Business Ethics: An Overview Outline • • • • • • • • Introduction Principles of personal and professional Ethics What is and What is not business Ethics? Code of Conducts and Ethics for Manager Business Ethics Levels Myths about Business Ethics Importance of Business Ethics Factors Effecting the need for Business Ethcis Introduction • An Important Ingredient of Management Sciences • Well known corporate failure brought ethical issues to the forefront • Ethics: ▫ Society’s Notion about Rightness or wrongs of Any Act ▫ Involves evaluation of Moral values that becomes norms • Business Ethics: ▫ Business Ethics, is a sum total of principles and code of conduct businessmen are expected to follow in their dealings with their fellowmen such as Stockholders, employees, customers, creditors, and comply with to enact the laws of the land and to protect all these stakeholders. Introduction • Branch of Philosophy, and is considered as normative science (based on cultural, religious, political, social realms) • Distinguished from: ▫ Formal science: mathematics and logic ▫ Physical science: physics and chemistry ▫ Empirical science such as economics & psychology • Ethics must follow rigorous logical reasoning • It involves: ▫ Systemizing, defending and recommending concepts of right and wrong behavior • Good tool for sorting out good or bad in human interactions • Heart of intellectual thoughts since the time of Greek philosopher Principles of Personal Ethics • Personal Ethics ▫ Personal ethics is an application of personal values (what is regarded as desirable) in everything one does. ▫ Also called Morality i.e. general expectation of any person in any society ▫ The Principles of personal ethics are: Concern and respect for the autonomy of others Honesty and the willingness to comply with the law Fairness & the ability not to take undue advantage of others Benevolence and preventing harm to any creatures What Motivate people to be Ethical? • People wants to maintain a clear conscience and would like to act ethically under normal conditions. • It is natural for people to ensure that their actions do not cause any injury to others. • People are obliged to obey the laws of the land • Social and material wellbeing depends on one’s ethical behavior in society. Principles of professional Ethics • One’s engagement in any specified activities as one’s paid occupation. • Certain basic principles people are expected to follow in their professional career: ▫ ▫ ▫ ▫ ▫ ▫ Impartiality: Objectivity Openness: full disclosure Confidentiality: trust Due diligence/duty of care Fidelity to professional responsibilities Avoiding potential or apparent conflict of interest What is Business Ethics? • Business Ethics refers to the moral guidelines, principles, and rules that are important to conduct any business. • These are moral values that guides an organization to achieve their goal. • Ethical Business behaviors: ▫ ▫ ▫ ▫ ▫ Is expected by the public Facilitates and promotes goods to society Improves profitability Foster business relations & employee productivity Reduce criminal penalties from public authority and regulators ▫ Protects businesses against unprincipled employee and competitors ▫ Protects employee from harmful action by their employer ▫ Allow people in business to act consistently with their personal ethical beliefs Why Ethical problems occur? • It occurs in business for many reasons: ▫ ▫ ▫ ▫ Selfishness of a few Competitive pressures on profit The clash of personal values and business goals Cross-cultural contradiction in global business operations Solution to Ethical Problems? • • • • May have one or more than one right answer Sometimes no right answer at all Logical and Ethical reasoning are followed Business or Company is considered to be ethical only if it: ▫ Tries to reach a trade-off between its economic and social obligation such as: Obligation to the society where it exist and operates To its people for whom it pursue economic goals To the environment from where it takes its resources What is not Business Ethics? • Religion preach high ethical/moral standards, but do not confront contemporary problems • A good legal system may incorporate many moral/ethical standards but it may vary from society to society depending upon social, religious and cultural beliefs • Ethical Standards are different from cultural traits • Ethics are different from Feelings • Ethics is not a science in strict sense of the Term ▫ We draw data from science to enable us make Ethical Choices. ▫ Science does not tell us what should be done in a particular situation ▫ Any thing scientifically possible may be Un-ethical • Ethics is not just a collection of values ▫ Values are under-defined, situational, subject to human error. ▫ They cannot assure true Ethical conducts. Code of Conducts and Ethics for Manager • Manager must observe the following ethical values: ▫ ▫ ▫ ▫ ▫ ▫ Integrity Impartiality Responsiveness to the public interest Accountability Honesty Transparency Business Ethics Level • Ethical and moral issues in business can be examined at several levels: ▫ Individual or personal ▫ Organizational, and ▫ Macro, such as: Industry Societal, and International. Individual Level • We all experience ethical challenges at the individual or personal level. • These include situations we face in our personal lives that are generally outside the work context. Questions or dilemmas that we might face at the personal level include: ▫ Should I tell the cashier that he gave me change for a $20 bill when I gave him a $10 bill? ▫ Should I notify my bank that it credited someone else's $100 to my checking account? ▫ Should I cheat on my income tax return by inflating my charitable contributions? ▫ Should I return the extra merchandise that a store accidentally sent me? • If an ethical issue involves or is limited to an individual's responsibilities, that person may examine her or his own ethical motives and standards before choosing