Uploaded by Qudsia Shahid

Module ITB 005

Introduction to
Module No. 005
Business Ethics and Social
Muhammad Shahid Iqbal
What is Ethics
Ethics: Principles, values, and beliefs that define what is right
and wrong decisions and behavior.
Business ethics is the application of ethical behavior in a
business context. Acting ethically in business means more than
simply obeying applicable laws and regulations:
It also means being honest, doing no harm to others,
competing fairly, and declining to put your own interests above
those of your company, its owners, and its workers.
If you’re in business you obviously need a strong sense of
what’s right and wrong. You need the personal conviction to do
what’s right, even if it means doing something that’s difficult or
personally disadvantageous.
Views of Ethical Behavior
Utilitarian View: Where moral behavior is that which delivers
the greatest good to the greatest number of people. It
denominated business decision making because it’s consistent
with goals like efficiency, productivity and high profits
Individual View: The value of individualism is based on
independence and making choices for oneself. An individual has
“the right to act as an autonomous agent”
Moral-Rights View: Where moral behavior is that which
respects fundamental rights shared by all human beings.
Justice View: Where moral behavior is that which is impartial,
fair, and equitable in treating people and making decision
(Procedural and Distributive Justice). The goal is to equitably
distribute benefits and costs.
Ethical dilemmas
An ethical dilemma occurs when someone must decide whether
or not to pursue a course of action that, although offering the
potential of personal or organizational benefit or both, may be
considered potentially unethical. Most ethical dilemmas involve
conflicts with superiors, customers, and subordinates. These
are situations real or imagined where a person
between courses of action, all of which are morally
Issues of Honesty and Integrity: Honesty is a good policy. i.e. is
it OK to accept a pair of sports tickets from a supplier?
Conflicts of Interest and loyalty: occur when individuals must
choose between taking actions that promote their personal
interests over the interests of others. i.e. can I buy office
supplies from my brother-in-law?
Ethical dilemmas
Bribes versus Gifts: It’s not uncommon in business to give and
receive small gifts of appreciation, but when is a gift
unacceptable? When is it really a bribe? i.e. is it appropriate to
donate company funds to a local charity?
Whistle-Blowing : an individual who exposes illegal or unethical
behavior in an organization. i.e. if I find out that a friend is
about to be fired, can I warn her?
How firms can shape ethical conduct
Hiring Criteria: the place to begin with hiring. Job applicants
differ in their personal ethical standards. Tests, interviews, and
references used in the employee selection process should
include ethical issues as well as technical aspects of the job. For
example Integrity tests which measures applicant’s
dependability, carefulness, responsibility and honesty.
Behavior of senior Managers: Ethical standards flow from top of
the organization. What seniors mangers say and do goes a long
way towards setting a firm’s ethical climate. They should
address ethical issues that ensure that their behavior act as role
model for other.
Code of ethics: this is a formal document that states
organization's primary values and ethical rules it expects its
employees to follow. These codes specify that everyone is
expected to obey all laws and then address issues.
How firms can shape ethical conduct
Employee protection mechanism: effective ethics programs
create protection mechanisms for employees who reveal
unethical practices. The organization needs to provide
formal mechanisms so that employees can discuss ethical
dilemmas and report unethical behavior without fear. This
might include creation of ethical counselors, or ethical officers,
a clearly worded statement which indicate that organization
will take no punitive action who report unethical practice or
blow the whistle on violators.
Offer ethical training: Set up seminars, workshops, and similar
ethical training programs. Use these training sessions to
reinforce the organization’s standards of conduct, to clarify
what practices are and are not permissible, and to address
possible ethical dilemmas.
How firms can shape ethical conduct
Employee Goals: care need to be taken in setting employee
goals. When management sets unrealistic high expectations. It
puts pressure and stress on employees. This can lead an
attitude that can undermine ethical standards. Goals should be
challenging but never so high as to encourage employees to
achieve ends regardless of means.
Performance Evaluation Criteria: Performance appraisals
of managers should include a point-by-point evaluation of how
his or her decisions measure up against the organization’s code
of ethics. Appraisals must include the means taken to achieve
goals as well as the ends themselves. People who act ethically
should be visibly rewarded for their behavior. Just as
importantly, unethical acts should be punished.
Code of Ethics
Code of Ethics
Code of Ethics
From Obligations to Responsiveness to
Social Obligation: is when a firm engages in social actions
because of its obligation to meet certain economic and legal
responsibilities. The organization does what it’s obligated to
do and nothing more.. e.g. Government regulations bound:
Proper disposal of Tanneries Waste, non discrimination
against employees. It reflects the classical view.
Social Responsiveness: is when a company engages in social
actions in response to some popular social need. Managers are
guided by social norms and values and make practical, marketoriented decisions about their actions. e.g. PSO program for
reduction of pollution; Ariel’s campaign for SOS villages, Child
care centers, Ford Motor endorse a federal ban on sending
text messages while driving.
From Obligations to Responsiveness to
Social Responsibility: A socially responsible organization views
things differently. It goes beyond what it’s obligated to do or
chooses to do because of some popular social need and does
what it can to help improve society because it’s the right
thing to do. We define social responsibility as a business’s
intention, beyond its legal and economic obligations, to do the
right things and act in ways that are good for society.
This definition assumes that a business obeys the law and
cares for its stockholders, but adds an ethical imperative to
do those things that make society better and not to do those
that make it worse. A socially responsible organization does
what is right because it feels it has an ethical responsibility to
do so.