrument and Relativity Orientation Interpersonal Concordance Orientation Level 2 Conventional Stages Law and Order Orientation Social Contract Orientation Level 3 Post Conventional Stages Universal Ethical Principles Orientation

  28. Usefulness of Kohlberg’s theory • Helps us understand how our moral capabilities develop • Reveals how we can become increasingly sophisticated and critical in our understanding of moral standards we hold • People generally progress through the stages in the same sequence and not everyone progresses through all the stages • Implies that moral reasoning of people at later stages of moral development are better than their reasoning at earlier steps

  29. Carol Gilligan Moral Development Theory • Pre-conventional level: Right conduct is viewed in a selfish manner solely as what is good for oneself • Conventional level: Importance is on not hurting others and willing to sacrifice one’s own interest and help others. This is a characteristic feature of women • Post-Conventional level: At this level, balances is found between caring about others and pursuing own’s interest

  30. Kohlberg vs. Gilligan

  31. Code of ethics • Most common way of institutionalizing ethics in the organization • Statements of the norms and beliefs which form the ethical rules of the organization as defined by the middle and top level management • Indicates “This is what we expect you to behave”

  32. Thank You

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