a course of action. Organizational Level • People also confront ethical issues at the organizational level in their roles as managers or employees. • However, these issues may carry consequences for the company's reputation and success in the community and also for the kind of ethical climate or culture that will prevail on a day-today basis at the office. • Issues posed at the organizational level might include: ▫ Should I overlook the wrongdoings of my peers and direct reports in the interest of company harmony? ▫ Should I perform an unethical or illegal act to earn a division or workunit profit? ▫ Should I offer a kickback to ensure I get the client's business to meet my sales quota? ▫ Should I make this product safer than required by law, because I know the legal standard is grossly inadequate? ▫ Should I accept this gift or bribe that is being given to me to close a big deal for the company? • If an ethical issue arises at the organizational level, the organizational members should examine the company's policies and procedures and code of ethics, if one, exists before making a decision or taking action. Industry Level • An organization or manager also might influence business ethics at the industry level. • The industry might be insurance, stock brokerage, manufactured homes, real estate, automobiles etc. • Related to the industry might be the profession of which an individual is a member—law, medicine, accounting, pharmacy, or engineering. • Some examples of questions that might pose ethical problems or dilemmas at this level include the following: ▫ Is this practice that we stockbrokers have been using for years with prospective clients really fair and in their best interests? ▫ Is this standard we physicians have adopted violating the Hippocratic oath and the value it places on human life? Societal or International Changes • At the societal and international levels, laws, norms, customs, and traditions govern the legal and moral acceptability of behaviours. • Business activities acceptable in Turkey or Russia may be immoral or illegal in the United States, and vice versa. • At these levels it becomes very difficult for the individual manager to have any direct effect on business ethics. • However, managers acting in concert through their companies and trade and professional associations can definitely bring about high standards and constructive changes Myths about Business Ethics • Ethics is personal. This myth holds that individual ethics is based on personal or religious beliefs and that one decides what is right and wrong in the privacy of one's own conscience. • Business ethics and ethics do not mix. This popular myth holds that business practices are basically amoral (not necessarily immoral), since businesses operate in a free market. This myth also asserts that management is based on scientific, rather than religious or ethical, principles. Myths about Business Ethics • Business ethics is more a matter of religion than management. A cornerstone of this myth is the belief that "altering people's values or souls isn't the aim of an organizational ethics program—managing values and conflict among them is.“ • Business ethics is relative. This myth holds that no right or wrong way of believing or acting exists. Right and wrong are in the eye of the beholder. Myths about Business Ethics • Good business means good ethics. The reasoning here is that executives and organizations that maintain a good corporate image, practice fair and equitable dealing with customers and employees, and earn profits by legitimate means are de facto ethical. • Information is neutral and amoral. This myth holds that information and computing are neither moral nor immoral, but amoral, that is, they are in a "gray zone," a questionable area regarding ethics. Myths about Business Ethics • Many believe that business ethics is a fad or movement, having little to do with the daytoday realities of running an organization. They believe business ethics is primarily a complex philosophical debate or a religion. • Those who support this myth react that codes of ethics or lists of ethical values to which the organization aspires are rather superfluous because they represent values to which everyone should naturally aspire. Myths about Business Ethics • Ethics can't be managed. Some are still sceptical about business ethics, believing you can't manage values in an organization. Importance of Business Ethics • Customer Satisfaction: Today, customer is the king. The customer is satisfied if the businesses has their own reputed and reasonable ethics. • Good Reputation/Good Will: If ethics are good and well made, then it helps in creating goodwill. As a result mutual trust and confidence is build. • Long term Suitability: Ethical standards in businesses helps in creating long-term suitability for business in achieving goals and provide high esteem to their success. Importance of Business Ethics • Increase Employee Role: If there exist well reputed ethics, it helps the employees to provide it’s best to business development and help them in achieving their Goal. • Better Service to Society: If Ethics are good in businesses then companies will contribute surely best in society to achieve the success and satisfaction to customers. Best service towards society shall provide good reputation to businesses and as a result business survival for long period takes place. Importance of Business Ethics • Smooth Functioning: If business have ethics then all stakeholders will contribute their best and feel satisfied. Hence full contribution helps businesses in smooth functioning of the business operations. Factors Effecting the need for BE • Long-Term Growth: If businesses need long term survival and growth then it must have business ethics installed to run successfully with reasonable profit. • Cost and Risk Reduction: If businesses want to reduce risk and cost then it must make sure that there must be optimum utilization of every resources and it is only possible with the help of Business Ethics. Factors Effecting the need for BE • Leadership: It is Important for every businesses to have leadership Ethics and it is only possible if business have their own own Ethical standards. • Vigilance: It is Important to be proper vigilance in organization for every work. If there is proper vigilant Ethical environment must be strong. • Moral Values: If businesses want their employees must have known moral values then businesses need to devise Ethics – Moral Values. Factors Effecting the need for BE • Formal Organization: Every business with formal rules must have their own Ethics. Hence, if business need to be formal then it must have their own ethics for workers. • Environment in countries: If countries have all business within their ethics then a business without ethics suffers a lot. It force businesses, especially new businesses, to make their own business ethics for smooth functioning. Elements of Business Ethics • Publication of a Code: ▫ Enterprise with effective ethics program do define the principles of conduct for the whole organization in the form written documents which is referred as the ‘Code’ ▫ This generally covers areas such as: Fundamental honesty and adherence to law Product safety and quality Health and safety in the workplace Conflict of interest Employment practices Fairness in selling/Marketing practices. Financial reporting Elements of Business Ethics • Top Management Commitment: ▫ Top management has a crucial role in guideline the entire organization towards ethically upright behavior. ▫ The executive officer for CEO and other lower level manager need to be openly and strongly committed to ethical conduct. ▫ They must give continuous leadership to development and upholding the values of the organization. Elements of Business Ethics • Establishment of Compliance Mechanism ▫ In order to ensure the actual decision and action comply with the firm ethical standards, suitable mechanism should be established. • Measuring Results: ▫ Although it is difficult to accurately measure the end result of ethics proagrammes, the firms can certainly audit to monitor compliance with ethical standards. Elements of Business Ethics • Involving employees at all levels: ▫ It is the employees at different levels who implement ethics policies to make ethical business a reality For example, small group of employee can formed to discuss the important ethical policies of firms and examine the attitudes of employees towards these policies. Ethics Vs Law Ethics Law It deals with what is right and what is wrong from society’s point of view It deals with what is right and what is wrong from law’s point of view Depend upon moral values Depends upon law, rules and regulations There is no penal provisions against it There is legal provisions for it Ex. Charging unduly high price Ex. Charging above MRP Basis for Morals Comparison Ethics Meaning Morals are belief of individual Ethics are guiding principles which or group as to what is right or helps the individuals/group to wrong decide what is right or wrong What it is? General principles by group Response to any stimuli Root Word Mores mean customs Ethikos means character Governed by? Social, cultural norms Individual, norms Deals with Principles of Right & wrong Right & Wrong conduct Application business Consistency in No legal or profession Yes Morals may differ from society Ethics are generally uniform to society and culture to culture Freedom to No Think or chose? Yes Basis for Ethics Comparison Values Meaning Ethics are guiding principles which helps the individuals/group to decide what is right or wrong Values is defined as principles and ideals that helps an individual or group in judging what is important or what is not What are they? System of Moral principle Stimuli for thinking Consistency Uniform Differ from person to person Tells Tells what is morally correct What we want to do or achieve? or incorrect in any given situation Determine Extent of righteousness or Level of Importance wrongness of our options What it does? Constraints Motivates Relationship Between Ethics, Morality and Values • Ethics can be differentiated from morality, as the latter is a set of beliefs and practices concerned with what is understood as good or evil. • While Ethics are philosophical deliberation that come up with the moral justification and principles that guide our moral values. • Thus Ethics, has a wider scope than morality. However, still, the terms are used interchangeably. • While morality can limit the scope of human deliberation, in determining the goals and means towards the human ends, Ethic on the other hand lays faith in the free will of the individual, and gives enough room to deliberate upon different means to an end, while also providing moral justification for the same Relationship Between Ethics, Morality and Values • The Obligatory character of ethical norms is derived from the very fact that they are derived on the basis of experiences of the ages, based upon human free will. • However, it should not be believed that ethical principles are timeless. Ethical principles change with time, place, society, and circumstances. Nor can ethical principles be developed instantly. Thus ethical principles always relates to their sociocultural context. • That is why behavior, that is seen as inconsistent with ethical principles, can be part of ethics of another society. Therefore, ethics are always relative to the socio-cultural background of an individual. However it remains a universal fact that, ethics are central in functioning of any society. Though the content of ethics change, with society, their nature and significance remains same. Assignments No. 1 & 2 1. Role of Business Ethics in Data privacy and Security; Also provide examples of corporate leaks. 2. What Core values do the following companies follow: 1. 2. 3. 4. University of Gwadar Nike OGDCL Ufone
